NEW DELHI: The scorching pace of imports of mobile phone components from Vietnam has set alarm bells ringing in the industry, prompting handset makers to ask the government not to impose any additional duties on components and to re-evaluate present duties.
India has imported mobile phone components worth more than $1 billion from Vietnam — with which India has a free trade agreement (FTA) —in the first half of this fiscal alone, compared to $800 million in the whole of 2018-19 and just over $600 million in FY18, an industry association of companies making handset in India has informed the government.
“The import numbers have started to look astounding,” India Cellular and Electronics Association (ICEA) said in a letter to the electronics and IT ministry. “In the face of this, we can ill-afford any further duty imposition and, in fact, need a rethink on whether some of the duties imposed should continue as they are,” it said, urging the government to tweak existing duties under its phased manufacturing programme (PMP) to boost local production and curtail imports.
“Not only should we not proceed with any additional duty imposition and simultaneously withdraw all unintended residual components of basic customs duty, we should re-evaluate all current PMP duties on all sub-assemblies and components by studying the Vietnam imports meticulously,” the association said.
It is futile to have a duty-led regime when zero-duty imports on the same products are permissible through Vietnam and other Asean countries, Korea and Japan, which is being exploited by several companies, it said.
Handset makers had three years ago suggested imposition of duties to thwart imports of electronic products, beginning from mobile phones to its components to help build local capacities to generate volumes and exports. The government consequently imposed basic customs duty of up to 15% on imports of more than half a dozen mobile phone components, including a 20% duty on fully made mobile phones.
While India has become a manufacturer and exporter of fully made mobile phones — Apple, Samsung, Xiaomi make and export 4G and 3G devices from India — it has not been able to establish an ecosystem of component makers.
“The import of substitution concept has run its course,” ICEA said. The National Policy on Electronics 2019 envisages manufacturing target of $190 billion and export target of $110 billion, putting the focus on making India a global manufacturing hub, the volumes of which will pull sub assembly and component industry in the natural course of events, it said.
When differential duty and PMP were conceptualised, Vietnam in particular and ASEAN countries were not considered, the association said. Rather, the focus was on becoming an option to China, for companies to build manufacturing facilities.
Even when the issue of FTA and blatant infringement of value added norms by ASEAN countries came into light, the government did not take adequate action, it said.
“This is extremely disheartening and has made the industry rethink their investment plans in India,” the association said, giving examples of Samsung which moved its television manufacturing facility to Vietnam after India imposed duty of 5% on open cell TV panel, making local manufacturing of LED TVs more expensive for the South Korean consumer electronics company. The duty was eventually revoked.
The association further cautioned that import of printed circuit board assembly (PCBA), which makes up 50% of the cost of making a smartphone, should be prevented and be dealt with an iron hand on the grounds that the import would be clear infringement of 35% value-added norms.
Source: economictimes.indiatimes.com