South Korean major LG Electronics is contemplating hiking the prices of new handset models it will import into India due to the revised duty structure announced in the recent budget that has swung in favour of component imports compared to finished product imports for mobile devices.
Since the company currently imports finished handsets, it will be paying higher duty than earlier while other manufacturers like Karbonn, Micromax, Lava, Samsung and others, who import components, accessories and assemble them in India, have been offered a duty rebate.
Amit Gujral, marketing head, LG Mobile India, said they were evaluation the impact of the duty on their mobile handsets and would soon take a call on it.
"As of date, we have not increased it (prices of mobile handsets) but since we import all our devices from our headquarters in South Korea we will get impacted by the new duty structure. New (mobile handset) models that will come in, depending on the segmentation we will share its load (higher cost) with consumers or we might absorb it," he said.
In a bid to promote its Make In India programme and local manufacturing of mobile devices like cell phones and tablets, the government in the last month's union budget, revised the excise duty structure for mobiles handsets to 1% without CENVAT credit or 12.5% with CENVAT credit. The duty structure for mobiles was 6% with CENVAT credit earlier. This will give impetus to local mobile manufacturers.
Gujral said the company may look at starting local manufacturing if the economies of scales would permit. The South Korean behemoth currently has one plant each in Pune and Greater Noida for manufacturing white goods products.
"For us to talk about local manufacturing is different from other players because we don't have to look at setting up a new plant. We already have two giant plants for which goods and we can start mobile handset manufacturing there. For us it that will happen when there is economies of scale. It will be a mix of export and local consumption. So, we have to work out the feasibility of the same. We are not saying no but we are not even prepared to say yes," he said.
Its South Korean rival Samsung is already producing 90% of the mobile handsets sold in the country at its plants in Noida and Tamil Nadu, and is reportedly looking to set up a third one in Uttar Pradesh.
Finnish telecom major Nokia had to shut down mobile handset plant in Tamil Nadu as it is embroiled in a tax dispute with the state government, which has slapped a Rs 2,400-crore notice on it for evading tax on mobile handsets sold in the domestic market.
Simultaneously, it is involved in a legal tangle, where the apex court has ordered it to produce a Rs 3,500-crore guarantee before transferring its plant to Microsoft, which recently acquired its handset division. Other major players like Micromax, Karbonn, Lava, Intex and others are also producing their handsets in local market.
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