Commerce department for tariff reduction, only if telecom and IT agree

The Department of Commerce and the Ministries of Communications and IT are divided over any country-specific reduction in the 20 per cent import tariff on electronics items, including mobile phones, people aware of the matter said.

While the commerce department is keen on exploring tariff concessions on technology products with respect to proposed free-trade agreement (FTA) negotiations with the European Union (EU), other ministries are reluctant to relax their protectionist stance.

The push for import-duty reduction comes against the backdrop of the dispute between India and the EU at the World Trade Organization (WTO). Both sides are trying to resolve that.

In April, a WTO panel had ruled that India violated its zero-tariff commitment under the Information Technology Agreement (ITA) under the multilateral trade body, after three similar but separate disputes were raised by the EU, Japan, and Chinese Taipei.

India, a signatory to the ITA, is required to eliminate tariffs on a range of products, including mobile handsets. Starting with the 2007-08 Budget, India imposed tariffs on a slew of electronics items, especially to curb cheap electronics imports from China and promote India’s domestic manufacturing.

India’s argument is at the time of signing the ITA (in 1996), products such as smartphones didn’t exist.

According to the European Commission, EU exports of such technology affected by India’s “violations” are up to euro 600 million annually, which is significant.

But the commerce department says the trade bloc has not been affected in a major way by the tariffs since the EU’s share in imports of such information and communication technology (ICT) products into India during the calendar year 2022 was only 3.03 per cent.

“We will go ahead with any tariff reduction only if the telecom and the IT ministries are on board. As of now, they are not ready to give any duty concession,” one of the persons cited above told Business Standard.

On the other hand, FTA negotiations with the EU are also going on and government officials say it will take over a year for both sides to conclude the trade deal. This will also give more time to both sides to negotiate

The communications and the IT ministries are unwilling to give tariff concessions because they want to boost domestic manufacturing, especially with a focus on schemes such as the production-linked incentive, which has started yielding results in the case of large-scale electronics manufacturing. Business Standard