India has proposed to reduce import duties on telecom equipment, including mobile phones and smart watches, and offered an optimum duty reduction package, in line with the United State’s (US’) demands.
According to sources, Commerce and Industry Minister Suresh Prabhu told US Commerce Secretary Wilbur Ross that duties on IT products — a key US concern — may be cut, but not eliminated.
Since under the World Trade Organization rules, import duties have to be similar for all nations, tariff reduction on telecom equipment may lead to major revenue loss for the government and a jump in imports, which stood at $15.82 billion in the April-February period of 2016-17.
During his visit to India, the US commerce secretary has repeatedly hit out at India for charging high tariffs on US products, enacting market access barriers and having a difficult regulatory environment.
While the US had earlier trained its guns on India regarding “high” tariffs on US motorcycles and alcoholic beverages, Ross also focused on high duties on telecom network equipment. “The tariffs for network routers and switches and parts of cellular phones are as high as 20 per cent,” he said on Tuesday.
The US has put other items — including radio receivers, high-end mobile phones (costing more than Rs 10,000), components, certain print circuit assemblies, and smart watches — in its wishlist of products on which India should eliminate duties.
India has however argued that duty elimination will only help countries like China and Hong Kong and not the US. “Of the more than $20.5 billion of imports on the tariff lines proposed by the US side, the US share is only 2 per cent ($415 million),” said an official document, part of the ministerial discussions, reviewed by Business Standard.
Bringing in the issue of Washington deciding to cut off India’s duty-free access to US markets under the Generalised System of Preferences (GSP) trade scheme, India has said that US concessions on the programme totaled only $190 million. “This figure is now even lower, with recent removal of certain products by the US from GSP benefits for all countries,” the document said. On the other hand, India will suffer a potential revenue loss of $3.2 billion if duties are removed on IT product tariff lines, it added.
India has also sought to calm US nerves on the proposed e-commerce policy that Washington claims restricts entry by foreign corporate firms and raises the cost of business of US companies through forced server localisation.
“Comments from different stakeholders including the US are being examined by the Government of India and the final draft will be modified suitably after considering all the comments from stakeholders,” the document said, indicating the possibility of less stringent rules.
The US has been flagging concerns on areas like the broad-based data localisation requirements and restrictions on cross-border data flows, as well as expanded grounds for forced transfer of intellectual property and proprietary source code.
It is also against preferential treatment for domestic digital products, which it says is ground for discrimination.
The government has also brought in new restrictions on inventory control and requirements, limiting individual sellers to a maximum of 25 per cent of aggregate sales.
The government has clarified it intends to create a level playing field for all the players including domestic and foreign companies.