Govt. set to approve Rs 1,770 core telecom manufacturing unit proposal

DEITY Joint Secretary Ajay Kumar said the government is likely to approve a Rs 1,770 crore proposal from a local company to make telecom products in India.

However, Kumar did not disclose the name of the firm.

According to DEITY Joint Secretary, the government policies are aimed at reducing dependence on imports, PTI reported.

The application for investing in a telecom manufacturing unit is in process and is expected to be approved by inter-ministerial panel within a month.

The Department of Electronics and Information Technology under National Policy on Electronics 2012 has received investment proposal worth Rs 4,595 crore for electronics manufacturing which includes telecom and IT products.

The proposal by the domestic company is the biggest among proposals that government has received so far for indigenous manufacturing.

Investing in telecom production

India has received $12.65 billion foreign direct investment in the telecom sector between 2000 and 2013.

list of telecom product manufacturing units in India

According to Knowledgefaber.com, Indian telecom equipment manufacturing sector is slowly attracting some investor interest.

Tejas Networks has attracted $73 million PE funding from Mayfield funds, Intel Capital and Battery Ventures. They have also raised a further $24 million from Goldman Sachs and $20 million from Sandstone Capital in 2008. VMC has raised approximately $25 million from Fidelity international in 2008.

Karbonn mobile is in talks with PE funds Mount Kellet Capital and Accel Partners to raise $50 million. Karbonn intends to use these funds for setting up a handset manufacturing facility in Bangalore capable of producing 400,000 units per year.

While PE firm TA Associates has invested approximately $45 million in Micromax in late 2009, Sequoia Capital, Madison India and Sandstone Capital have invested in excess of $ 40 million acquiring 10 percent stake (in 2nd round funding) in 2010. Micromax plans to invest 35 percent of its capital infusion in setting up its manufacturing facility.

Knowledgefaber says for the current 3G network rollouts, the carriers are expected to spend in excess of Rs 18,000 crore between 2010 and 2013. Of this, approximately Rs 1,500 to Rs 1,800 crore is expected to be earmarked for SDH-based transmission network equipment. In 2012-2013, as the BWA networks are rolled out, data optimized services are offered to the consumers and the demand for capacity enhancement increases, carriers are expected to roll out Carrier Ethernet networks and high end transmission elements such as DWDMs.

Recently, India has put on hold its Preferential Market Access Policy that could have given significant priority to local telecom product makers in grabbing business.

According to telecom regulator TRAI, 12-13 percent of all local products made with the aid of foreign vendors were used in the sector during 2009-10. However, purely India-made products formed 3 percent of the market.

Govt to approve Rs 1,770 core telecom manufacturing unit proposal

Out of the total investment proposal received for domestic manufacturing, government has cleared proposals worth Rs 961 crore which include investment from Bosch Electronics, Samsung and an Indian firm Sahasra Electronics.

Some of the other investments proposal includes Rs 450 crore for manufacturing of consumer electronics, Rs 310 crore LEDs and LED Products, Rs 45 crore for electronics components, Rs 610 crore automotive electronics, Rs 40 crore power electronics, Rs 210 crore strategic electronics and Rs 750 crore for semiconductor test and packaging.

Growth Potential

Earlier, TRAI said requirement of 3G equipment is expected to be around Rs 10,127 crore and LTE and WiMax about Rs 12,659 crore in 2015-16. By the year 2020, the combined demand is likely to be Rs 26,456 crore.

In addition, the growing subscriber base would necessitate expansion of telecommunications networks and increase in demand for various types of telecom equipment. The demand for telecom equipment in India was Rs 54,765 crore in 2009-10 which was about 5.5 percent of the global demand.

This is projected grow to $19 billion in 2015 and $34 billion in 2020. Only about 12-13 percent of the demand for telecom equipment is being met by domestic production.

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