With the department of telecommunications (DoT) asking the Customs department to strengthen the mechanism to check imports of telecom equipment, global gear makers Ericsson and Nokia have expressed concern over the delay in getting imported components and products because of strict checking, according to people aware of the matter.
On the other hand, local telecom suppliers have urged the government to increase the vigilance so that no infiltrated equipment from untrusted sources can enter the territory and skip the customs duty through manipulation of HS codes. These loopholes are in a way restricting the Make-in-India initiative, thereby affecting their business here, local telecom suppliers said in a recent meeting with officials from DoT and Customs.
The Harmonised System or HS codes is a standardised numerical method of classifying traded products based on their categories. Each product that is imported or exported is assigned certain codes for easy verification and charging of relevant duties accordingly.
While global gear makers are in line with the government’s move to check products at Customs so that they do not skip the right duty structure, one of their concerns is that with this activity there is a pile up of supplies at the Customs, thereby affecting their operations, sources said.
In June, FE reported that the DoT sought Customs help on the matter as some companies were able to import telecom equipment in the non-trusted category by manipulating product codes. The risks of this are two fold. First, products from countries like China with malware can enter the country. And second, the government loses revenue as the codes are changed to those of products attracting zero duty.
Local equipment makers, which are part of the telecom production-linked incentive schemes, also lose out as the finished products manufactured by them face competition from cheaper imports, a government official said, adding that the DoT has requested Customs to identify the right set of duty based on the keyword.
Further, DoT has also shared a list with Customs for equipment which are prone to be manipulated.
For example, routers, switches and gigabit passive optical network (GPON) OLT equipment that figure among the products being manipulated, attract Customs duty from zero to 20%. However, the companies which import change the nomenclature or HS code of the product to avoid higher Customs duty, official sources said, adding that the government does not want to disrupt the necessary imports and is deliberating over concerns raised by both local suppliers as well as foreign players.
Even as companies such as Nokia and Ericsson have started manufacturing certain products in India, given the pace of deployment of 5G and other network requirements, all the demand can not be fulfilled from the Indian operations and therefore they have to rely on imports, industry officials said.
According to a report by a DoT taskforce, most of the country’s requirements for telecom products are being met through imports. India’s spending on telecom products was estimated to be $11 billion in 2022 and is expected to increase to $16 billion by 2025, according to Rakesh Bhatnagar, director general of VoICE consortium, who heads the taskforce.