Telecom gear PCBA duty hike to increase localisation and create jobs: Sunil Vachani, Dixon

sunil vachani, Dixon

The government’s move to increase the basic customs duty (BCD) from 10% to 15% on printed circuit board assembly (PCBA) on specified telecom equipment will help increase local value addition and lead to job creation in the country.

Finance Minister Nirmala Sitharman, in her Budget speech 2024 on July 23, proposed increasing the basic customs duty (BCD) from 10% to 15% on printed circuit board assembly (PCBA) on specified telecom equipment to boost the domestic manufacturing industry. "To incentivise domestic manufacturing, I propose to increase the BCD from 10% to 15% on PCBA of specified telecom equipment," Sitharaman said Tuesday while presenting the Union Budget 2024-25 in Parliament.

“The telecom PLI has done well in the last 18 months. The latest move to increase basic customs duty to 15% will increase localisation and create more jobs. There is $6 billion worth of PCBs being imported into the country,” Sunil Vachani, Executive Chairman of Dixon Technologies, told Moneycontrol.

The move will deepen the local manufacturing for telecom equipment. “It is a positive step," he said.

Dixon has a joint venture with Airtel to make customer premises equipment (CPE) and routers. It expects the demand for these devices to pick up due to the rollout of the country's 5G fixed wireless access (FWA) broadband service.

Industry lobby body Cellular Operators Association of India (COAI) had sought a reduction of customs duty to zero. It then gradually increased depending on creating an ecosystem for manufacturing telecom gear in India.

COAI, which represents Reliance Jio, Bharti Airtel, and Vodafone Idea, said that over the past five to six years, the government of India has gradually increased the customs duty on telecom equipment to 20%, adding a significant financial burden on telecom companies and significantly impacting the rollout of 5G services in India.

SP Kochhar, Director-General of COAI, previously said exemptions on customs duties for specific telecom equipment will alleviate the cost challenges associated with deploying this critical infrastructure. "Until high-quality equipment is available domestically at competitive prices, COAl urges the government to reduce customs duties for 4G and 5G network products, as well as other related items, to nil," Kochhar had said.

Nittin Arora, Partner, Grant Thornton Bharat said the increased BCD on PCBA will incentivize domestic production, create a level playing field, and attract foreign investment. “This demonstrates the government's commitment to promoting domestic manufacturing, self-reliance, and economic growth in the telecom sector.”