India-made mobile phones to become expensive by 1-2%

Consumers will have to shell out 1-2% more on mobile phones following the levy of a special additional duty (SAD) on circuit boards of mobile phones.

The Union Budget for 2017-18 imposed a SAD levy of 2% on populated printed circuit boards (PCBs) that is the heart of the smartphone and accounts for nearly half of the manufacturing cost of the phones.

"This will lead to a potential one% increase in cost of mobile handsets. In the initial phase, the cost will be passed on to consumers as it is difficult to absorb this cost fully," Panasonic President and CEO (India and South Asia) Manish Sharma told PTI.

Other handset makers, however, declined to comment on the impact on prices.

"Due to increase in duty by additional 2%, we estimate the price of mobile phones to go up to 1-2% but it depends on OEMs to decide whether to pass it on to end consumers or not," Counterpoint Research Senior Analyst Tarun Pathak said.

He added that handset companies may cut down on bills of other components to nullify the increasing cost as most of the mounted components for PCB are still imported.

Finance Minister Arun Jaitley in his Budget Speech said the focus is on creating an ecosystem to make India a global hub for electronics manufacturing.

Over 250 proposals envisaging investment of Rs 1.26 lakh crore for electronics manufacturing have been received in the last two years, he said.

"A number of global leaders and mobile manufacturers have set up production facilities in India. I have therefore exponentially increased the allocation for incentive schemes like M-SIPS and EDF to Rs 745 crore in 2017-18. This is an all-time high," he added.

The industry is of the view that the Budget will push handsets makers to move from local assembly to actual manufacturing.

Indian Cellular Association National President Pankaj Mohindroo said phased manufacturing is at the heart of development of mobile ecosystem to achieve target of 500 million handset production by 2019 and export target of 120 million mobile phones by 2019-20.

"Though the Budget does not talk about it, we expect it to be taken up during debate," he added.

Micromax co-founder Rajesh Agarwal said 'Make in India' is a great opportunity, given India has attracted huge investments in local manufacturing lately not only benefitting the economic growth but also creating increased employment.

"At Micromax, we are committed to supporting the Make in India initiative and invest accordingly," he added.