Union Budget 2024: FM announces duty cut on mobile phones, PCBA and chargers.
| Photo Credit: Haider Ali Khan

Union Finance Minister Nirmala Sitharaman, in her Budget speech on July 23, announced a cut on basic custom duty (BCD) to 15% on mobile phones, mobile printed circuit board assembly (PCBA) and mobile chargers. Currently, the BCD on them is 20%.

Click here for the Union Budget 2024 updates, highlights

It is being speculated that this 5% window might impact the end pricing of smartphones in near future.

While presenting the Union Budget of 2024-25, the Finance Minister said, “With a three-fold increase in domestic production and almost a 100-fold jump in exports of mobile phones in the last six years, the Indian mobile industry has matured. In the interest of consumers, I now propose to reduce the basic customs duty [BCD] on mobile phone, mobile PCBA, and mobile chargers to 15%.”

Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA), an industry body of mobile and electronics industry, said, “We are impressed with its intent and direction focusing on enhancing manufacturing and export competitiveness. Hon’ble Finance Minister has also acknowledged the tremendous growth of mobile phone manufacturing and exports.”

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He added that ICEA recommended to reduce BCD on mobile phones, its PCBA and charger to 15%, which has been accepted.

The mobile and electronics industry is elated with the announcements and will go a long way to enhance manufacturing, exports and our competitiveness, said Mr. Mohindroo.

“The move to reduce the basic customs duty on mobile phones, PCBAs, and mobile chargers to 15% is a progressive step that highlights the maturity and growth potential of the Indian mobile industry. This reduction will not only benefit consumers but also bolster our domestic manufacturing capabilities, allowing India to compete more effectively on the global stage,” said Anand Dubey, CEO, Indkal Technologies.

The proposed exemptions on key components like oxygen-free copper and parts for connectors are also commendable steps that will further strengthen our electronics manufacturing ecosystem, added Mr. Dubey.

“The proposal to reduce the basic customs duty on mobile phones, mobile PCBA, and mobile chargers to 15% is a positive step,” said A. Gururaj, MD of Optiemus Electronics.

“We welcome the Budget 2024 announcement to reduce BCD on mobile phones, PCBA and chargers, while simultaneously extending exemptions on raw materials for smartphone manufacturing, capital goods, and inputs for capital goods in the electronics industry,” said Muralikrishnan B, President, Xiaomi India.

“At Xiaomi India, we have been manufacturing nearly 100% of our smartphones locally with a strong emphasis on sourcing components like PCBA, charging cables, camera modules, and mechanics, among others. Today’s announcement will help further strengthen the domestic electronics manufacturing ecosystem.”

With these progressive steps, we anticipate a surge in consumer spending, including increased demand for smartphones, added Muralikrishnan.

Image used for representative purpose only.
| Photo Credit: K.V.S. Giri

India has the highest tariffs on inputs in electronic segment among competing economies such as Vietnam and Thailand, ICEA said on July 6 citing its latest study as the industry body made a strong pitch for reduction in tariffs.

The high tariffs impact competitiveness, ICEA said, adding that the industry is seeking reduction of tariffs, and glide path to match Vietnam and other competing nations.

Also Read | Electronics industry urges cut in import tariffs

The study revealed that high tariff-induced costs accentuates India’s cost disability vis-à-vis the four competing economies.

India Cellular and Electronics Association (ICEA) said the study is critical to evaluate India’s competitiveness to reach the $300-billion electronics production goal by 2025-26, including $120 billion of exports.

A line-by-line comparison of India’s non-zero tariffs shows that India’s tariffs are higher for up to 98% lines compared to Vietnam (for FTA tariffs) and 90% of the lines compared to Thailand.

The competing economies have nearly double or more zero-tariff lines than India, according to the study released by ICEA at a conference.

ICEA, India’s apex electronics industry association, conducted the five-nation study of input tariffs in electronics sector across India, China, Vietnam, Thailand and Mexico, covering 120 key components.

“…our recommendation is that we should begin decompression exercise starting 2023. Relevant FTAs will take time, targeted tariff reduction is the immediate solution,” Pankaj Mohindroo, Chairman at ICEA, said during a briefing.

ICEA study mentioned that over 80% of Vietnam’s imports for 120 tariff lines are under free trade agreements (FTAs). The average tariff in Vietnam (considering their FTA imports) is much lower — close to 1%.

Also Read | ‘India can make $300-bn electronics by 2026’

The study also claimed that instead of building a domestic ecosystem, high import duties perpetuate imports as it results in uncompetitiveness of the domestic ecosystem.

“Tariffs act in the reverse direction to their intended purpose by adversely impacting costs, growing domestic production and exports. High tariffs only work in an import substitution phase, not when a sector like electronics has entered the phase of export-led growth,” ICEA release said.

India’s mobile phone exports increased nearly 100% to $11.1 billion, and electronics exports by about 56% to $23.6 billion by March 2023.

The study shows that between 2015 and 2021, while India’s electronics tariffs rose, those of the competing economies decreased.

India and Mexico have trade deficits, while China, Thailand and Vietnam have moved to an overall trade surplus.

Despite lower tariffs in 2022 and while tariffs continually decreased during 2015 to 2021, each of the four competing economies performed better than India in exports, trade deficit and surplus for electronics.