The Prime Minister’s Office (PMO) has asked US tech giant Apple to revise its list of preconditions to set up a proper manufacturing facility in the country and come up with a “workable” strategy that will conform to an existing scheme meant for promoting domestic manufacturing of electronics. Sources told FE that the PMO is not so enthusiastic about the wish-list submitted by Apple, especially the exemption it sought from the phased manufacturing programme (PMP) — that is chargers, batteries and headphones for manufacture of Apple phones be exempted from import duties. This means the PMO is, in effect, endorsing the views of the ministry of electronics and IT (MeitY) and the revenue department of the finance ministry that such an exemption isn’t feasible.
“The PMO is not very enthusiastic about Apple’s demands. The government has worked very hard on Make in India and has come up with the PMP, and now to give special concessions to Apple is like stirring a hornet’s nest. Others will also demand the same thing. It is like going back to where we started. So the company has been asked to come with a workable plan, which is aligned to the PMP and the Make in India programme,” explained one of the sources. An email sent to Apple for response on Monday, didn’t elicit any comment until the paper went to the press on Wednesday. Apple, which moved on to become the world’s most valuable company from 70th largest a decade ago, has turned to India, the world’s fastest-growing smart phone market, to reverse slowing global sales, according to analysts. The company launched iPhone 8 last week.
What might have gone against Apple was the fact that while it was quick to hand over a list of preconditions—from tax concessions to permission to export refurbished phones—to set up a large manufacturing unit in India, it didn’t share with the Centre any details on the quantum of investment or specific job opportunities it will create here. Sources had earlier told FE that the iPhone maker would set up only a “pilot project” near Bengaluru (to produce around 3-5 lakh phones), and the likelihood of a larger manufacturing unit in India hinged on the kind of concessions the Centre would offer to the tech giant.
Last year, Apple had sought several other sops — including a 15-year customs duty holiday on imports of iPhone kits, new and used capital equipment, and consumables — to set up a manufacturing unit. It has sought duty cuts on components — completely knocked down (CKD) and semi knocked down (SKD) units of iPhones — for re-assembly at the finished goods manufacturing line. It has also sought a relaxation of the 30% local sourcing requirement under the foreign direct investment rules.
Apple’s plan of exporting refurbished iPhone, one of the pre-conditions for manufacturing in India, from India has also hit a wall. A section of the government fears allowing Apple to bring in such second-hand iPhones from all over the world to service or upgrade here for subsequent exports could pose environmental risks. With cost of production in China rising due to soaring wages, among others, Apple is perhaps looking at diversifying its manufacturing base out of China, analysts have said. The company doesn’t make its own products; rather it does it through contract manufacturers, including Foxconn and Pegatron. So, if Apple sets up a base here, the contract manufacturers may also establish units here to cater for the tech major’s demands, they said.