Any telecom gear marked ‘security sensitive’ should be 100% made-in-India, the department of telecom (DoT) has told the Prime Minister’s Office.
In response to the PMO’s concern that linking manufacturing of mobile gear with security could lead to distortions in the market, the telecom department has said that security of telecom network is of paramount importance since disruption in telecom services can have disability effect not only on economic sectors of the country but also on strategic ones.
“Telecom products that have major security implication should ideally be 100% manufactured indigenously,” said a DoT note to PMO. “However, realising that this cannot be achieved at one go without disrupting the supply, in most cases, a phased approach has been proposed to be adopted,” it added.
Current preferential market access regulations mandate sourcing of mainline telecom equipment, classified as security sensitive, from Indian-owned companies between 2013 and 2020 in phases. These equipment include SIM card operating systems, LTE and Wi-fi based broadband gear, GSM 2G base stations, 3G wireless access systems and others.
While the preferential market access policy was notified in October 2012, detailed guidelines are yet to come.
Security agencies have played an important function in the formulation of the new rules, as they have warned multiple times that malicious codes could be implanted into networks, before or after manufacturing, and that testing of equipment alone may not solve the problem. “Besides security testing of telecom network, it’s important to ensure that the environment in which the telecom product is manufactured is under sovereign control so that the problem is controlled at the root itself,” the DoT note said.
The country’s new telecom policy (National Telecom Policy 2012) also states that domestic production of telecom equipment should meet up to 80% of the sector’s requirements by 2020.
PMO had also said the domestic value-added criterion, key in manufacturing, was onerous and not based on any study. “The policy stipulates high percentage of value addition over a short period of time (25% in year 1 to 45% in year 5), not allowing time for manufacturing efficiencies to set in,” said the PMO note on preferential market access policy concerns, challenges and way forward.
In response, DoT said: “There are a number of technologies (in telecom) of strategic importance where India would try to develop domestic capability and have to innovate and develop indigenous products. With this objective, we are working on creating complete value chain, including R&D.”
The telecom department also stated that, apart from preferential market access, various other schemes like setting up of wafer fabrication units, R&D fund, etc., are being implemented to bring foreign vendors with expertise in their fields to set up shop in India, which will, in turn, result in increased value addition.
Over PMO’s concern that manufacturing in India was not cost-competitive, the telecom department said that they have taken up the issue with concerned ministries and departments to promote manufacturing. “Government policies like Modified Special Incentive Package Scheme (MSIP) and Electronic Cluster Scheme are for addressing these disabilities,” added DoT.
Earlier this month, telecom minister Kapil Sibal said that the country has got Rs 2,000 crore worth of investment proposals in the electronics manufacturing sector under the Modified Special Incentive Package Scheme ?- of which projects worth Rs 1,000 crore for setting up of manufacturing units have been cleared.
The DoT has also prepared a six-point agenda to be given to the commerce ministry to boost local manufacturing in the telecom sector. This includes giving deemed export status to local telecom equipment suppliers, inclusion of Saarc region under focus market scheme and zero-duty structure for parts and components used for manufacturing.