The Indian government has been urged to review duties on the import of mobile device components from Vietnam by the India Cellular and Electronics Association (ICEA).
The value of component imports from Vietnam into India has skyrocketed, exceeding $1 billion in the first half of this fiscal year compared to $800 million for the entire previous fiscal year (FY19) and around $600 million in FY18.
In a letter to the electronics and IT ministry, the ICEA said: “the import numbers have started to look astounding. In the face of this, we can ill-afford any further duty imposition and, in fact, need a rethink on whether some of the duties imposed should continue as they are.”
The association called for the government to support local production by amending duties under its phased manufacturing programme (PMP) as well as cutting imports, saying: “Not only should we not proceed with any additional duty imposition and simultaneously withdraw all unintended residual components of basic customs duty, we should re-evaluate all current PMP duties on all sub-assemblies and components by studying the Vietnam imports meticulously.”
Three years ago, device manufacturers in India proposed duties as a means of discouraging imports so as to boost local production and increase exports. This led to the government imposing basic customs duty of 15% on several components, as well as 20% duty on fully assembled devices.
However, India has a free trade agreement with Vietnam, meaning that zero-duty imports from this market (and other ASEAN countries such as Japan and South Korea) are legal. The ICEA argues that this renders India’s duty-led regime pointless as this loophole is exploited by many major firms – particularly as India has an ecosystem of device makers, but not of component manufacturers.
The ICEA acknowledged that this issue was not considered when plans were first conceived for differential duty and PMP, but noted that the government had failed to act against it. India’s new National Policy on Electronics 2019 is aimed at boosting India’s standing in global manufacture to the extent that increased component production becomes a natural corollary, with the ICEA noting that this means that “the import of substitution concept has run its course.”