Turning back on a decade and a half's time starting when cheaper mobile phones from abroad entered India's domestic market, the government is now gearing up to make India a manufacturing hub for electronics and especially mobile phones.
Under the phased manufacturing program (PMP) developed by the Ministry of Electronics and Information Technology (MeitY), the government wants to jump start the large scale manufacturing of one the largest selling consumer goods in the country — mobile phones.
After India signed the World Trade Organisation’s ITA-1 pact, it became cheaper to import components as well as finished goods (Information Technology Agreement), under which certain inputs for IT products were exempted from duties.
According to industry estimates, only about two per cent of value addition is done in India with regards to mobile phone manufacturing. Raising that figure over the next ten years is the primary aim of the PMP, which was proposed by a joint panel of the industry and the government.
In 2016-17, total value of mobile phones to be produced in India is likely to reach Rs 90,000 crore from Rs 54,000 crore in 2015-16.
Here are the key highlights of the policy:
The panel set up under the MeitY has set target of 500 million handset production by 2019 and export target of 120 million mobile phones by 2019-20, taking annual manufacturing output in the range of Rs 1.5-3 lakh crores.
Mobile phone makers will get tax benefits and incentives to promote the sub-assembly of various mobile parts on a phased manner.
This will include mechanics, microphone and receiver, keypad and USB cables in 2017-18; printed circuit boards, camera modules and connectors in 2018-19; and display assembly, touch panels, vibrator motor and ringer in 2019-20.
Key parts such as printed circuit boards (PCBs) continue to be imported. PCBs are the backbone of mobile phones and covers nearly 54 percent of the total cost. With China dissuading local units from producing lower-end phones, to focus on producing premium devices, it is likely that real manufacturing would kick off in India.
PMP will run alongside a major scheme supporting electronics manufacturing clusters under which 8,000 acres of land will be developed across the country over the next three years.
The government also expects to engage with Apple under the conditions of PMP. While Apple has proposed to shift manufacturing to India, it has continued to demand a series of sops including a ten year tax hliday and duty free imports of components, among others.