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'Affordable mobiles should be given concessional duty treatment'

The mobile handset industry is among the fast growing Industry today, having immense potential towards generating employment across all sections of the society.

Rajeev Jain        Last Updated: January 30, 2017  | 19:50 IST
'Affordable mobile handsets should be given a concessional duty treatment'
Rajeev Jain, Chief Financial Officer, Intex Technologies

The mobile handset industry is among the fast growing Industry today, having immense potential towards generating employment across all sections of the society. In the last fifteen years, mobile handsets have become a necessity, first with the affordable feature phones and now with the smart phones aiding internet penetration in every nook and corner of the country including the hinterland.  Currently, India has nearly 300 million smart phone users and are becoming the catalyst for the Government initiatives such as 'Digital India', 'Skill India', 'Make in India' and 'Smart Cities'. In last two years, due to government initiative, the industry has added employment to around 50000 people and tapping on to more immense potential at a steady pace.

Post-demonetization, the entire country is looking forward towards mobile phones as the right platform to promote digital payments and cashless economy via mobile banking, digital payment apps, telco apps, UPI and USSD. The cashless drive will further expand and create new user base going forward, thus fueling the growth in mobile handset industry.

The penetration in household items like refrigerators and washing machines is very low as compared to international standards. TV penetration in Indian households is around 60% against global peers at 89%. Similarly, washing machine penetration is around 9% against international standard of 70%. The inclusive India growth cannot afford to have such dismal penetration levels and showcases the immense untapped potential in India market. However, with continuous focus of present government on rural infrastructure and availability of power and connectivity, both mobile handset and consumer electronics is likely to witness multifold growth.

The potential of industry can be exploited faster by a few following steps:

A long-term policy on mobile manufacturing in India has to be laid out. Although the mobile handset industry is working towards an agreed phased manufacturing program, the speed can be increased if we have a stable policy with stated long-term goals. The industry has huge potential and can supplement government initiative towards 'Make in India' with highly technical products. Interestingly, in the last two years, 40+ new mobile phone manufacturing units were set up along with 15 new component units. Additional direct employment of 50,000 has been added in the last fiscal year. There are many examples in other industries as well like the automobile where a clear laid out program reduced dependence on imports.  In fact, we are now exporter in the automobiles.
The Government of India has also set out a vision to establish India as a global mobile phone and component manufacturing hub and hence, has constituted a  Fast Track Task Force which aims at 500 million phones (worth Rs 3 lakh crore), 50,000-crore worth ccomponent industry and generating 15 lakh employment by 2019-20.

Policy on research and development must incentivize corporates to go for research if we wish to succeed in a highly technical industry like mobile handset. China and Taiwan are the global manufacturing hub for mobile components because their governments offer varied export incentives to augment manufacturing in their respective countries. India should evaluate and strategize to remain competitive in future, turning "Make in India" a success. Execution of planned blueprint for mobile industry will be an impetus to bring sophisticated component manufacturing in India and unleash our manufacturing prowess.

The affordable mobile handset or consumer durable items of certain value should be given a concessional duty treatment to give the government's digital initiative an impetus. Irrespective of the increased purchasing power, consumers continue to be price conscious and hence we need to cautiously make foray into rural sector for the penetration of mobile handsets and consumer durables.

Technical skilled manpower is another challenge that needs to be addressed to realize our manufacturing targets. Training manpower for repair and refurbishment is an efficient and effective way, wherein the government incentives may invite corporates to invest their time and money in skilling the youth of India. Though we are taking steps to train manpower and have tied up with U.P. government and TISS, yet this is additional cost as compared to Chinese competitors.

Lastly, better clarity under GST  about the duty differential between manufactured items and traded items is indispensable. The present duty differential in CBU and SKD in mobiles must be protected (13.50%- 2%) to maintain the momentum of "Make in India".

It is necessary to have coordination among various departments of the Government, educational and research institutions, industry and trade to formulate a policy road map, which will boost the manufacturing capabilities and the youth of India realizing their amass potential. The examples in other industries has already proven that the coordinated efforts has changed the face of industry and realized potential over time. The mobile hand set industry has this potential.

 

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