India's ending tariff exemptions raises production cost concerns

Jingyue Hsiao, Taipei; Adam Hwang, DIGITIMES Asia 0

The India government has canceled exemption of tariffs on imported PCBs, base station controllers, modules and cable harness used in production of telecom and communication/networking equipment in its fiscal 2022 (April 2021-March 2022) budget plan, raising concerns it could increase production cost.

The cancellation aims to encourage local production, but as local supply chains are not complete and have to rely on imported components for making telecom and communication/networking equipment.

In a bid to encourage local production of telecom and communication/networking equipment, the India government has implemented the Production Linked Incentive (PLI) scheme, and Nokia and Ericsson showing interests in joining the PLI.

Nokia and Ericsson have requested the India government maintain the original exemption of customs tariffs, according to the Economic Times, which said production cost for such equipment could rise by 5-6% if the India government goes ahead with the new policy.

Broadband India Forum formed by related companies has also asked the India government to rethink the policy, according to the Business World.

As India has signed FTAs with Southeast Asian countries, makers of such equipment might move from India to ASEAN and then ship their products to India duty-free.