)
Several foreign technology firms including Cisco, Nokia Networks and Huawei, among others, are crying hoarse over a Union Budget mandate, which has imposed 10 per cent import duty on some telecom equipment.
The directive not only increases the cost of the equipment but also goes against the global Information Technology Agreement (ITA), of which India is a signatory as a member of the World Trade Organisation, the companies have alleged.
Under the ITA agreement, products falling under eight categories including telecom, computers and semi-conductors are allowed to be imported duty free by the member countries.
Also Read
Some of the companies are said to have also reached out to the Prime Minister's Office (PMO) over the issue, apart from raising the issue at the level of the Union telecom and finance minister.
John Neuffer, senior vice-president of global policy at Information Technology Industry Council said that the 10 per cent import duty on telecom equipment sent a “negative signal.” Even though finance minister Arun Jaitley had said that the tariff hike would be imposed only on products which were not under the purview of the ITA, the notification by the department of revenue might have included products which are covered in the accord, he added.
Neuffer and his team at the council, whose members include the top 60 technology companies of the world (including all major ones from the US, Europe, Japan and Korea), are currently meeting key officials of the PMO, IT ministry, consumer affairs etc. On the agenda are key issues which have impacted top tech companies in the past such as the preferential market access policy, the policy mandates around the Bureau of Indian Standards’ compulsory registration order and telecom security equipment testing.
The notification has imposed the tariff hike on equipment used in Voice Over Internet Protocol or VoIP, optical transport, and Long Term Evolution products among others. Though the impact to the industry in terms of additional cost could not be immediately ascertained, Neuffer said that it would have a “significant commercial impact.” Official of another firm said that the 10 per cent increase in duty would have an impact on the capital expenditure target of each and every telecom service player, which might have a cascading impact on the consumer as well.
The official, who requested not to be named, said that in the industry’s representation to the finance minister, it said that the mandate was a “regressive step” and imposing it would be bad for the sector, which had been in recession for the past two-three years and was just coming out from it.
The intention of the directive is in line with the larger objective of the government to boost local manufacturing of electronics. One way to achieve this aim is to make it more expensive to import goods. Currently, it is more expensive to produce most goods locally in India, compared to importing them. Neuffer said that the new government is carrying the legacy of the past government by taking measures such as increasing the tariff on telecom imports. “This is a new direction?” he questioned. You can’t force manufacturing in India this way, he added.
The country’s electronics import bill is expected to surpass that of oil by 2020. This concern has sparked a slew of policy measures to incentivise domestic manufacturing.
The Nokia Network said in a statement that while it welcomed the government’s initiatives to provide an impetus to manufacturing but the 10 per cent customs duty on specified telecom equipment imports could have an “impact on overall cost for the telecom industry at a time when India needs better capacity and coverage of mobile broadband networks to cater to the rapidly increasing mobile data traffic.”
