Basic customs duty cuts on mobile phones, printed circuit board assembly (PCBA) and chargers, announced in Union Budget 2024, will not move the needle much in terms of cost benefits to end users, said analysts.
Experts argued that since more than 95 per cent of smartphones and a large chunk of chargers are already being assembled or manufactured locally, the customs cut announced in Budget 24-25 might not make any significant change in terms of price benefit, barring some brands which import phones as completely built-up units (CBU) in India.
Smartphones like Google Pixel and some iPhone Pro models are likely to get some benefit out of the rationalisation.
Experts, however, argue that although Apple looks like the major beneficiary of the duty cut, the impact for the technology giant might not be significant enough to cut prices.
“I think Apple is a major beneficiary here, but it’s not so huge that you would expect Apple to cut prices. There might be some impact in the sense that the price arbitrage happening from Thailand and Dubai and other places might stop,” said Navkender Singh, associate vice president, International Data Corporation.
The Union Finance Minister on Wednesday announced a reduction in basic customs duty (BCD) on mobile phones, their printed circuit board (PCB) assembly, and chargers to 15 per cent from the previous rate of 20 per cent.
Analysts see a limited impact from the cut and ask for further rationalisation in duties on components where India is still dependent on imports, including battery cells and display module panels.
“Already 99 per cent of smartphones were being assembled in India. Just some smartphones like Google Pixel, Honor and iPhone Pro models are still coming as CBUs, which will see some impact. But largely, if you look at PCB assembly, we already had the Semi-Knocked Down (SKD) manufacturing happening in India, and chargers are completely localised in India,” said Tarun Pathak, analyst, Counterpoint.
Pathak further said that from the duty perspective, there could be just a one to two per cent impact on the end consumer.
Reducing the BCD on mobile phones, their PCBA and chargers was one of the major demands from the electronics manufacturing bodies, including the India Cellular and Electronics Association (ICEA).
Pankaj Mohindroo, chairman, ICEA, shared his views on the BCD cut in the Budget, where he said that the recent reduction in basic customs duty was designed to enhance the competitiveness of the Indian electronics manufacturing sector and ultimately benefit consumers.
“In reality, duties are paid by customers as a pass-through cost, so reductions are always passed on directly to them, making mobile phones and accessories more affordable and accessible. Additionally, lower production costs can increase India’s competitiveness vis-a-vis destinations such as Vietnam and China, where effective tariffs are near zero compared to 6-8 per cent in India,” he added.
On the mobile PCBA, the reduction could provide short-term relief for manufacturers to get supplies from other regions until domestic supplies are able to meet demand.
“The industry kept saying that they didn’t have enough capacity to expand. They questioned how they could manufacture for the country and export from here without sufficient capacity. In response, the government decided to reduce the pricing of imports from China and other places until the industry’s capacity could increase. This should be understood as a move to ensure that the momentum towards making India a manufacturing hub does not stop,” Singh added.
First Published: Jul 24 2024 | 6:53 PM IST
