Budget's excise tweaks will end up raising the price of entry level phones in India
New Delhi, February 17 2014: Give the man 8 marks on 10 for consistency: Every budget that he has presented in this government has seen the screws tightening ever so slowly but remorsely on the very tools, service and devices that were promised to bootstrap the millions of unempowered Indians with Information technology and affordable communication.
Once more, the Finance Minister has cloaked yet another price rise- fuelling measure in words that promise the exact opposite. Consider this para in his budget speech today:
" To encourage domestic production of mobile handsets (which has declined) and reduce the dependence on imports (which have increased), I propose to restructure the excise duties for all categories of mobile handsets. The rates will be 6 percent with CENVAT credit or 1 percent without CENVAT credit....."
Our push button "breaking news" channels were quick to roll out news crawlers, instanta, proclaiming "Mobile phones to be cheaper!!" and the like.
Sorry folks, we bring you bad news -- albeit the real news. The FM's forked tongue said one thing and meant something else -- which as usual is hidden in the fine print.
There was a time when mobile phone attracted zero excise dutry. Last year, the Finance Minister imposed a 6 percent excise duty on phones above Rs 2000 ( that's $ 40 in global money then, $ 33 now). The new rate that he magnanimously announced today extends the 6 percent to ALL phones not just those costing above Rs 2000. This will effectively increase the cost of such affordable phones by at least Rs 60..... how's that for hurting the truly weak sections of society, trying to empower itself with a phone -- plus all that the Internet offers as a Great Leveller?
About 10 million phones in this entry level are bought every month -- and the Finance Minister is hitting those who can least afford even a small increase of fifty or sixty rupees. Nokia India Managing Director P Balaji has been quoted by Financial Express as suggesting that "the net duty load on devices with MRP below Rs 2,000 will increase from 2 per cent to 7 per cent.".
Nor is the provision going to help domestic manufacture much because, everyone knows, including the mandarins of the Finance Ministry, that very little of the so called made in India phone is actually made here -- most of the component parts are still imported... and these will now attract a 7 percent import duty.
It's a lose-lose situation for us any way we slice it!