ESC says 2.5% BCD on mobile phone components to reduce imports

Electronics and Computer Software Export Promotion Council (ESC) said that the latest imposition of 2.5% basic customs duty (BCD) on mobile phone components will lead to a significant drop in imports and as a result, would promote component localisation.

ESC’s views contrast strongly with the apex electronics body ICEA which has called for the reduction of 20% basic customs duty on mobile phones.

“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,” said Sandeep Narula, Chairman of ESC. ESC represents the MSME manufacturer exporters in the ICT sector.

ICEA, which represents global smartphone maker Apple, Xiaomi, amongst others, recently wrote to the Finance Minister and argued that the tariff will hurt the plans of global value supply chains looking to shift to India and domestic device makers alike. It will also threaten investment and production targets set under the Production-linked Incentive (PLI) scheme, ICEA said.

This comes after the Central government’s proposed in Union Budget 2021-22 to raise BCD on import of printed circuit board assembly (PCBA), camera modules by 2.5%, with effect from April 1.

Narula opined that India has to first emerge as a strong ICT manufacturing hub to accelerate export, and explained that this is possible if the product and component industries grow in sync.

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

The ESC chairman cited that to expand footprints in global markets, Phased Manufacturing Program (PMP) is the ideal route followed.

“By increasing the duty on components, the government is wanting to create a conducive atmosphere for mobile phone companies to source components domestically, so that they can cut down the transaction cost and inventories,” he said.