In a move to persuade Apple India to manufacture and export more iPhone models in the country, government departments are spreading their feathers and offering a variety of incentives to the company, within reason of course.
Apple, too, is keen on making the most of the opportunity to set India as their export base, especially since their operations in China has taken a big hit in the last year or so. As stated by an Apple India official, “Apple doesn’t see India as a large domestic market, so its plan is more export-driven.”
So far, Apple’s manufacturing partner Wistron has been assembling iPhone SE and iPhone 6s at their Bangalore-based plant. As for newer models, Foxconn is reportedly planning to invest Rs 1,500 crore in a Sriperumbudur plant in a bid to start producing current generation iPhones for sale in the subcontinent.
Apple is currently in talks with the Ministry of Commerce and the Department of Revenue in an attempt to win over some more sops than the ones already offered. One of them is a commitment to tax breaks for five years, and the other being income tax benefits for the proportion of exports made. A rather weird move considering that the Merchandise Exports from India Scheme (MEIS), providing 2-4% duty benefits, has already been extended to make it indefinite.
In an effort to see if giving Apple these commitments
However, the thing that they should really be considering is whether or not this is an equitable partnership, for it would not be fair to keep handing over sops to only Apple, while the rest of the electronic manufacturing industry in India lags behind.
Another huge concern for the two ministries is the question of whether or not providing such export incentives will be in direct conflict with the World Trade Organization’s provisions. The MeitY, on the other hand, feels that giving this 5-year agreement to Apple is integral to the growth of the scheme.
As for Apple’s tax exemption, the MeitY is of the opinion that it can be given for 10 or 15 years once the company starts making profits. However, giving Apple special treatment would only encourage other companies to seek the same perks, which could prove to be detrimental to the country’s progress. The best way out of this would be for the government to set into place a new policy on incentives for High and New Technology Enterprises (HNTEs), which would be applicable to companies that request the same privileges.
Minister for Electronic and IT, Ravi Shankar reportedly said, “Apple wanted a lot of exemptions which would have led to a situation of discrimination vis a vis other players. Therefore, we explained to them the whole position. My department is now in talks with them and I understand that they are keen to make India a hub for exports, so they are reworking their proposal.”
Let’s see if Apple is able to sweet talk the government into even more benefits and whether all this tussle will actually lead to Apple making India their primary manufacturing hub.