India is considering imposing customs duties on telecom components in a phased manner.
What is the proposal?
The intention is to boost the domestic supply chain and simultaneously transform the country into a global telecom gear manufacturing hub.
The proposal, currently under examination by the Department of Telecommunications (DoT), suggests an initial 10 per cent import duty in January and increasing it to 15 per cent by October next year.
Components that would attract this duty includes packaging items, antennae, WiFi switches, plastic and metal housing items, wires, cables, USB ports, connectors, power adaptors, and other electrical and mechanical items relevant to the telecom industry.
All this is part of the government’s Phased Manufacturing Programme (PMP), designed to incentivise local production and enhance value addition.
The goal of this plan is to boost India’s telecom gear manufacturing capabilities.
To promote domestic production
It would start with promoting local production of low-value accessories and gradually moving to high-value components.
This would be supported by raising the basic customs duty on imported accessories and components.
Telcos to obtain permits and govt approval
The Directorate General of Foreign Trade (DGFT) would implement an import licensing regime if the proposal is approved.
Telecom companies would be required to obtain permits and prior government approval for importing network gear used in fiber-based home broadband networks.
The telecom industry has expressed hesitation regarding the proposed customs duties on imported components.
Industry leaders argue that India lacks an immediate local ecosystem for these components.
This would lead to supply chain disruptions and increased costs for network deployment.
However, the government is motivated to push for self-reliance in the telecom sector due to national security concerns and the desire to encourage participation in the production-linked incentive (PLI) scheme for network gear.
The potential customs duties could discourage imports and ensure that telecom gear manufacturers actively use locally available components.
The move could also reduce India’s dependence on foreign markets, especially China, for imported components and raw materials.