Govt eyes import duty cuts on mobile phone parts: Officials

Import duty cuts: The government is contemplating reductions in import duties for essential components used in the production of high-end mobile phones, according to two officials. This potential move could benefit companies like Apple and enhance the competitiveness of their exports in the global market.

Players in the sector have been advocating for duty cuts on around twelve components to lower the manufacturing costs of smartphones, making them more competitive against regional rivals such as China and Vietnam.

Pending decision

The electronics and information technology ministry is finalising the proposal, including the extent of the duty cuts, with the hope of its inclusion in the federal budget on February 1, as per one official. The exact number of components covered in the proposal remains unclear.

The finance ministry will make a decision on the proposed cuts during the budget finalisation process. The electronics ministry, finance ministry, and Apple have not provided comments on the matter.

Camera parts for high-end phones are reportedly among the components considered in the proposal. Currently, import duties on mobile phone components like camera modules and chargers, for which the industry seeks cuts, range from 2.5 per cent to 20 per cent, as per the India Cellular and Electronics Association (ICEA).

The ICEA argues that India's levies are the highest among six comparable manufacturing nations, including China, Vietnam, Mexico, and Thailand. It warns that unless these levies are reduced, the growth of India's mobile phone exports could be hampered.

Industry's anticipation

Mobile phone exports, excluding Apple, include Samsung from South Korea and Xiaomi from China. While Apple's iPhones are currently assembled in the country, the company is exploring expanding its production to include iPads and AirPods to diversify its manufacturing beyond China.

In the last fiscal year (2022–23), mobile phone exports, other than Apple, doubled to $11.1 billion, aided by government incentives for local manufacturing. The industry anticipates exports in the 2023–24 fiscal year to reach $15 billion.

In the 2023–24 annual budget, Finance Minister Nirmala Sitharaman previously eliminated a 2.5 per cent customs duty on select parts of mobile camera phones to encourage the assembly of high-end mobile phones in India.

Separately, government's trade department is reportedly seeking import duty cuts on more than a dozen items, spanning engineering goods to inputs for garment production, according to a third government official. The department for the promotion of industry and internal trade has not provided comments on this matter.

(with Reuters inputs)