Preferential market access policy on hold for telecom vendors

India’s decision to put on hold its preferential market access (PMA) policy for private telecom companies will be a big relief for vendors such as ZTE, Ericsson, Nokia Siemens, Alcatel-Lucent, Nokia Siemens, Huawei, etc.

As per the new guidelines, which had invited severe criticism from abroad and India, telecom service providers in India need to source domestically manufactured electronic equipment within a certain timeline.

The government is putting the PMA policy on hold at a time when India imported telecom equipment worth Rs 39,821 crore in the first three quarters of this fiscal as it lacks manufacturing capability for producing value-added products.

The country imported Rs 52,441 crore worth of telecom equipments in the 2011-12 fiscal.

In an internal note, the National Security Council said the demand for telecom equipment in India constituted 6.2 percent of the global demand of Rs 16.4 trillion in 2012-13.

A failure to improve indigenous manufacturing would lead to a $150 billion import bill in the next 10 years. China exported more than $7 billion worth of telecom equipment and $2 billion in computers to India in 2011, as per a UN data.

Despite security concerns, the government on Monday decided to review the policy after as many as 37 international trade organizations complained that it would distort the market.

“No notifications on PMA in the private sector on security related products will be issued till the PMA policy is reviewed and any notifications in the draft stage will be withheld. The overall policy on PMA will be recalibrated and submitted to the Cabinet,” said the Prime Minister’s Office in a statement on Monday.

However, the government note did not say anything over implementing the policy for the government sector.

The government through the new telecom policy (NTP 2012) mandated that domestic production should meet up to 80 percent of the country’s telecom equipment requirement by 2020.

The policy states that India will provide preference to domestically manufactured products that have security implications, consistent with its commitments to the World Trade Organization (WTO).

In February last year, the Cabinet approved the policy seeking preference for domestically manufactured electronic products in procurement of those electronic products which have security implications, especially in the fields of defense and telecom.

Earlier domestic telecom equipment makers have sought Prime Minister’s intervention to help expedite the notification on Preferential Market Access policy that aims at boosting indigenous production.

Last week, Telecom Systems Design and Manufacturers Association sought PMO’s intervention to finalize the PMA policy.

“We are seriously concerned that despite Cabinet approval of PMA, which happened almost 16 months back…the final notification for implementing PMA on security consideration has not yet been released,” said Telecom Systems Design and Manufacturers Association said in a letter to Prime Minister Manmohan Singh.

The TSDMA letter was signed by its members including Shyam Telecom, Tejas Networks, Matrix Comsec, Vihaan Networks, Inventum Technologies and Pulse Engineering.

TSDMA said that current telecom systems are highly sophisticated, using complex chips with millions of elements along with long software codes.

The PMA policy has received sharp criticism from foreign companies and trade associations. Even Indian GSM telecom services industry body COAI has called for the review of the policy. On the other hand, domestic players have been pushing for its implementation.

Meanwhile, India recently proposed to set up three funds with a combined corpus of Rs 17,500 crore to boost local research and manufacturing of telecom products as it seeks to cut dependence on imports.

Pix: Bloomberg

editor@telecomlead.com