Handset Makers To Hike Prices Due To Raise In Excise Duty

Bangalore: Due to raise in effective duty on imported handsets post union budget, local smartphone vendors such as Micromax, Lava, Karbonn and Intex are all set to increase prices.

The BJP government’s budget as declared on Saturday intends to increase the excise duty on mobile handsets to 12.5pct from 6pct , in case a vendor takes Cenvat credit. If there is no Cenvat credit, the duty remains unchanged at 1pct.

The difference in duty between imported and locally made handsets has widened to 11.5 percentage points from five. The alteration in tax structure aims at encouraging local manufacturing. Top executives of the telecom companies; also expect this to encourage domestic manufacturing.

A spokesperson for Micromax said that there will be a "short-term impact on the cost" due to the steep rise in duties. Micromax, currently No2 in local market has already started manufacturing some handsets in India, while others are in the process of doing so.

Intex and Lava said they their price hike will be up to 5pct, while Karbonn expects its prices to go up by 6-7pct. Samsung, one of the major market leader in mobile industry, is unlikely to raise prices as 90pct of its phones, including smartphones, are made in India.

Sanjay Kumar Kalirona, head of mobile business at Intex Technologies, said the higher duty will lead to a price increase of around 7pct,. He also assured that they will try put off the cost burden from customers.

Pardeep Jain, Managing Director of Karbonn Mobiles said the excise duty increase will put pressure on the local handset vendors. He also said, "We will have to raise prices by 6-7pct, within the next two weeks."

Lava chairman and managing director Hari Om Rai said the company will have to increase prices by 4-5pct .

Local handset vendors who intend to shift manufacturing to India over time. look forward to working with the government to help build a robust manufacturing eco-system in India," the Micromax spokesperson said.

Intex's Kalirona plans to invest Rs 200 crore in the next fiscal year starting April to increase its manufacturing capacity at its two facilities — in Jammu and Baddi, Himachal Pradesh — which are being used to produce mobile batteries, chargers, multimedia speakers and feature phones.

Lava is investing Rs 600 crore in two plants in Uttar Pradesh, one in Noida's Sector 58 where it will assemble phones, and the other near the Yamuna Expressway.

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