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NEW DELHI—India's government is weighing a proposal by Apple Inc. to refurbish and sell secondhand iPhones in the country, officials said, as the tech giant tries to gain traction in a fast-growing and populous, but not very affluent, market.

Success in new markets like India will be central to the Cupertino, Calif., company's expansion, analysts said. Apple last week reported its first quarterly revenue decline since 2003 amid falling sales of its smartphones in China.

In India, however, Apple Chief Executive Tim Cook told analysts that iPhone sales had jumped 56% in the three months ended March 26 from the same period a year earlier. Apple's market share for smartphones in the country remains small at roughly 2%.

Used phones would let Apple offer a less-expensive product in a country where 70% of smartphones sold last year cost less than $150. IPhones, by comparison, typically cost $500 to $1,000 without a data plan in India.

"The target consumer in India is still looking for more value for money" and have many other cheaper models to choose from, said Rushabh Doshi, an analyst at research firm Canalys in Singapore.

Apple sells refurbished devices, which have been repaired or had parts replaced, in many countries, including the U.S. In some countries, it also offers what it calls certified preowned products, which contain a mix of new and reused components.

In India, the company has applied to make and sell certified preowned iPhones, according to government officials. "We are looking into the issues related to Apple's proposal," a senior official in the Prime Minister's Office said Wednesday. The official, who declined to be named, said the country was concerned about ending up with potentially hazardous electronic waste.

Apple declined to comment on concerns that its products might generate hazardous electronic waste. In its most recent environment report, Apple said it "disposes of hazardous waste responsibly."

Prakash Javadekar, India's minister for environment, forest and climate change, said his agency was evaluating Apple's plan, as did an official who declined to be named at India's Telecom Ministry, which oversees policies related to the electronics industry.

Pardeep Jain, managing director of smartphone maker Karbonn Mobile India Pvt., an Apple rival, said he wasn't opposed to Apple's proposal, since he believes most consumers in India prefer new phones and don't want to buy used phones.

Newton, Mass.-based research firm Strategy Analytics projects some 149 million smartphones will be sold in India this year, up 26% from last year. India is expected to overtake the U.S. in smartphone sales next year, which would make it second only to China. Price is a big challenge for Apple in India, where average per capita income is about $1,500 a year. Apple's new iPhone SE, its cheapest-ever handset, typically costs more than $500 in India.

The best-selling iPhone model in India is now the older iPhone 5S model, which costs about $300 and accounted for some 50% of sales in the first quarter of this year, said Tarun Pathak, a Delhi-based analyst with Counterpoint.

The iPhone SE is intended to replace the 5S. Mr. Pathak said that will leave Indian consumers with only pricier models. Used or refurbished devices, if allowed in India, could help Apple fill the gap at the low end, he said.

Apple in recent months has lowered prices in India, ramped up advertising and expanded its distribution network to get devices into smaller towns and cities.

In January, the company said it had sought the government's approval to open its own retail stores and sell products online, rather than simply through Indian-owned retailers and distribution firms. The proposal is pending, and a government panel recommended last week that Apple be granted a waiver from using locally made parts.

Sean McLain contributed to this article.

(END) Dow Jones Newswires

May 05, 2016 14:05 ET (18:05 GMT)

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