5 Percent Escalation in Mobile and Tablet Prices Leaves Mobile Manufacturers Disgruntled

BENGALURU: People planning to buy smartphones or tablets in upcoming months in India might find it a shocking fact that the government has proposed to raise the prices by more than 5 percent on all such devices. According to the Times of India report, this figure is based around the government’s plan to extract special additional duty on components such as populated PCBs; and basic customs and countervailing duties on batteries, chargers, headsets, and speakers. This step is an effort towards further realizing the Make in India campaign because customs and excise assume a significant role in incentivizing domestic value addition.

“I propose to make suitable changes in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and certain other goods and simplify procedures, so as to reduce costs and improve competitiveness of domestic industry in sectors like information technology hardware, capital goods," said Arun Jaitley, Finance Minister.

As it turns out this announcement wasn’t enough, as government proposed another 2 percent special addition duty (SAD) on populated PCBs, a proposal which has caused a lot of stir among the handset makers who import these components. These PCBs are usually used for manufacturing mobile phones, laptops, and PCs. Pankaj Mohindroo, President, the Indian Cellular Association remarked “Populated PCBs are roughly half the cost of a phone. Any increase in cost will get passed onto consumers.”

The figures showing a steep escalation in the prices comes as a shock to most of the people across the industry. There is a straight implication that the duty differential between complete mobile phones and its parts or components used for manufacturing will be reduced as a result of the imposition of 2 percent SAD. The common belief is that India hasn’t yet developed the ecosystem to support the complexity involved in populating a mobile phone bare PCB.

Exemptions from Basic Customs Duty (BCD) and Countervailing duties (CVD) on imports of chargers, adapters, battery, wired headsets and speakers are other crucial decisions that have floated around, as a part of this Union Budget. The budget talks about the total duty cost adding upto 29.44 percent, taking into account a BCD of 10 percent, a CVD of 12.5 percent, and a SAD of 4 percent. Figures predict the impact to be on the negative side for a relatively smaller period, as the prices of the components put together round upto 35 percent for feature phones, compared to 10% in smartphones. With requests in pursual to incorporate the changes, it’s highly likely that we’ll observe immediate rise in feature-phones compared to smartphones.

"This is a very steep. In the long term, a separate industry worth Rs 7,000-Rs 10,000 crore will be set up here by 2018," remarked Pankaj.

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