Some Indian officials have baulked at Apple's demands forconcessions before it assembles iPhones there, raising doubts about a springdeadline to launch a key project in Prime Minister Narendra Modi's campaign tolure foreign investors.
The country is still keen for the U.S. tech giant to produceits signature smartphones there, and Information Technology Minister RaviShankar Prasad said on Wednesday that India would keep an "open mind"in negotiations.
"We will very much like Apple to come and have a basein India," he said.
But Apple Inc's long list of demands, including taxconcessions and several other policy exceptions, still faces resistance fromofficials who consider it excessive and unfair on foreign companies alreadyoperating in India.
Their caution underlines how Modi's ambition to make India aglobal manufacturing hub, in order to drive the economy and create jobs formillions of people entering the workforce each year, will not be easy.
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"We have not done this for anyone," said a seniorgovernment official whose department is one of several involved in evaluatingthe Apple proposal. "If we do this, we must see a lot of valueaddition."
Another official involved in the review said the governmentshould make policies for the industry, not individual companies.
"Apple is coming here because it sees a lucrativemarket, this is not a favour being done to India."
Competitors such as South Korea's Samsung Electronics andChina's Xiaomi have already set up manufacturing in the country.
Apple did not respond to a request for comment.
LETTER SPELLS OUT DEMANDS
Modi met Apple CEO Tim Cook last May and discussed iPhoneproduction in India.
Where any plant would be located and how many people itmight employ have yet to be finalised, although it would likely involvethousands of jobs.
Attracting such a household name would be a valuableadvertisement for a country shaking off a reputation for stifling bureaucracy,but officials are wary of tailoring rules to individual investors.
"What Apple is trying to do, if it happens, I think itwill be available to everybody in the industry. I don't see the government ofIndia making discriminatory policies," said Arvind Vohra, chief executiveat Gionee India, part of Chinese smartphone maker Gionee.
It is setting up a local manufacturing plant under India'sexisting rules.
From Apple's point of view, the ambitious timeline agreed byModi and Cook reflected its need to capture more of the fast-growing Indianmarket, where it has only about 2 percent share as iPhone sales in the UnitedState and China have slowed.
In a letter sent to the prime minister's office on Oct. 13and seen by Reuters, it called on the government to "make the environmentattractive" for it to make phones for the Indian market as well as forexport.
On the matter of duties, it said high import taxes onsmartphones could lead to retaliation from trading blocs.
"This would increase the cost of India manufacturedsmartphones and in turn limit India's ambition of becoming a smartphone hub forthe rest of the world."
Despite the reluctance of some officials, Modi couldintervene to get the Apple project back on schedule.
In June, the government relaxed local sourcing rules forforeign retailers like Apple barely a month after the finance ministry turneddown the company's request for a waiver.
The company and its partners have reportedly won significantconcessions before in other markets.
MEETING NEXT WEEK
On Jan. 25, the departments of industry, informationtechnology and electronics, and finance will meet Apple executives to considerthe conditions set out by the firm in India, government officials said.
In May, Modi and Cook agreed to work towards a "package"of four projects: assembling iPhones, opening Apple stores, importing certifiedpre-owned iPhones and refurbishing them in India, according to the letter.
Apple said its initial focus was to set up manufacturing ofiPhones in India over two phases, the first of which was to be introduced byspring this year.
But after conducting due diligence on what it would take toget the project going, it determined its entry was "dependent ongovernment support on a number of pre-requisites."
The Cupertino, Calif.-based company listed a set of sevendemands. Among them, it sought duty exemption on raw materials formanufacturing, components and capital equipment for 15 years for both domesticand export markets.
Apple also sought a change in rules that would govern how itcould import defective iPhones to repair and export them again, a move it saidwas crucial for it to keep supporting and repairing older models of the iPhone.
Currently, Indian rules restrict such imports to phones thatare no older than three years.
Apple asked for the government's help in quickly processinga request for a ruling from Indian tax authorities on transfer pricingagreements between its affiliates.
It also identified India's customs procedures as a hurdle tomanufacturing and asked the government to make them less onerous. "For trusted traders inspections need to be less intrusive - this means less boxes opened," Apple wrote. "The complete process should not require more than thirty minutes."