Prasad asks Deity to probe Rs 251 smartphone scheme

Telecom Minister Ravi Shankar Prasad has asked Department of Electronics and IT Secretary (Deity) Aruna Sharma to look into the scheme of Ringing Bells offering a smartphone for just Rs 251.

This has come in response to a letter from BJP MP Kirit Somaiya. "The minister has received a representation from Kirit Somaiya and mobile phone manufacturers where they have expressed doubt about the veracity of this venture," a Telecom Ministry source told PTI.

He added that the minister has asked the Deity secretary to go into the whole issue and if need be, states' cooperation will be sought to find out more about the company.

Somaiya has approached a host of ministries, including telecom and finance, regulators Sebi, Trai, RBI, and state governments, raising issues about the company claiming to offer the world's cheapest mobile phone.

The Noida-based company Ringing Bells today closed its booking for Rs 251 phone and has said delivery of all handsets will be completed by June 30.

Ringing Bells' President Ashok Chaddha said the manufacturing cost of the phone is about Rs 2,500, which will be recovered through a series of measures like economies of scale, innovative marketing, reduction in duties and creating an e-commerce marketplace.

"By going for Made in India components, we can save on the 13.8 per cent duty. Also, we will be selling online first and thus, save the costs incurred on the large distribution network," he said.

Chaddha also rejected speculation of the handset being subsidised by the government. "The phone will be manufactured in Noida and Uttarakhand. Two plants will be set up for Rs 250 crore each with a capacity of 5 lakh phones. The money will come in the form of debt and equity (1.5:1)," he said.

Chaddha added that the equity is being met by the promoter family of the company that is "engaged in agri-commodities business" in Uttar Pradesh, but declined to give details.

But this has not cut much ice with Somaiya as well as the industry. "The response... of Ashok Chaddha of Ringing Bells that how much cost will be saved due to import/local assembling/online marketing... far from convincing," Somaiya said in a letter attached to his tweet.

The mobile phone industry body ICA too has raised some red flags. "We have checked with all operators in the industry and no one has admitted to having been in any kind of bundling deal or partnership with them. I will only say consumers should stay cautious. More than consumers, it may hurt businessmen in small towns if the promise made by the company fails," ICA National President Pankaj Mohindroo said.

The company today closed the booking for its 'Freedom 251' phone, citing heavy demand.
The notice on the website of company said it has received 3.70 crore registrations on Day 1 and 2.47 crore on Day 2 (as of 1949 hours).