Duty-free Handsets from SEZs are Threat to Local Manufacturing Units

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Indian Cellular and Electronics Association (ICEA) is worried that that duty-free handsets from special economic zones may damage the mobile handset and component manufacturing industry

Mobile phone vendors have warned the government against allowing manufacturers to sell their devices made in special economic zones (SEZ) at zero duty rate in the local market on the ground that it will threaten the proposed $2 billion investment to boost local manufacturing units.

The special economic zones were set up to draw foreign investments and promote exports. The units in SEZs can sell goods and services locally in accordance with the country’s import policy and payment of applicable duties.

Threat to local factories under PMP

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In a letter letter addressed to the Finance and Information Technology Ministry, Indian Cellular and Electronics Association (ICEA) President Pankaj Mohindroo raised concerns that such a move would be without any substantial value addition and would also kill the 268 factories set up in the phased manufacturing plan (PMP).

The letter also stated that more than Rs 5,000 crore had already been spent in the units and smartphone manufacturers such as Vivo, Oppo, Samsung and Wistron had received approvals for their investments in India under PMP.

ICEA, comprising Apple, Xiaomi, Oppo, Vivo, Micromax and Lava, views that allowing zero duty rate can damage the mobile handset and component manufacturing industry. It said that it would negate incentives for local production that were given by increasing import duties on key components and completely built handsets.

PMP’s aim to promote local production

India’s phased manufacturing plan aims to promote local manufacturing of printed circuit boards, camera modules and connectors in the current financial year and display assembly, touch panels, vibrator motors and ringers in 2019-20. The programme will be extended as the manufacturing ecosystem evolves over the next few years. It is part of the Make in India initiative.

In October, the association proposed a 10-year tax holiday on the export of mobile phones to supplement PMP, saying it would give India a competitive edge.

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