Budget 2024: Cost of 4G and 5G Network Rollouts Set to Rise with Customs Duty Increase

Budget 2024 Cost of 4G and 5G Network Rollouts Set to Rise with Customs Duty Increase

The upcoming rollouts of 4G and 5G networks are expected to become more expensive, following Finance Minister Nirmala Sitharaman’s proposal to increase the basic customs duty (BCD) on printed circuit board assembly (PCBA) from 10% to 15% in the Budget 2024-25. PCBAs are a crucial component in various telecom equipment, including mobile base stations, and around 80% of them are currently imported. Additionally, over 50% of the PCBAs used in optical fiber network gear, mobile switching centers (MSCs), and routers are also imported, according to industry executives. 

Vodafone Idea (Vi) may be particularly affected in the short term, as it has yet to roll out 5G networks and is still expanding its 4G coverage to better compete with larger rivals Reliance Jio and Bharti Airtel. Jio and Airtel, which have already completed their nationwide 5G rollouts, are expected to be less impacted in the immediate future. 

A senior executive from a global network vendor estimated that network rollout costs could increase by approximately 4-5% due to the higher BCD, given the significant reliance on imported PCBAs for manufacturing base stations, optical fiber network equipment, routers, and switches. 

The Cellular Operators Association of India (COAI) and Vi did not respond to requests for comment. However, domestic telecom equipment manufacturers are optimistic, viewing the increased customs duty as an opportunity to boost local PCBA production, thereby reducing reliance on imports. 

Atul Lall, Managing Director of Dixon Technologies, stated that the increased BCD would likely stimulate local manufacturing, potentially leading to a more robust telecom equipment manufacturing ecosystem in India. Currently, over 70% of the PCBAs used in telecom customer premises equipment (CPE) are produced locally. 

N K Goyal, Chairman Emeritus of the Telecom Equipment Manufacturers Association (TEMA), noted that the higher customs duty would discourage imports and promote self-reliance, as India possesses sufficient domestic manufacturing capacity for PCBAs. Industry insiders believe that an increase in local PCBA production could eventually lower the overall cost of telecom network equipment as economies of scale are achieved. 

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