Budget 2024: Electronics industry seeks ₹45,000-cr sops, duty rationalization

New Delhi: Electronics and mobile phone makers have sought incentives of ₹40,000-45,000 crore in the form of direct financial incentives or through the production linked incentive (PLI) scheme or both, to promote local manufacturing of components that are used in making mobile phones.

The demand has been raised with the finance ministry which is likely to be addressed in the upcoming Union Budget, representatives of the Indian Cellular and Electronics Association (ICEA) said Tuesday.

“The financial support package of ₹40,000-45,000 crore has been recommended to the finance ministry. It will be spread over eight years and meant for components and sub-assemblies. It can run parallel to the mobile PLI scheme which will have a sunset date,” said ICEA chairman Pankaj Mohindroo.

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The industry body that represents Apple, Foxconn, Dixon Technologies, Xiaomi, Oppo, and Vivo, among other handset makers and electronics manufacturing services companies, has also recommended rationalisation of import duty structure and reducing the duties on components of mobile phone parts or sub-assemblies over time, in order to attract global value chains to India and enable them to create manufacturing at scale.

This will provide long term policy certainty and predictability, foster job creation besides increase the ability of Indian manufacturing ecosystem to integrate with global value chains, Mohindroo added.

Customs Duties

Import duty structure which has seven slabs as of now should be reduced to four slabs with rates of 0%, 5%, 10% and 15%, the agency said.

A significant step, the agency said, would be to reduce the basic custom duties on chargers, adapters and printed circuit board assembly (PCBA) to 15% from 20%. Duty on parts of PCBA, camera module and connectors should be brought down to zero, it added. The current high tariffs increase manufacturing costs in India by 7.0-7.5% on the bill of materials, deterring local ecosystem development, hampering exports and adversely affecting job creation, as per the findings of ICEA's disability report which studied tariffs across China, India, Vietnam, Thailand and Mexico. 

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For instance, India’s simple average MFN (most favoured nation) tariff for inputs is 7.4%, while China’s tariffs in bonded zones is zero and Vietnam’s FTA-weighted average tariff is 0.7%, ICEA's study said. The study which analysed data from eight tariff lines found that India has far higher number of components on higher duty slabs, compared to other nations. Almost all (97%) of Vietnam’s weighted average tariffs are between zero and 5%, while 56% of China’s tariff lines are in that range.

Electronics is the fifth-largest export category from India. The country has clocked $115 billion of electronics manufacturing output in FY24, with exports of $29 billion. More than half of the exports are attributed to mobile phones, which are also the biggest contributor to the production with $51 billion.