The Modi government isn’t giving in to Apple’s demands for concessions and exemptions to set up a manufacturing base in India.
New Delhi: The Narendra Modi government seems to be in no mood to roll out the promised red carpet for Apple Inc. The tech major’s year-long negotiations to facilitate the setting up of a manufacturing base for finished goods (FG) in India are proving to be tougher than expected, with the government taking strong positions against the various concessions and exemptions it has sought.
In a communication dated 9 October 2017, accessed by ThePrint, the Department of Industrial Policy & Promotion (DIPP) has all but ruled out any further duty exemptions for Apple, or extending permission to repair and re-export used mobile phones for up to seven years, as requested by the Cupertino, US-based giant.
The DIPP has written to Apple India Private Limited on its reference “seeking concessions/exemptions as pre-requisites to establish iPhone FG manufacturing in India”, and has also put out a status report on each of these pre-requisites.
Apple has sought full duty exemption on manufacturing and repair inputs, capital equipment, parts and consumables for smartphone manufacturing and service/repair for 15 years, for both domestic and export markets.
The Modi government has indicated no such preferential treatment may be possible. It has pointed out that while a Basic Customs Duty (BCD) of 10 per cent has been imposed on cellular phones from 1 July under the GST regime, an “exemption from BCD has been given for inputs and raw materials for manufacture of all parts of cellular mobile phones”. There is also the same 12 per cent GST for both domestically-manufactured and imported cellular phones, it has added.
The other critical issue for Apple is the ability to import, repair, and re-export goods. It has sought permission to import used goods beyond the existing provision of three years and up to seven years, saying its “overseas warranties involve repair of mobile phones up to a period of seven years”.
Apple has consistently been arguing for this waiver, pointing out that its ability to import defective units for repair and re-export is an “essential element in a global supply chain”. It has also sought assurances that the system will not be abused, as serial number tracking can be brought in. As per existing provisions, used electrical goods can be imported for repair and re-exported within one year of import. If the re-export is after a year, the government’s permission is required. The idea is to check dumping of e-waste in India.
The DIPP has, however, rejected Apple’s argument, saying that used electrical and electrical assemblies (EEAs) can already be imported for repair and re-exported with same machine identity within one year.
“Further, EEAs which are under warranty and need repairs can again be imported and re-exported within one year. Thus extension for seven years may not be necessary for products under warranty,” it said.
Apple has also been reminded to submit details on recycling of the waste generated, and it has been pointed out that “since the present proposal for import, repair and re-export of used iPhones may have similar issues relating to waste generation in the country, full details are required from M/s Apple Inc. to address the environmental concerns raised by Technical Review Committee”.
Apple also wanted clarity on the Merchandise Export from India Scheme, to which the DIPP clarified that a 2 per cent incentive is available for the export of mobile phones. On advance pricing, it has been asked to approach the Central Board of Direct Taxes.
The grand design
Apple has been expanding its presence in India over the last three years and now operates from three offices – in Bengaluru, Gurugram and Mumbai. The company’s big India plan got a major push earlier this year when CEO Tim Cook called on PM Modi in May. It is also working with Taiwanese firm Wistron Corp to assemble the iPhone SE in Bengaluru.
While the first phase of Apple’s expansion programme centres on the iPhone FG manufacturing, other plans include single brand retail trading, iPhone CPO import and iPhone CPO manufacturing, in order to fulfil the domestic demand for Apple goods and expand some to global markets.
Apple manufactures over 200 million iPhones annually. India sales account for approximately 1% of the iPhone’s worldwide sales.
Who said what
In response to queries from ThePrint, the DIPP declined to comment, saying several ministries were involved in the discussions. Apple, too, declined to comment on the matter.
However, according to the DIPP communication accessed by ThePrint, a series of meetings have been held with all stakeholder ministries, and all of them are “positively inclined to the proposal” mooted by Apple.
“The Government of India has taken a number of measures to encourage domestic manufacturing in the country and is actively engaged in resolving the issues raised by Apple. In this regard, series of meetings were held with stakeholder Ministries/Departments namely Department of Commerce, Department of Revenue, MeitY and Ministry of Environment, Forest and Climate Change. All the Departments are positively inclined to the proposal,” it said.
According to PTI, Alphons Kannanthanam, the new Minister of State for Electronics and Information Technology, said Tuesday that the government does want Apple to come to India, and that the proposal is being examined.