The Government of India, in a recent Notification (No 31/2016-Customs) decided to roll back import duties levied on components of mobile phones in the Union Budget 2016. The duty on chargers, batteries and headsets was brought down from 29% to 12.5% and lowered the duty on populated printed circuit boards (PCBs) to 0% from 2% (instead of raising it to 12.5%). In regards with this, BIF has sent a note to DEITY, DIPP and DOT, stating that lowering of duty on populated PCBs will be a big dampener for PM Modi’s vision of ‘Design in India’, as PCB provides the most opportunity for design and R&D.

The note also highlighted that no entity will design and invest in R&D in India if the PCB continues to be imported from China at 0% (zero) duty in fully-manufactured form. Though the increase in duty on imported handsets by 12.5% has increased manufacturing intensity of mobile phones in India from 5 million/year to 100 million/year, the local value addition is hardly 1 to 2%. Moving on, BIF also emphasized that India faces a unique challenge to encourage and initiate indigenous design and manufacturing or ‘Make in India’ with higher local value addition. Accordingly, it is imperative to work towards reduction of the exponentially increasing Import Bill for electronics/telecom equipment & services – an expense expected to surpass the oil import bill by 2020 (estimated at $ 400 billion).

“While the industry was hoping the Government moved ahead with its 2015 initiative, this recent announcement has pushed the country back to the days of phone assembly, instead of progressing to a phased-manufacturing regime. This notification goes against the letter and spirit of the stated intent of the Government, which is to gradually reduce the electronic imports and achieve ‘Net Zero Imports’ by 2020 under ‘Make in India’, as part of the Digital India action plan,” remarked TV Ramachandran, President – Broadband India Forum.

The mere assembly of PCBs in India will immediately increase value addition to 10% from the current 1%, with scope of increasing it further with investment in ‘Design in India’ and R&D. It will also raise the quality of jobs and prevent these moving to other markets, and encourage component manufacturing in India by enabling components to be consumed in India.