If you follow the smartphone market in India, then you must have seen that smartphones are getting expensive. In fact, a few years back, there used to be a lot of smartphone options between Rs 7000 and Rs 10,000 price bracket. However, apart from different memory variants of the same model, you will no longer find many options in the same budget range.
Also, another factor to consider is that almost every popular smartphone from top brands in India sees price hikes within a few months of their launch in the country. Earlier, brands used to reduce the prices of popular smartphones to increase sales. But now, it seems that the smartphone industry is collectively increasing the prices. Some smartphones from brands like Xiaomi, Poco, Realme, Oppo and others have seen several price hikes during 2021. To recall, Xiaomi had increased the price of its hugely popular Redmi Note 10 smartphone thrice within five months of its launch.
Not just Xiaomi, popular models across all major smartphone brands have seen a price hike during 2021. So, why is this happening? The industry has collectively responded that the sole reason for the increased prices is the increase in import duties and taxes on components such as camera modules, chargers, PCBAs, power banks and other essential components to manufacture smartphones.
ICEA President’s letter to the government
Mobile industry body ICEA (India Cellular and Electronics Association) has expressed concern over the hike in import duty in the budget for 2021-22. according to a report good By The Economic Times, ICEA President Pankaj Mohindru wrote a letter to Union Minister of State for IT Rajiv Chandrasekhar about the increased tariffs on mobile components.
Mohindroo said in his letter that these charges were “suo-motuly levied by the Revenue Department”. According to a report in The Economic Times, “losses between Rs 10,000 crore and Rs 15,000 crore have been incurred due to shortfall in production due to competitive losses.”
The ICEA president said the production-linked incentive (PLI) scheme “struggles” with increased tariffs. “The PLI scheme aims to reduce the current cost inefficiency in India versus China and Vietnam, but tariff hikes on components will exacerbate this “cost inefficiency”.
In another press statement, ICEA said the government offered incentives under several schemes to attract global and domestic manufacturers, resulting in the production of mobile phones increasing from 6 crore units worth Rs 19,000 crore in 2014-15 to 33. million units. Value of Rs 2,20,000 crore in 2020-21.
“The 12% GST rate on mobile handsets increased the tax in this sector from the current national average rate of ~8.2% (pre-GST era) of about 50%. The industry was emerging from GST with a tax hike, and the government introduced a The rate is again increased by 50% (i.e. from 12% to 18%).The effect of this increase in the GST rate is to increase the prices for the consumers, which in turn is reducing the demand for mobile phones. .
“Furthermore, this move of the government is also proving to be a deterrent to the ‘Digital India’ initiative, as the current high cost of smartphones gets compounded further due to increase in GST rate,” ICEA said.
Recently, ICEA, in its letter to Chief Ministers of various states, requested them to reduce the GST rates on mobile phones to 12% and on parts and components to 5%.
Why mobile brands don’t want to shift production from China to India
In his letter, Mohindroo explained, “The gray market in high-end phones is over 50%. Price arbitrage in high-end phones is 43.96% (of which 22% is BCD and 18% is GST)…a high BCD Will not encourage companies to make high-end phones in India, and will not remove or rationalize it. Change your plan to shift manufacturing from China to India.”