Alarm bells for budget smartphone maker Ringing Bells

Several Indian government agencies are keeping a watch on Delhi-based Ringing Bells Private Limited, which announced the production of smartphones for 251 rupees (around $4) per piece.

The company, which launched the Freedom 251 smartphone in February amid much fanfare -- and in the presence of leaders from the ruling Bharatiya Janata Party -- received a tremendous response from feature phone users and those unable to afford the high prices of other smartphones on the market.

However, the company closed online booking after reporting over 3 million registrations online within a few days. "We are in the process of compiling the emails and issuing these [smartphones] to the first 2.5 million registrations very soon," the company's website said, without mentioning delivery dates.

Following charges that it was cheating people, the management, which promised to deliver the new product from April, announced that buyers pay cash only after delivery.

However, the government, which received complaints against the company, asked the Directorate of Enforcement to investigate allegations that Ringing Bells has flouted the Foreign Exchange Management Act (FEMA).

Even the Serious Fraud Investigating Office (SFIO) in the Corporate Affairs Ministry has ordered scrutiny of the company's books, and the Department of Electronics and IT has been reviewing all issues pertaining to the company, Indian Minister for Communication and IT Ravi Shankar Prasad told Parliament on Wednesday.

"The government, through various departments, is taking steps to protect the interest of consumers," he said, adding that a team from SFIO submitted its report along with a request seeking information from Registrar of Companies, a week after the Freedom 251 smartphone was released last month.

Sharing suspicions held by members of Parliament of another Ponzi scheme to cheat the people, the minister said that company representatives were directed to comply with the Indian safety standards as required under "Electronics and Information Technology Goods (requirements for compulsory registration) Order, 2012".

Even the Indian Cellular Association (ICA) expressed doubts over the technical specifications of the smartphone as advertised by the company, saying that they could not manufacture a product at such a low price of 251 rupees.

ICA associate director Bijesh Roul told ZDNet that it was practically not possible to sell a smartphone with those specifications.

"The Bill of Material" (BoM) value of Freedom 251 with so many features, even if it outsourced from cheapest supply chain, will cost more than $40 per phone and if the taxes and duties are included, the price would be between $65-$70 in the open market," he said, and pointed out that even if buyers want to purchase it on any ecommerce platform it would cost around $60.

According to the Freedom 251 manufacturers, the device has a 3.2MP AF Rear Camera and .3MP Front camera, and with its inbuilt touchless technology, "is Ideal for perfect Selfie".

"With its 1450 mAh battery, Freedom 251 comes with 1.3 GHz Quadcore Processor capable of fast and responsive performance. 1GB RAM and 8GB internal memory, all the space you need. SD card support (expandable up to 32GB)," it adds.