Telecom minister A Raja has decided to crack the whip on the vast grey market of imported mobile handsets. In a letter addressed to the secretaries of the department of telecommunications and information technology on July 9, the minister has expressed concern over the huge revenue loss to the government and the threat to national security from these products.
While asking the secretaries to take steps to check import of mobile handsets, Raja has sought to know the status of implementation of measures being taken by the ministry to promote indigenous manufacturing of handsets.
?It has come to my attention that many Indian distributors have developed brands, which are merely phones sourced from abroad and re-branded here. These brands have not created any manufacturing in India, but have been given a free access to the Indian market because of our liberal policies. The policy measures, which we take should promote the growth of manufacturing of both mobile phones and mobile phone parts and components and not merely promote re-branding and re-distribution,? the minister has stated in the letter.
?Existence of unbranded phones, which are largely unregulated is a drag on the otherwise shining success story of domestic manufacturing and robust export,? he added.
Imports of mobile handsets have risen exponentially to more than 8 million units per month.
These imports distort the country’s mobile handset market because of evasion of value added tax, octroi and entry tax, imposts that the legitimate industry has to bear. The sellers of these phones don’t even duly add the profits from this business to their income, and avoid paying the right amount of tax.
?There appears to be sufficient reasons to believe that this (the distortion) has been accentuated in the states where value added tax on mobile phones has been unilaterally increased from 4% to 12.5% which increases the arbitrage for such avoidances,? Raja has written.
The phenomenon of cheap imports and growth in grey market started from 2007-08 and have since gained considerable momentum.
India is one of the world?s fastest growing markets adding around 15-20 million users each month so the market is lucrative for cheaper handsets, especially in rural areas. All major handset manufacturers like Nokia, Samsung and LG have manufacturing bases in the country.