Budget 2024: Customs duty hike to increase costs for 4G, 5G network rollout

Union Budget 2024: The increase in basic customs duty on printed circuit board assemblies from 10% to 15% can help create a robust telecom equipment manufacturing ecosystem in India

The cost of upcoming 4G and 5G network deployments is expected to rise following Finance Minister Nirmala Sitharaman’s proposal to increase the basic customs duty (BCD) on printed circuit board assemblies (PCBA) from 10 per cent to 15 per cent in the Budget 2024.

Around 80 per cent of PCBAs, which are crucial components for telecom equipment like mobile base stations, are imported. More than 50 per cent of the PCBAs used in optical fibre network equipment, mobile switching centres (MSCs), and routers are also sourced from abroad, according to a report by The Economic Times.

Vi may face major impact

Experts anticipate that Vodafone Idea (Vi) will bear the greatest impact. The unprofitable telecom company has not yet deployed 5G networks and is currently focused on expanding its 4G coverage in key areas to compete with larger competitors like Reliance Jio and Bharti Airtel, the report said.

In contrast, India’s leading telecom providers, Jio and Airtel, are expected to remain unaffected in the near future, having already completed their nationwide 5G rollouts.

The news report quoted an executive of a global networks vendor as saying, “Network rollout costs will rise by around 4-5 per cent once the higher BCD is passed on to the client as the dependence on imported PCBAs for manufacturing base stations, OFC gear, routers to switches is still pretty high, ranging from 50-80 per cent.”

Also Read: Budget 2024: Freshers to get one month's free salary. Check eligibility

Boost for local production

Domestic telecom equipment manufacturers are optimistic about the upcoming increase in customs duties, which is expected to enhance local production of PCBAs by making imports of this crucial network gear component more expensive, the report said.

PCBAs are vital for the production of various telecom network equipment, including base stations, routers, OFC gear, switches, exchanges, transmission systems, and customer premises equipment (CPE). A PCBA is the completed board with all components soldered and installed onto a printed circuit board (PCB).

Stimulate manufacturing ecosystem

Contract manufacturers such as Dixon Technologies and Optiemus Electronics, who already produce a significant portion of PCBAs for various CPEs such as routers, fixed wireless devices, and Android-based set-top boxes, expect that the BCD (basic customs duty) increase will further stimulate domestic manufacturing, the report said.

The report quoted Atul Lall, managing director at Dixon Technologies, as saying, “The proposed increase in the basic customs duty for PCBAs will further boost their local production, minimise import dependence, and eventually help create a robust telecom equipment manufacturing ecosystem in India.

Currently, more than 70 per cent of the PCBAs used in telecom CPEs are produced domestically in India, while the remainder are imported.