It has also advocated a deemed export status for the `specified telecom equipment', some of which are now being manufactured locally along with bringing down the import duty on the surface mount technology devices to 5 per cent.

Sources that these recommendations have been made to the finance ministry by the group in order to remove the anomalies in the customs duty on telecom equipment, sub-assemblies and components.

Sources said the department of telecommunications has also taken up these issues with the finance ministry, and reminders to this effect have also been put recently by the minister of state for communications, Kabindra Purkayastha, to finance minister Yashwant Sinha.

Under DoT's proposal to thefinance ministry, the import duty structure now in vogue promotes import trading rather than local manufacturing as the average customs duty on parts of telecom equipment is higher than customs duty on finished equipment.

It may be noted here that the basic customs duty on finished telecom equipment is 30 per cent whereas, parts, sub assemblies and components attract 20 per cent duty.

Considering that there is no difference between the duty on parts/sub-assemblies and components, the present duty structure does not encourage manufacture of telecom equipment from the component level, as per DoT sources.

Moreover, the specified telecom equipment have been allowed for import at a concessional rate of customs duty of 20 per cent plus 2 percent special duty. However, no CVD or special additional duty is applicable for these items.

Even the Telecom Equipment Manufacturer's Association (Tema) has stated that some of the items, which are covered under the `special additional duty', are now being manufacturedlocally.

"As the inputs required for the manufacture of these equipment attract high rate of customs duty as well as excise duty, DoT has categorically stated in its note to the finance ministry that the present import duty structure does not encourage the manufacture of these high tech products", sources said.

In another meeting held recently between Tema and Telecom Commission chairman Anil Kumar discussions took place on issues related to the foreign exchange fluctuations and the increase in duties.

Sources said that during the meeting, it was informed by Tema that duty depreciation in the past one year had made it difficult for manufacturers to cater to such volatility.

It was also suggested that the vendors should be compensated for such losses by revising the payable price suitably by the DoT. A similar compensation package was also sought for the increase in the excise duties.

Such price compensations procedures, Tema said, are being followed by other departments like the railways, centralelectricity authority, defence amongst others and considering this, the telecom equipment manufacturers could also be compensated on the same lines.