New Delhi: Mobile phones and tablets will become dearer with the government proposing a hike in levies on components like printed circuit boards (PCBs) and peripherals like batteries and chargers.
Focussed on incentivising domestic value addition to help Make in India, Finance Minister Arun Jaitley on Monday said suitable changes are proposed to be made in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and certain other goods.
This will "reduce costs and improve competitiveness of domestic industry in sectors" like IT hardware, capital goods, defence production and textiles among others, he said while presenting Budget 2016-17 speech.
The Budget proposes to withdraw Basic Customs Duty (BCD) (10 percent) and Countervailing duties (CVD) (12.5 per cent) exemptions on imports of chargers, adaptors, battery, wired headsets and speakers used in mobile phones.
The total duty cost comes to be over 29 percent, which will make the imports of these products expensive.
"At first glance the Union Budget 2016 seemed to be in alignment with the various initiatives (Prime Minister Narendra) Modi's government has undertaken, but there are certain elements which does not seem positive," Karbonn Mobiles chairman Sudhir Hasija said.
What will hurt the mobile manufacturers is the increase of duty on some of the parts which have to be imported, he added.
"We still import components such as batteries and speakers considering there is no manufacturing in India. With 29 percent increase in the excise duty it is going to be harder to contribute to Make in India," he said.
The Union Budget proposes a 2 percent special additional duty (SAD) on populated printed circuit boards (PCBs) used for making mobile phones, laptops and personal computers.
"With the levy, the price of domestically made phones will go up by one percent. We would request government to roll back this duty," Indian Cellular Association President Pankaj Mohindroo said.
He added that overall, the Budget is good for domestic manufacturing.
Sudhin Mathur, director (smartphone business) at Lenovo's Mobile Business Group said till a competitive supplier base is established in India, there may be a marginal increase in cost of the box due to higher cost of accessories.
Hari Om Rai, co-chairman FTTF (Fast Track Task Force) and Lava International CMD, said the industry is unhappy on the imposition of the SAD.
"As much as half of production cost of a mobile phone consists of populated PCBs and this imposition of 2 percent SAD will mean that the duty differential between complete mobile phones and its parts/components for manufacturing will be significantly diminished," he said.
India has not yet developed the eco-system for the complexity involved in populating a mobile phone bare PCB, he added.
Micromax co-founder Rajesh Agarwal said the proposal on reduction in excise duty will eventually promote manufacturing of these components domestically.
India is an important market for handset makers as it is witnessing strong sales growth rates at a time when global sales are waning.
According to research firm IDC, shipments in India grew 28.8 percent in 2015 y-o-y to 103.6 million units compared to 10.1 percent growth for the global market.
Buoyed by the opportunity, several handset makers, including global players like Xiaomi and Lenovo have commenced assembling phones in India.
However, given that major components are still sourced from countries like China and Taiwan, handsets are still assembled and not manufactured here.