Expand PLI scheme for electronics inputs and components, ICEA tells Centre

The Indian Cellular and Electronics Association of India (ICEA of India) has petitioned the government on extending the production-linked incentive (PLI) scheme to components and sub-assemblies for electronics with an initial budgetary allocation of Rs 5,000 crore. This, it said, is to “test the waters”.

The organisation has projected that components and sub-assemblies could provide a $100-billion export opportunity in the next five years.

This comes after the government has not been able to  push localisation (make in India) and therefore value addition by imposing tariffs on inputs and components for sub-assemblies to make mobile devices.

The ICEA has said tariffs on inputs and components are a barrier to localisation and has asked for scrapping the duties to zero on most of the inputs.

According to estimates by the ICEA, the hike in tariffs on inputs for sub-assemblies in the last Budget has increased the average cost of production (COP) for mobile device manufacturers by 1.76 per cent, and, if the last two Budgets are considered, it would be 3-4 per cent. That is why the ICEA has petitioned the government that smaller “nuisance tariffs” across a range of components, starting from 2.75 per cent, “which (do) not have any beneficial impact and only (create) a burden for legitimate manufacturers should be removed”. These include duties on parts and components of mobile phones used to make a whole range of mechanical parts, printed circuit board assemblies, camera modules, and chargers.

The ICEA wants them to be zero. In its discussions and presentations to the government, the ICEA has pointed out it has envisaged mechanics (also known as mechanical parts) as low-hanging fruit in the phased manufacturing programme (for being made in India), in which they were included in 2017. However, the production of mechanics in India has not been up to expectations and even now 70 per cent of what is required is imported.

This, the ICEA said, is owing to the uncharacteristic duty imposed on resins at 8.25 per cent despite the fact that specialised resins are not manufactured in India. The duties on other inputs required for making mechanics, such as sponge, mesh cover tape, gasket, and adhesive, go up to 16.5 per cent. The ICEA has said the country “could have replaced imports completely if we had (a) rationale duty structure”.

It has suggested components not manufactured in India be exempt from duties.

For instance, a preliminary study done by mobile device makers says that the simple average MFN (most favoured nation) tariff for mobile phones and its supply chain, and select major electronics products is 9.9 per cent compared to 5.7 per cent in Vietnam, 3.2 per cent in China, 5 per cent in Thailand, and 3.5 per cent in Mexico.

Owing to free-trade agreements with over 56 economies, Vietnam’s duty on goods from a majority of the countries is as low as 1 per cent.