While tech giant Apple sees India as an alternate manufacturing destination amid the trade war between US and China, it feels the country’s import tariffs need to be brought down.

The iPhone maker has reportedly told Indian government officials that they need a globally “competitive tariff regime” to be able to both ship out smartphones and sell them in the domestic market from a single facility, Financial Express reports.

The Indian government is reportedly exploring the feasibility of allowing imports at zero or concessional duties of hi-tech telecom components that are not available in the country, provided the finished products are re-exported, the daily added, quoting sources.

As Apple manufactures its products through contract manufacturers Wistron, Foxconn and Pegatron, it wants incentives for those firms to set up units here.

Apple has already started the assembly of iPhones in India (SE in 2017 and 6s in 2018) through Wistron at its Bengaluru unit. Foxconn has a plant in Chennai and will soon be starting trial production of the latest iPhones.

However, the likelihood of a larger manufacturing facility in India hinges on the kind of concessions the Indian government would offer to the tech giant. The proposal in this year’s union budget to ease the mandatory 30% local sourcing rule will be beneficial to Apple.

Apart from the uncertainty caused by the Sino-US trade war, labor costs in China are also on the rise. Hence foreign firms have been scouting for alternate locations.

However, India is hardly in a position to take full advantage of this situation due to high corporate taxes, inflexible labor rules and hurdles in land acquisition. It is losing out to countries like Vietnam, where tax rates and other policies are much more investor-friendly.

Due to high import duty, Apple has so far failed to make any significant impact in the Indian smartphone market, the second largest in the world.

In 2018 Indians bought more than 140 million smartphones, out of which only 1.7 million were sold by Apple. The price-sensitive Indian consumers favored Chinese brands such as Xiaomi and Oppo, as they offer phones with comparative features for much less money.