Cheaper connect to cell phones

Three key accessories — battery pack, chargers and hands-free headphones — can now be mass-produced in India at lower prices.

For the common man, Budget 2010-11 has brought some cheer with Finance Minister Pranab Mukherjee’s attempt to boost the uptake of mobile handsets. The Budget has included tax exemptions for accessories and batteries, prices of mobile handsets and accessories are expected to come down by as much as 15 per cent.

In a bid to encourage domestic manufacturing, the finance minister has exempted mobile accessories such as battery chargers and hands-free devices from basic countervailing duty (CVD) and special additional duties (SAD). So, three key accessories — battery packs, chargers and hands-free (bluetooth and wireless) headphones — can now be mass-produced in India at cheaper prices, benefiting the over 500-million telecom subscribers.

But, don’t expect prices to come down immediately, say industry experts. “The impact on prices will be 10-15 per cent, but this will come into effect only when the new batch of accessories is manufactured. It might not have an immediate impact,” said Pankaj Mohindroo, president of the Indian Cellular Association.

Ambrish Bakaya, director (corporate affairs), Nokia India, agrees. “The announcement is clearly aimed at giving an impetus to manufacturers. I think the benefits of this will cascade into the market, but not immediately. In the long term, I think prices will go down further, as anything that reduces costs, whether an accessory or something else, impacts the product,” he explained.

The Budget has also done away with the 4 per cent SAD on pre-packaged goods imported for retail sale. The exemption is largely seen as a breather for the telecom industry, which feels that more capital in hand will help it bring handset models faster to India. “Removal of the special additional duty is a good move. It will take away delays and help the industry manage cash flows to that extent,” said D Shivakumar, vice-president and managing director, Nokia India.

To clarify further, in 2008, a scheme for refund of SAD paid was introduced for those who imported handsets for resale. The procedure of getting exemptions was cumbersome and importers ended up with a lot of blocked capital due to delays.

According to Venugopal Dhoot, chairman, Videocon Group, this could also give a push to handset manufacturing in the country. “Mobile phones are not mass-manufactured in India yet. But this move will encourage local and multinational players to get into manufacturing rather than just import,” he added.

Ramesh Vaswani, executive vice-chairman, Intex Technologies, echoed the sentiments. “This move of the finance minister will act as an incentive for foreign vendors of mobile phone accessories to set up local manufacturing facilities,” he said.

Rajiv Agarwal, chief executive and director, MobileStore, said the changes in direct tax slabs would leave more money in the hands of consumers, which was a good sign for the retail sector.