The Telegraph
Since 1st March, 1999
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Mobile phones to cost less

New Delhi, Feb. 21: The Indian Cellular Association, the apex body of mobile handset manufacturers, has promised to bring down the price of mobile phones purchased from the authorised outlets to less than Rs 3000.

ICA has urged the government to bring down the basic customs duty to 5 per cent from the existing level of 10 per cent and abolish the special additional duty of 4 per cent. It has also sought application of uniform state sales tax

The association has also sought removal of cellular mobile handsets from the 1/6 income-tax eligibility definition and abolish revenue share on telecom operators for mobile handset sales and retain countervailing duty (CVD) at zero per cent.

ICA claims that the acceptance of these recommendations would give a boost to the industry trade, enabling it to increase its share in the legal mobile handset market from 25 per cent to 90 per cent. This would also see a growth in teledensity, which is a key development objective for the government.

In the Union Budget for 2002-2003, the government had recognised that a large smuggled market operates in India for the sale of mobile handsets. The extent of this market was over 90 per cent. In a bold and reform-oriented move, the government abolished the CVD of 16 per cent on mobile handsets, but basic customs duty was increased from 5 per cent to 10 per cent.

The fall in prices was announced on March 15, 2002, just two weeks after the budget was announced. Consequently, as and when states have rationalised sales tax rates, ICA members have announced price cuts ranging from 8-15 per cent soon after for those states.

The mobile handset industry has been growing at a rapid pace. The sale of legal handsets has grown by over 150 per cent in the financial year 2002-03. This growth is attributed to the reduction in prices following duty cuts in Budget 2002-03 as also rationalisation of state sales tax in many major states.

The cellular subscriber base grew 79 per cent last year from 54.7 lakh subscribers at the close of the calendar year 2001 to over 80 lakh subscribers at the end of September 2002.

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