NEW DELHI: The government withdrew a notification levying duties on key mobile handset components such as LCD displays, touch panels and vibrator motors from February 1.
People familiar with the matter said this could be the first step toward deferring the levy by a year — to April 1, 2020 — giving relief to handset makers such as Samsung. It will give them more time to get in place an ecosystem for locally manufacturing such components, they said.
Samsung and other handset manufacturers had said a February 1 deadline would increase the cost of locally made mobile phones, making it cheaper to import them, putting about 100 plants already set up for assembly out of work.
The likes of Apple will also be relieved as the levies would have made devices dearer at a time the Cupertino-based company struggles to push sales in the price-sensitive Indian market, also the world’s fastest-growing one, experts said. Government officials earlier told ET that the Centre was inclined to put this notification on hold, following representations by several industry associations and major handset makers.
“It is prudent not to impose duty at this moment. This is specifically so because there is serious stress in the industry and it won’t be able to absorb any additional cost,” said Pankaj Mohindroo, chairman of the India Cellular and Electronics Association (ICEA). The lobby group’s members include Apple, Foxconn, Flextronics, Vivo, Oppo and Xiaomi. The notice had said LCD display assemblies, vibrator motors and touch panels were scheduled to attract 12.5% countervailing duty (CVD) and 1% excise duty without input tax credit from February 1. ET on January 23 reported the government was likely to put the levies on hold.
“This has been postponed… for at least a year,” said a top executive at a leading handset maker. “This will allow us enough time to ready the ecosystem needed to manufacture these components.” Apart from ICEA, various industry associations had sought a year’s deferment of duty under the phased manufacturing programme (PMP) that was notified on January 8. They included the Federation of Indian Chambers of Commerce & Industry, the Associated Chambers of Commerce and Industry of India and MAIT as well as Samsung.
They said the components can’t be made locally. The display panel accounts for 25-30% of a mobile phone’s production cost and the new duties threatened to disrupt the plans of handset makers that are locally assembling phones. Samsung told the government it would have to stop manufacturing Galaxy Note 9 and S9 models in India if the deadline was imposed. It said it’s in the process of setting up a display assembly plant for mobile phones at an outlay of $100 million to be operational by April 1, 2020.
PMP is the flagship programme under Make in India that aims to make India an electronics manufacturing hub by 2025. “…in real development of ecosystem, we are still far behind. Among many reasons, one being we have positioned Make in India as something that will make India 100% self-reliant, which is impractical and unrealistic,”said Faisal Kawoosa, handset industry expert and founder of techARC. Rather, the best strategy would be to leverage from the inclusive ecosystem which exists globally. “So, primarily we shouldn’t expect Make in India to create entire things in India,” he added.