Manufacturing Moving To Vietnam, Indian Cellular Industry Warns

NEW DELHI: The Indian cellular industry has expressed concern that manufacturing is moving out of the country to Vietnam and says the government needs to create a business-friendly environment to attract more investors.

"Manufacturing has been moving out to Vietnam due to an investor friendly and predictable regulatory environment in place and better incentives available. The big brands are now buying products for the Indian market from Vietnam," Indian Cellular Association (ICA) president Pankaj Mohindroo told IANS.

Mohindroo, along with other industry players, said in a presentation to Finance Minister Arun Jaitley: "Vietnam offers a 30-year tax holiday window at just 10 percent tax on mobile manufacturing which further goes down to 100 percent exemption in the first four years and reduction of 50 percent in the next nine years."

The presentation was made ahead of the union budget for 2015-16 due in February. According to ICA, India's mobile manufacturing industry is only 1/12th of Vietnam and 1/60th of China.

"A 10-year tax holiday in a block of 15 years should be granted on all profits and gains from manufacturing or rendering of services in or in relation to the mobile phone industry for all fresh investment made in plant and machinery and other equipment of a durable nature for all three environments," Mohindroo has recommended to Jaitley.

The three environments are special economic zones, domestic tariff areas and export-oriented units. The ICA is the apex body of the mobile industry comprising manufacturers, brand owners, technology providers, value-added service and solution providers, distributors, retail chains and eminent consumers of mobile handsets.

It has members like Samsung, LG, Microsoft Devices, HCL Infosystems and Apple Europe Ltd, among many others. India's position in mobile phone exports has fallen from seventh in 2009 to 14th in 2013. The value of exports was $3.40 billion in 2009 and fell to $2.28 billion in 2013.

The estimated domestic market for mobile handsets was 75,000 crore ($12 billion) in 2014, of which handsets worth 58,550 crore were imported. For 2015, the estimated market size is 1 lakh crore, with imports accounting for 75,500 crore. As of November-end 2014, there are 964.20 million telephone subscribers in India, of whom 937.06 million are wireless subscribers.

The ICA, in its budget recommendations, said: "India achieving a 25 percent share in global mobile phone manufacturing by 2019 from the current share of three percent" should be the aim of the 'Make in India' initiative in the mobile industry. This will help in the creation of 1.3 million jobs for people in the mobile handset sector.

Mentioning that mobiles with a screen size of between six and seven inches are sometimes classified as computers and mobiles above seven inches are always classified as computers, Mohindroo said: "Putting mobile tablets under the computers category has put obstacles for the domestic manufacturing industry to take off, as it works out to be cheaper to import than to produce domestically."

"Mobile phones, mobile tablets and computers are the same category. We recommend that they should be charged the same duty as applicable for mobiles," he added.

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