Apple Inc. has asked the Government of India to put off a planned increase in import taxes on mobile phone parts so it can make more iPhones in India. However, people who know the situation say the government is unlikely to agree.

One of the 'prerequisites' that the US technology giant has been negotiating with Indian officials for months to expand its operations in one of the world's fastest-growing smartphone markets includes a government tax exemption and an incentive scheme.

To help Prime Minister Narendra Modi's 'Make in India' push to boost domestic manufacturing, Apple has stated its desire for India to delay a present policy that seeks to tax more imported mobile components.

According to the sources, the Indian government had informed Apple that there would be no policy exemptions, which means there won't be any tax savings on imported parts, even though it wanted Apple to manufacture in India as a showpiece investment.

'Apple favours duty-free importation of parts. India wants to be more indigenous, according to a person with first-hand knowledge of the negotiations.

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The insider claims that Apple is prepared to progressively increase local value addition while continuing to press for immediate import tax reduction to build up iPhone production.

Apple opted not to respond, and neither the Modi administration nor the Ministry of Electronics and Information Technology—which is aiming to assist in the establishment of an electronics manufacturing base—offered a response.

The conflict could be a hindrance. In India, where it only sells the iPhone SE model, it faces the danger of delaying Apple's efforts to join the country. Apple only has a 2% market share in India despite a boom in smartphone purchases.

India now needs the right ecosystem for the expansion of component manufacturers. Hence Apple asked for a tax break.

Even though more than 75% of cell phones sold in India are locally produced, 90% of the $14 billion mobile components, according to Counterpoint Research data, are imported. India imposes a 10% levy on imported components like batteries, chargers, and headsets to address this issue.

As part of a 'phased manufacturing programme' (PMP) to encourage part manufacturers to switch to more local production, the government plans to extend the levies to other components. According to Neil Shah, a director at Counterpoint, it has been a 'chicken-and-egg' problem for component suppliers to build manufacturing operations in India.

'Either Apple and its partners will comply with this at some point, or Apple will always price its products more.' In a previously leaked paper analysing Apple's demands, the Indian IT ministry stated that the company's request for a PMP exemption 'may not be possible.'

The letter claims that the legislation would have to be changed to comply with Apple's additional demands, such as capital equipment incentives and the ability to import and export phones following repairs.

Those connected with the negotiations assert that the government has made it clear that it won't make any special adjustments, even though it has publicly indicated that it is still considering Apple's proposals.

'We have told them to come and invest, but we can't do anything that goes against our policies. We cannot operate solely in your best interests, said a senior government official with firsthand knowledge of the circumstance. They are (in our opinion) changing.'

The insider mentioned that when Apple expands in India, it expects to be able to create between 5,000 and 10,000 jobs.