India wants double-size bite of Apple, but govt not keen on more sweeteners
Your iPhone and iPad might not get the made in India tag, just yet. Top sources in the government say that it is unlikely to further sweeten the deal for Apple to start manufacturing in India with its contract manufacturer Foxconn. Though India is still keen for the U.S. tech giant to produce its signature smartphones here, and Information Technology Minister Ravi Shankar Prasad said on Wednesday that India would keep an “open mind” in negotiations.business Updated: Jan 19, 2017 13:12 IST
Your iPhone and iPad might not get the ‘made in India’ tag, just yet. Top sources in the government say that it is unlikely to further sweeten the deal for Apple to start manufacturing in India with its contract manufacturer Foxconn.
India is still keen for the US tech giant to produce its signature smartphones here and information technology minister Ravi Shankar Prasad said on Wednesday that India would keep an “open mind” in negotiations.
“We will very much like Apple to come and have a base in India,” he said.
But Apple Inc has a long list of incentives and tax sops that it wants before it starts manufacturing in India.
Three departments within the Indian government are looking into Apple Inc’s list of demands. They are: department of industrial production and promotion, department of revenue and department of information and technology. This panel will take a final decision on Apple’s demands on January 25.
“Apple has been looking for several duty and tax incentives for manufacturing handsets in India, but the government is unlikely to make any exception for one company,” said a top official in one of the departments mentioned above. Speaking to HT on condition of anonymity, the official said that any exception for the iPhone manufacturer will defeat the purpose of an integrated policy such as Make-in-India.
Apple wants more incentives from the government under the Make in India. Local manufacturing will help Apple open retail stores in the country. Taiwan’s Hon Hai Precision Industry Co Ltd (Foxconn), which makes Apple devices, has a manufacturing facility in southern India.
“Apple wants higher exemptions since there are not many high-end phone-component makers in India to buy from,” said another government official, who did not wish to be named. “The company will have to manufacture the components in India, and it has to meet international standards.”
Apple CEO Tim Cook has said that the company was looking at India as the next big market. Apple was not in India for a year or two, instead “100s of years”, Cook said during his visit to India earlier in the year.
HT’s mail to Apple has so far not received any response.
The government already offers several initiatives, including differential duty structure, modified special incentive package scheme (MSIPS) and zero-duty on import of all components except adapters, batteries and headsets, for global and local manufacturers, under Make in India.
Aimed at promoting electronic manufacturing, MSIPS provides capital subsidy of 20% in special economic zones (SEZs) and 25% in non-SEZs, in the form of reimbursement of excise for capital equipment. For high-capital investment projects, it also provides for reimbursement of central taxes and duties.
Also, if a handset-manufacturer assembles phones locally, then it just pays a 1% duty, instead of the 12.5% on a phone that is imported.
However, Apple seems dissatisfied with just these benefits. A person in the know of things said that India is now being compared to manufacturing destinations like Vietnam and China.
“Apple might want MSIPS to continue, freight subsidy as the country has logistical issues, continuation of differential duty on mobile handsets and components manufacturing even when the GST regime comes in and income tax holiday in the country just as China or Vietnam offers,” an industry expert told HT.
Earlier, the Tim Cook-led company had sought relaxation of local sourcing norms under the shield of ‘state-of-the-art and cutting edge’ technology providers.
A foreign brand looking to open single-brand retail stores in India is mandated to source 30% from Indian manufacturers for a minimum period of three years. With Prime Minister Narendra Modi’s intervention, Apple is likely to see a relaxation on this, from three to five years.
“Apple wants higher exemptions since there are not many high-end phone-component makers in India to buy from,” said a government official, who did not wish to be named. “The company will have to manufacture the components in India, and it has to meet international standards.”
Competitors such as South Korea’s Samsung Electronics and China’s Xiaomi have already set up manufacturing in the country.
In May 2016, Modi and Cook agreed to work towards a “package” of four projects: assembling iPhones, opening Apple stores, importing certified pre-owned iPhones and refurbishing them in India, according to the letter.
Apple said its initial focus was to set up manufacturing of iPhones in India over two phases, the first of which was to be introduced by spring this year.