In a bid to make India a mobile manufacturing hub of the world over a period of next few years, the Centre has introduced Phased Manufacturing Programme (PMP). The scheme would promote domestic production of mobile phones by providing tax relief and other incentives on components and accessories used for the devices.
An official notification of Ministry of Electronics and IT says, “The Phased Manufacturing Programme has been notified with the objective of substantially increasing the domestic value addition for establishment of a robust Cellular mobile handsets manufacturing eco-system in India.”
In the last two years, easing out of tax regime for domestic mobile manufacturers resulted in setting up of 40 new mobile handset manufacturing units and 30 mobile components and accessory manufacturing units, resulting in the direct employment for over 1 lakh people. These units have the potential to generate indirect employment to 2 lakh people, according to the government.
The Budget 2015-16 introduced a differential Excise Duty for domestic mobile manufacturers. Under this, the Countervailing Duty (CVT) on imports at 12.5% and Excise Duty at 1% without input tax credit (or 12.5% with input tax credit) were given to domestic cell phone manufacturers. This was done because earlier it was cheaper to import mobile components or finished goods after India signed the World Trade Organisation’s ITA-1 pact (Information Technology Agreement). This pact exempts duties from several IT products.
The differential duty approach has helped in increasing the local production of mobile handsets from 11 crore units valued at Rs 54,000 crore in 2015-16 to 17.5 crore units valued at Rs 90,000 crore in 2016-17, according to the official statement. It also says that the share of imported mobile handsets in total domestic demand is gradually coming down — from Rs 56,000 crore in 2015-16 to Rs 40,000 crore in 2016-17.
The PMP aims to take this growth story to a new level and it is estimated that the value of India’s domestic mobile handset manufacturing industry would grow exponentially over the next 5-10 years.
At present, India imports basic chipset for mobile handsets but there has been a spurt in the production of other mobile components. Over the next 10-12 years, PMP aims to make India a manufacturing hub of mobile components. With PMP, the share of locally-procured components in the manufacturing of feature phones will go up from about 15 to 37 per cent and for smart phones from about 10 to 26 per cent, leading to the setting up of a “robust indigenous mobile manufacturing ecosystem in India.”
The PMP would be rolled out over a period of time in a phase-wise manner. In the current financial year (2017-18), the PMP covers domestic production of components like Mechanics, Die Cut Parts, Microphone and Receiver, Key Pad and USB Cable. In 2018-19, it would cover printed circuit board assembly, camera module and connectores, while in 2019-20, the PMP would provide incentives for local production of display assembly, touch panel/cover glass assembly and vibrator motor or ringer.
The government is also reportedly planning to talk with tech giant Apple, which is setting up its manufacturing plant in India, to start its production in line with the new PMP.
(With PTI inputs)