During the budget session earlier this year, the Indian government removed certain exemptions on the components and printed circuit board assembly (PCBAs) used for manufacturing telecom products within India. Because of this, the overall production cost of the equipment and products will go up by 5% to 6%.
According to a PTI report, the Broadband India Forum (BIF) has written to the finance ministry and the Department of Telecommunications (DoT) to reverse the decision of excluding exemptions from the critical components and PCBAs that are imported to India for enabling the ‘Make-in-India’ initiative of the government.
Higher Production Cost Will Null PLI Benefits
If the production cost for the companies increases, the benefits offered under the Production Linked Incentive (PLI) scheme will be nullified.
BIF President, TV Ramachandran said that the exemptions provided under custom notifications since 2017 should be continued for several of the critical components. If the exemptions are removed, the overall cost for manufacturing products in India will go up by 5% to 6%.
If higher production costs offset the benefits of the PLI scheme, major companies will withhold their decision of manufacturing within India. Most of the critical components that are imported from outside the country need to be exempted from certain duties and taxes to keep the overall production costs low.
The BIF has also claimed that in certain cases, the finished product made in India will become costlier than the product manufactured and imported from outside the country. The broadband body said that PCBAs are now under a significant duty of 11%. Since PCBAs are required for the manufacturing and production of several products, including smartphones, controllers, base stations, and more, it will result in an increased manufacturing price for each of these products.
The government is pushing its own ‘Make in India’ program a few steps back if it continues with the increased duties on the critical manufacturing components and PCBAs. The BIF has requested the government to overlook its decision so that local manufacturing in the country can be boosted and companies can not only sell in India but also export it to other nations.