Red tape hurting Indian handset manufacturers

Red tape hurting Indian handset manufacturers

By KANISHKA SINGH | NEW DELHI | 28 November, 2015
While international phone companies are increasingly seeking access to India as their manufacturing base, Indian small scale handset manufacturers are left behind a slew of red tape and costly testing and standardization processes. Prime Minister Narendra Modi’s “Make in India” and “Digital India” go hand in hand. In order to fully realize his vision, Indian manufacturers need a boost.
As per regulations, each part that goes into making a phone is required to go through a stringent and tedious quality check and certification. Sometimes, the total cost of getting a handset cleared is more than or equal to the turnover of their company. Many Indian handset manufacturers are resorting to doing business in the grey market in order to sell phones that are not cleared by the government.
“We make enough money by making phones and selling them at small shops around north India. Our distribution is done through Delhi’s Palika Bazaar. We cannot think about selling in the ‘market’ as the amount to get one phone cleared is simply outrageous. On one occasion, we inquired how much the whole process would take for one of our phones. We were baffled to hear figures of over Rs 40 lakh,” said Balbir Dhillon, who has three phone manufacturing plants around Delhi in Faridabad and Ghaziabad. Dhillon sells his phones under the brand name iMenics. 
“Also, if we go that way, we would lose our USP. We offer high-end specs for low cost. If we factor in all the certification costs, the selling price will obviously go up. And at those prices, we cannot hope to compete with Micromax, Samsung, Xiaomi, Gionee and more,” he added.
Sumit Ahuja, who runs a phone and gadgets retail shop in Palika Bazaar, said, “Anyone who comes here doesn’t come for brands. They come for good phones at the lowest of prices. And we are able to cater to the demand which is high. The profit margin is also good.”
Looking at it broadly, these tests and certifications are essential. But the costs seem to be the only hurdle in bringing small-time handset manufacturers into the mainstream. Vipul Mehta from ETDC lab of the Standardisation Testing and Quality Certification Directorate said, “The safety and quality testing procedures are not optional. They are necessary to ensure that the people who will be using these products are safe and also that they get quality products for the price they pay.”
“We know that the certification is an arduous task, but these small-time manufacturers are playing with people’s lives. That is why you hear cases of exploding phones and batteries. To ensure safe products to the common people, it is imperative that testing charges are revised,” Mehta added. The rush to “Make in India” by foreign handset companies can be explained by the fact that the duty structure in India is favourable to those who manufacture or assemble in India. While a complete smartphone draws an import duty of 12.5%, its individual components can be imported in as low as 1% duty. So, mobile phone manufacturers are making use of the massive skew in the duty structure. It makes sense for them to “Assemble in India”.
According to Pankaj Mohindroo, national president of the Indian Cellular Association, the Indian handset industry grew to Rs 75,000 crore in 2014. By the end of this fiscal, it is expected to grow to nearly Rs 100,000 crore. There is a massive potential for growth and the companies are looking at India as the base to feed the demand from the rest of South Asia.
 

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