The Enforcement Directorate (ED) has sent a show cause notice to Chinese mobile phone company Xiaomi, its Chief Financial Officer (CFO) and Director Sameer B Rao, former Managing Director (MD) Manu Kumar Jain and three foreign banks in a foreign exchange law violation case of over Rs 5,551 crore. The financial probe agency said in a statement on Friday, the Adjudicating Authority of the Foreign Exchange Management Act (FEMA) has sent notices under Section 16 of the FEMA to Xiaomi Technology India Pvt Ltd, two of its executives, Citibank, HSBC Bank and Dutch Bank AG.
Three times the amount will have to be paid if the charge is proved
A show cause notice is issued after the investigation of a FEMA case is completed and when the case is disposed of, the accused may have to pay a fine of up to three times the amount of the contravention. The probe agency said that along with Xiaomi, the notice has also been sent to Jain and Rao. The ED had earlier attached Rs 5,551.27 crore deposited in the bank accounts of Xiaomi Technology India Pvt Ltd in connection with illegal remittances (money sent from abroad). Chinese company Xiaomi has been making and selling smartphones in India for a long time. But till now most of the parts used to come from China or other countries, only a few parts were manufactured in India. But now the situation is going to change soon. Xiaomi will now buy parts equal to about 50 percent of its phone’s price from India (Made in India).
Xiaomi plans to localize half of the components used in smartphones by value by 2025. Making the announcement, Xiaomi India President Muralikrishnan B said that the company will soon be entering the headphones, and earphones segment. It will be produced at the Optimus Electronics Limited (OEL) factory in Noida. He said that we want to increase the products we buy locally. Already 35 percent of non-semiconductor BOM (bill of materials) is being sourced locally. We will also look at getting semiconductors whenever possible. We expect to source up to 50 percent of components locally by value by 2025.
