New Delhi: A group of handset vendors has warned the government that any move to allow companies to sell devices made in special economic zones (SEZ) at zero duty rate in the domestic market would jeopardise $2 billion in proposed investments under a plan to encourage local manufacturing.
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), Pankaj Mohindroo, president of the Indian Cellular & Electronics Association, said in a letter to finance minister Arun Jaitley and IT minister Ravi Shankar Prasad.
Mohindroo said over Rs 5,000 crore had already been invested in these 268 units, while Vivo, Oppo, Samsung and Wistron were among those that had received approvals for investments under PMP.
“These companies have already received the requisite approvals for their investments in the country under the PMP and the government must keep this is mind,” Mohindroo told ET.
US electronics manufacturer Flex, which is in negotiations with mobile services provider Reliance Jio Infocomm, is seeking tax benefits to produce handsets in its
SEZ unit near Chennai and sell them in the domestic market without attracting duties, at rates similar to those in free-trade agreements (FTA), ET reported in its edition dated December 15.
The industry association, which includes members such as Apple, Xiaomi, Oppo, Vivo, Micromax and Lava, contended that such a move could damage the nascent mobile handset and component manufacturing industry because it would negate incentives for local production that were given by increasing import duties on key components and completely built handsets.
The industry association, which includes members such as Apple, Xiaomi, Oppo, Vivo, Micromax and Lava, contended that such a move could damage the nascent mobile handset and component manufacturing industry because it would negate incentives for local production that were given by increasing import duties on key components and completely built handsets.
Any further relaxation in supplies from SEZs to the domestic market can result in an “immediate existential crisis” for the local industry, Mohindroo said.
SEZs were set up to encourage foreign investment and promote exports from India. SEZ units may sell goods and services in the domestic market in accordance with the import policy and on payment of applicable duties.
“The FTA and SEZ are two different systems with different objectives and should not be mixed together,” the industry association said.
Under PMP, the government had identified 12 components used in mobile phones to be assembled locally in phases until 2019-20. It aims to promote indigenous manufacturing of populated 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.
PMP has been at the heart of spurring local manufacturing under the government’s Make in India programme. Handset companies say more steps are needed to make India a hub of smartphone manufacturing to take on Vietnam and Taiwan.
In October, ICEA proposed a 10-year tax holiday on the export of mobile phones to supplement PMP, saying it would give India a competitive edge.
Source: economictimes.indiatimes.com