Budget 2013: Import tax up by 5 per cent on set-top boxes and mobile phones.

The government took a few hesitant steps to encourage local manufacturing of electronic devices but the measures announced in the Union Budget got only a lukewarm reception from unconvinced industry observers.

On Thursday, Finance Minister P Chidambaram waived duty for machinery imported for local chip manufacturing while simultaneously raising import tax by 5 per cent on set-top boxes as well as mobile phones costing more than Rs 2000, in an attempt to encourage local manufacturing over importing.

Home to a swelling middle-class and one of the fastest-growing electronic gadget markets, India footed an import bill of $28 billion (Rs 1.5 lakh crore) in 2011, or more than one-fifth of the bill for buying oil from overseas.

About 65 per cent of electronic products demand is currently met by imports. If at least 50 per cent demand is met through domestic manufacturing by 2015, an additional 2 lakh jobs will be created.

India is one of world's fastest growing cell phone markets, with Gartner estimating that 251 million mobile phones will be sold here in 2013. About 70 per cent of the imported mobile phones are priced at Rs 2,000 or below, Chidambaram said, explaining his decision.

The Budget measures could prompt local mobile phone brands such as Micromax, Lava, and Karbonn to speed up plans for local manufacturing. Among foreign brands, only Nokia makes phones here.

SN Rai, co-founder and director at Lava Mobile, said the measures will raise end-user prices by 8-9 per cent.

Both Lava and Micromax said they did not see the Budget measures directly helping local manufacturing for them, although both are still evaluating setting up local factories. Besides phones, Finance minister also targeted set-top boxes, one of the biggest-selling electronic goods items in India currently driven by the ongoing cable digitisation.

With about 150 million cable TV subscribers, India is the third largest market for set-top boxes after the US and China. "There is a potential for 100 million set-top boxes over the next two three years," said Satya Gupta, chairman, Indian Electronics & Semiconductor Association who welcomed the import duty hike.


Source : economictimes.indiatimes.com