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Will iPhones get cheaper in India? Govt reserves decision for now

An inter-ministerial committee on Wednesday will decide if your Apple iPhone and iPad will get cheaper. Apple has asked for sops from the government to start manufacturing in India and analysts along with industry leaders see this as an opportunity to lure big telecom equipment manufacturers to India.How will the iphone get cheaper? Simple, if Apple starts locally assembling or making earphones, adapters (chargers) and batteries then it will only pay 2% of import subsidy rather than 12.5% that it pays to bring them the accessories to India.

business Updated: Jan 25, 2017 16:03 IST
Apple
The Apple logo hangs in the glass box entrance to the company's Fifth Avenue store in New York. (AP)

The government has reserved its decision on giving Apple sops to start its manufacturing plant in India for now as Apple top executives presented a detailed plan of its entry into India.

According to top officials in the commerce ministry, Apple in its presentation asked for sops like freigh subsidy, waiver of import duties and export subsidy.

An inter-ministerial committee on Wednesday was expected to decide if your Apple iPhone and iPad will get cheaper.

Apple has asked for sops from the government to start manufacturing in India and analysts along with industry leaders see this as an opportunity to lure big telecom equipment manufacturers to India.

How will the iphone get cheaper? Simple, if Apple starts locally assembling or making earphones, adapters (chargers) and batteries then it will only pay 2% of import subsidy rather than 12.5% that it pays to bring them the accessories to India.

Read: Apple may make in India, but with more incentives

Also if it assembles phones in India, it will only pay 1% duty on the finished iPhone rather than 12.5%. So essentially if the iPhone is priced at Rs 60,000, then as per 12.5% duty, Apple is expected to pay Rs 7,500. But if it locally makes the device, then it pays only Rs 600.

“The differential duty structure will indirectly benefit consumers and Apple will be able to pass on most or rather the full Rs 6,900 balance to Indian consumers. If the government gives Apple sops, then simply your Apple devices prices will come down,” a top industry expert told HT.

Read: MacBook launch: Will the new PCs cure Apple’s Achilles heel in India?

Though India is still keen for the U.S. tech giant to produce its signature smartphones here. Information Technology Minister Ravi Shankar Prasad recently said 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: the 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 Wednesday.

Read: Apple’s improved iOS to change iPhone experience

“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 conditions 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.

Read: Apple leads in smartphone profits with 91% share, Samsung not in top five

“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.

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.

Read: India’s loss, America’s gain? Apple may shift iPhone factory to US

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.

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.

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.

Read: Nokia has sued Apple in 11 countries. Here is why

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.

“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.

Read: Apple cuts iPhone 6S, 6S Plus prices by Rs 22,000 ahead of iPhone 7 launch

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.