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Mobile phone manufacturers request for old rules on importing parts

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Mobile phone manufacturers in the country have requested the government to reestablish the old rule of submitting an undertaking with a bond or bank guarantee for importing mobile parts, instead of submitting a surety, which has led to higher costs.

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According to letters sent to Department of Electronics & Information Technology (DeitY) Secretary Aruna Sharma and revenue secretary Hasmukh Adhia, by Indian Cellular Association (ICA), the new rule has led to an increase in transaction and compliance costs, at a time when the industry is already burdened with huge compliance costs.

"These issues are suffocating the potential of the manufacturers to optimize their manufacturing capacity," Pankaj Mohindroo, National President of the ICA said. "We feel that given a limited number of producers, each with substantial capital assets, additional check of surety serves little purpose."

"Amendment to replace bank guarantee with surety is also not working as the industry has to fall back on guarantees due to lack of resources for surety, especially in a case of FDI companies," Mohindroo added, while requesting immediate reversion to the old system with simple undertaking with the bond.

The recent changes in the customs rule according to ICA have added various complexities in the manufacturing of mobile phones and its parts and have resulted in "chilling effects on manufacturing operations" in the country. Budget 2016 introduced new Import of Goods at Concessional Rate (IGCR) of Duty for Manufacture of Excisable Goods rules, 2016, which replaced the earlier scheme with a view to streamlining the procedure for import of goods for further manufacture.

The ICA, also hopes for a change in the rule for the utilization period of the imported goods for mobile manufacturing to the earlier six-month period, from the current three months, which has taken away the cost advantage of bulk buying.

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