The Union Budget 2022 presented yesterday announced a cut in the customs duty on the parts used in the manufacturing of a smartphone and its related ecosystem. The Finance Minister offered this sop to improve local manufacturing of electronics items. Nirmala Sitharaman said that domestic manufacturing of wearable and hearable devices too will get a boost. Duty concessions were also announced on parts of phone chargers and phone camera modules.
While the natural expectation of this all is that prices of smartphones, wearables and hearables would come down.
But some of the smartphone manufacturers are not sure. Though officially they have not responded, some of them have been unofficially saying that the customs duty cut is most welcome, but how much of it can be passed to the consumers remains to be seen.
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More cheer for hearables and wearables brands
Smartphone companies say that even if the prices are cut it can be only by a small margin, as in the last two years they have taken a lot of hits due to the pandemic and rising input costs, and this is the time to come out of those troubles.
Duty concessions have been given to parts of transformer of mobile phone chargers and camera lens of mobile camera module and certain other items.
To be sure, this will be a shot in the arm for Make-in-India initiative that has seen phone brands like Apple, Samsung, Xiaomi Oppo, OnePlus, Vivo, among others, choose India as one of their manufacturing bases. It will help them to enhance their production, but price cuts will take sometime to happen, according to market analysts.
But more than smartphones, the happening wearables and hearables sector have a lot to cheer. "Customs duty rates are being calibrated to provide a graded rate structure to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters," the Finance Minister said. Local brands like Boat, which are already keen to move their manufacturing to India from China, will find this extremely helpful.
More jobs for sure
Price cuts or not, the customs duty cut will help companies to take advantage of the PLI (Production-Linked Incentive) scheme across 14 sectors, including IT hardware manufacturing. And the Finance Minister pointedly said it has the potential to generate at least 60 lakh new job opportunities
The PLI scheme covers key sectors like pharmaceuticals, medical devices, large-scale electronics manufacturing, food products, solar EV modules, automobiles/auto components, ACC battery, textile products etc.
An Indian government panel had in September 2020 cleared applications from these smartphone manufacturers to export mobile phones worth around $100 billion (Rs 7.3 lakh crore) from India.
The country saw an investment of Rs 2,595 crore and production worth Rs 67,275 crore under the PLI scheme for large-scale electronics manufacturing, of which, 31% or Rs 20,568 crore worth products were exported (till June 2021).
The PLI scheme provides an incentive of 4 to 6 per cent on incremental sales (over base year) to eligible companies involved in mobile phone manufacturing and manufacturing of specified electronic components, including assembly, testing, marking and packaging units.
Further, the government approved an outlay of Rs 76,000 crore for the development of semiconductors and display manufacturing ecosystem.
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