wto: WTO ruling on Indian duty, if upheld, could hit local production of mobiles

New Delhi: World Trade Organization’s ruling against India’s import duty imposition on mobile phones and telecommunications equipment has the potential to more than halve the local manufacturing by top Chinese players that are not part of the government’s production-linked incentive scheme, industry experts said.A WTO panel recently ruled that India had violated global trade rules after the European Union challenged the levy of 7.5% and 15% import duty imposed since 2017 on a wide range of IT products, including mobile phones (where the duty was further raised to 20%) and components to curb imports in a bid to increase domestic production.

Now, India may have to reverse the duties imposed on these products to zero. New Delhi does have the recourse of an appeal. WTO members take their trade disputes to the Dispute Settlement Body (DSB) in case of a difference, which then sets up a panel through mutual consent. However, in the scenario that it loses the appeal, reversing duties to zero may cause India’s electronics manufacturing push to lose the momentum it has achieved, experts said.

They said while the ruling won’t impact the ongoing PLI scheme and the phased manufacturing program (PMP), it may give Chinese handset makers, which are not part of the PLI scheme, a window to slowly start importing completely boxed units once again.

“Our industry has grown by leaps and bounds after the duty protection regime which checked the import of poor-quality Chinese phones dumped in the Indian market,” said Pankaj Mohindroo, chairman of industry body India Cellular and Electronics Association (ICEA).

“Following the duty protection to mobiles, significant investments in manufacturing has happened by companies like Oppo, Vivo, Samsung and Apple, bringing domestic manufacturing to Rs 3 lakh crores…All these developments are sought to be destroyed by the three panel rulings,” Mohindroo added.

Without effective disincentives in place, the Chinese players will have no reason to keep making in India, and may restart importing fully assembled devices, Mohindroo cautioned.

According to industry estimates, Chinese smartphone brands manufacture $23 billion worth of devices, every year in India, or 50-55% of total local production. In a zero-duty regime, this may more-than-halve to $10 billion per year, a big blow to India’s ambitions of becoming a global smartphone manufacturing hub.

Emails to top Chinese handset makers — Xiaomi, Oppo, and Vivo – did not elicit a response till press time.

Mohindroo added that the government’s push for Chinese brands to work with Indian contract manufacturers for exports might be stalled.

That said, the Indian industry no longer needs the level of ‘protection’ of 22%. “We can comfortably move to 15% immediately, and gradually to 10%,” Mohindroo said. This is because the mobile manufacturing story is led by the likes of Apple and Samsung, the largest beneficiaries of the PLI scheme, and accounting for a large chunk of local production and exports from India.

“Obviously the duties act as an incentive to make locally in India, but presuming the worst-case scenario here, we may have to go back to a regime when along with zero duties on finished goods, all inputs are also at zero duties to make it palatable for brands to make in India,” said Sunil Vachani, managing director, Dixon Technologies, which manufactures mobiles for a host of global brands such as Samsung and Motorola.

“With the PLI scheme in place, we will continue to remain competitive in the global landscape due to the large scale, as well as the sops that make India an attractive destination to manufacture,” he added.

However, another industry expert, who wished not to be identified, said the Chinese handset players may now find it difficult to make in China as the labour availability is now scarce, and labour costs have shot up significantly.

They have also committed to making in India, investing in manufacturing facilities to feed the domestic demand. For instance, Vivo announced it will invest ?1,100 crore by 2023-end to expand its local production capacity to support local and export requirements, and make its new 169-acre manufacturing facility operational by early 2024.


Source link

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top