Special duty waiver on handsets made in SEZs goes

Our Bureau

`Move will affect cost benefit vis-à-vis imported handsets'

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New Delhi Feb 27 In a move that could hurt the plans of mobile handset
manufacturers in the country, the Government has withdrawn the exemption
of 4 per cent special additional duty on handsets manufactured in
Special Economic Zones. The Ministry of Finance issued a notification to
this effect on February 21.

A number of companies including Nokia and Samsung have started
manufacturing handsets in the country while others like Motorola and
Sony Ericsson are in the process of setting up a plant.

According to the Indian Cellular Association which represents the
interests of handset manufacturers, the notification will jeopardise
these plans as it would eliminate the cost difference between imported
handsets and those manufactured at the SEZs.

"The entire Sriperumbudur SEZ region consisting of the three biggest
world-class companies and more than 20 upcoming ancillary industries
will come to a grinding halt following the notification. We hope this
will be rectified," said Mr Pankaj Mohindroo, President, ICA.

Earlier the Government had carved out three windows with zero-duty
environments, that is, SEZs, Export Oriented Units and Domestic Tariff
Area. However, the February 21 notification has introduced 4 per cent
duty in the SEZ environment, making the Sriperumbudur SEZ areas
non-competitive compared to other units in the EOU and DTA environments
located elsewhere in the country. "The SEZ units are now on the same
footing as imported goods with regard to customs duty, but the SEZs are
not competitive with imported China-origin goods given the over-high
transaction costs in India and relatively poor quality of
infrastructure," ICA said.

Handset manufacturers have requested the Communication Ministry to
intervene. "At a time when the UPA Government is promoting manufacturing
in India, this step will jeopardise plans made by a number of companies.
This anomaly needs to be rectified," said Mr N.K. Goyal, Chairman
Emeritus, Telecom Equipment Manufacturers Association of India

http://www.thehindubusinessline.com/2007/02/28/stories/2007022804940400.htm