Basic Customs Duty on mobile phone components to spur localisation

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New Delhi: Industry body ESC on February 9 said imposition of 2.5% Basic Customs Duty (BCD) on mobile phone components, announced in the recent Budget, would promote localisation of the electronic components industry, and drive exports and employment.

Electronics and Computer Software Export Promotion Council (ESC) asserted that a strong ‘pro-component’ policy is the “need of the hour”.

Coming out in support of imposition of 2.5% Basic Customs Duty (BCD) on mobile phone components, Sandeep Narula, Chairman of ESC said: “The imposition of customs duty is designed to make India a strong assembling hub, and will considerably cut down the component imports, which form a significant percentage of the local manufacturing/ assembly including in the case of mobile phones, thereby enhancing foreign exchange retention.”

The Budget proposed imposition of import duty on components of mobile phones and chargers, to enhance local value addition.

ESC’s Narula argued that India has to emerge as a strong ICT manufacturing hub to step up exports, which in turn requires product and component industry to grow in sync.

Further, the component industry, by nature is low capital base, labour intensive and “plug and play” ideally suited for the Indian micro, small and medium enterprises.

“Our reckoning is that global markets for electronic components will be close to USD 350 billion by 2025 and India can have a considerable share in this segment, which is presently insignificant,” he added.

The ecosystem in the country is geared towards growth of the electronics and components industry given the advent of 5G networks, artificial intelligence, the Internet of Things (IoTs), policy push from the government such as Digital India and Smart Cities, wider broadband connectivity and e-governance programmes.

“The turnaround of mobile telephone sector in India and how the sector in a relatively short timeframe emerged as a strong export segment has been due to focused attention given to Phased Manufacturing Programme (PMP) wherein duty structure has been calibrated to achieve the objective – higher duty on finished goods and lower duty on components,” ESC said.

The duty hike on components is aimed at creating a conducive atmosphere for mobile phone companies to source components locally, so they can cut down the transaction cost and inventories.

The ESC chairman stressed that in next 3-5 years, India’s component segment would grow “leaps and bounds” availing the PLI scheme, unleashing a radical transformation in the digital base of the country.

“ESC has recently commissioned two major studies in association with IIM Bangalore on how production of components like semiconductors, PCBs and similar components can be undertaken in India to promote the country’s digital base, in a relatively shorter timeframe” he said.