FM proposes increasing PCBA duty fro 10% to 15% on certain telecom equipment to push local manufacturing

Finance Minister Nirmala Sitharman, in her Budget speech 2024 on July 23, proposed increasing the basic customs duty (BCD) from 10% to 15% on printed circuit board assembly (PCBA) on specified telecom equipment to boost the domestic manufacturing industry.

“To incentivise domestic manufacturing, I propose to increase the BCD from 10% to 15% on PCBA of specified telecom equipment,” Sitharaman said Tuesday while presenting the Union Budget 2024-25 in Parliament.

Industry lobby body Cellular Operators Association of India (COAI) had sought a reduction of customs duty to zero. It then gradually increased depending on creating an ecosystem for manufacturing telecom gear in India.

“Over the past 5 to 6 years, the government of India has gradually increased the customs duty on telecom equipment to 20%, adding a significant financial burden on telecom companies and significantly impacting the rollout of 5G services in India,” SP Kochhar, Director-General of COAI, said recently, urging exemptions on customs duties for specific telecom equipment to alleviate the cost challenges associated with deploying this critical infrastructure.

“Until high-quality equipment is available domestically at competitive prices, COAl urges the government to reduce customs duties for 4G and 5G network products, as well as other related items, to nil,” Kochhar had said.

Domestic and multinational companies ‘ local production of telecom equipment, leveraging the production-linked incentives (PLI) scheme, surpassed the milestone of Rs 50,000 crore. Exports totalled around Rs 10,500 crore, creating more than 17,800 direct jobs.

The telecom PLI scheme has attracted Rs 3,400 crore in investment within three years.

“This achievement highlights the robust growth and competitiveness of India’s telecom manufacturing sector, fueled by government initiatives to enhance local production and minimize import dependency,” the Ministry of Communications said in a statement on July 10.

The government claimed that in the fiscal year 2023-24, telecom and networking products sales by companies benefiting from the PLI scheme increased by 370 percent compared to the base year of 2019-20. The scheme has significantly reduced the country’s reliance on imported telecom equipment, achieving a 60 percent import substitution rate.

The ministry noted that India has become nearly self-sufficient in producing antennae, gigabit passive optical networks (GPON), and consumer premises equipment (CPE). PLI-approved vendors are exporting 5G equipment to North America and Europe.

The gap between telecom imports and exports has narrowed significantly thanks to the PLI schemes for telecom and networking products and related initiatives. The total value of exported telecom equipment and mobiles exceeded Rs 1.49 lakh crore, compared to imports of over Rs 1.53 lakh crore in FY 2023-24.