Budget 2013-2014: Cellphones to Cost More

Mobile phone handsets from foreign manufacturers that cost more than 2,000 rupees ($37) will become more expensive after India’s finance minister proposed increasing the import tax on them to 6% from 1%.

The move will make smartphones and feature phones (handsets that have some smartphone features but are generally cheaper) made by companies such as Apple Inc., Samsung Electronics Co. Ltd, Nokia Corp. and BlackBerry more expensive as most of their models cost more than 2,000 rupees.

Sunil Dutt, BlackBerry India’s managing director, said the proposed move could hurt the smartphone market in India, which is currently growing at about 80% a year.

“It could have a negative impact on the purchase decision of many consumers who aspire to own smartphones. In turn this will also impact some of the services consumption which carriers are trying to take to the customers along the lines of health care, mobile governance, and so on,” he said.

P. Balaji, managing director at Nokia India, added that the 6% import tax would make it difficult to compete with gray market supply, while the vice president of Samsung India’s mobile unit said the proposed move would lead to higher prices for consumers.

Apple’s India unit wasn’t immediately available for comment.

The technology research unit of Cyber Media (India) Ltd. says about 224 million handsets will be shipped to India in calendar year 2013 compared to 202 million in January to November last year.

The decision to increase the import tax could encourage companies to make cheaper phones, said T. M. Ramakrishnan, chief executive at local handset maker S Mobility Ltd. “This decision will surely impact the industry’s focus on making smartphones more affordable,” he said.

Smartphone and feature phones sales are on the rise in India as telecom operators are providing high-speed Internet and other communications services. They are also encouraging users to use data services on their handsets as margins are higher than traditional voice telephone services.

Mohammad Chowdhury, head of telecom at PricewaterhouseCoopers India, also warned that the proposed tax would “impact negatively the uptake of data services in India and in all likelihood slow it down, just at a time when it has begun to gain momentum.”

In his budget presentation Thursday, Finance Minister P.Chidambaram said about 70% of imported mobile phones and 60% of domestically made mobile phones cost 2,000 rupees or less.