Manufacturers contend that domestic duties make local manufacturing unviable as imports turn out to be 30 per cent cheaper than domestically manufactured goods.

As per a customs notification, telecom operators are allowed to import finished equipment at a concessional rate of 20 per cent without payment of any countervailing duty (CVD).

However, if the same equipment is to be manufactured in India, the local manufacturers have to pay excise duty up to 18 per cent. This is apart form the customs duty which has to be paid on imports of components averaging to about 30 per cent.

Domestic manufacturers contend that the concept of CVD was meant to impart a level playing field to local manufacturers who have to pay excise duty. Importers are required to pay CVD which is equivalent to the amount of excise duty that wouldhave been paid if the item was manufactured locally.

Sources said that in this case, the notification does not require the payment of CVD by importers. "This has rendered local manufacturing of these equipment totally non-competitive", said sources.

The exemption of the CVD under the notification has been given under the assumption that the exempted equipment is not being produced in India. However, sources contend that these equipment are not only manufactured in India but have also been designed in the country.

Much of this equipment is also being exported to a number of countries. An example cited is the "wireless in local loop" (WILL) system designed by IIT, Chennai. And even if any equipment is not being produced locally at present, the present duty structure renders its chances of ever being produced in the country, totally negligible.

Industry has suggested a number of remedial measures including granting export status to the local telecom equipment manufacturers which will exempt them frompayment of excise duty and remove the present anomaly.

Another option is reducing excise duty from 18 to nine per cent and compensating the loss of revenue through a CVD of nine per cent on imports.