The government’s recent decision to increase import duty on numerous telecom network products seems to have handed the country’s youngest telco Reliance Jio Infocomm a distinct, if unexpected, advantage over rivals Vodafone Idea and Bharti AirtelNSE 0.69 %, people familiar with the development said. That is because the Mukesh Ambani-controlled telco buys such gear from Samsung. Such telecom equipment imported from Korean suppliers enjoys duty-free status under a free trade pact between India and South Korea, the sources said. Vodafone Idea and Airtel, on the other hand, depend on Europe’s Ericsson, Nokia and China’s Huawei for their networks.
“Jio is unlikely to be hurt by the recent duty hike as it imports network equipment from South Korea, and bulk of such products are duty free under CEPA (Comprehensive Economic Partnership Agreement between India and South Korea),” a senior industry executive said. Vodafone Idea and Airtel, on the contrary, would see “around a 10% jump in their annual network gear import bills as they import largely from European and Chinese gear makers where such customs duty exemption is not available”, the person told ET. A government official acknowledged that some telecom equipment imports are “duty-free under some free trade agreements”.
Network and mobile radio communication gear, including base stations, switching systems, repeaters, routers, modems, optical fibre transmission systems, digital line system apparatus, synchronous digital hierarchy (SDH) systems, high bit-rate digital subscriber line (HDSL) systems, and digital loop carrier (DLC) systems, are exempt from import duty under the Indo-Korean free trade pact CEPA.