Budget Focus: Electronics Sector Seeks Duty Relief on Manufacturing Equipment

A fresh fault line has emerged in India's electronics manufacturing push, with the industry urging the government to fix what it calls a distorted duty structure on machinery used to make mobile phones. The issue is now under active consideration as preparations gather pace for the upcoming Union Budget.

The concern has intensified after China imposed curbs on exports of high-precision equipment, critical sub-systems and rare earth-linked machinery, cutting off supplies that Indian manufacturers had long relied on. With imported machines no longer easily available, companies were forced to start building the equipment domestically to keep factories operational.

However, manufacturers say this shift has exposed a structural imbalance. While fully imported mobile phone manufacturing equipment continues to attract zero customs duty, the components needed to assemble the same machines locally are taxed at 5-25%. As a result, producing equipment in India has become costlier than importing it - even when imports are practically inaccessible.

Industry leaders have warned policymakers that unless this mismatch is corrected, India's ambitions to move beyond an assembly-centric model could stall. Instead of strengthening domestic capabilities, the current framework risks discouraging deeper manufacturing and technology development.

Government officials are now reviewing the industry's representations, with possible duty rationalisation being weighed as part of broader efforts to shield India's electronics supply chain from external shocks and support home-grown manufacturing.