Why telecom players fighting over preferential access to contracts

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Published: June 4, 2020 3:30 AM

The government wants to become self-sufficient in telecom equipment manufacturing, primarily because of security concerns.

The idea of the meeting was to get suggestions from industry players so that DoT can come out with its incentive policy to promote manufacturing.The idea of the meeting was to get suggestions from industry players so that DoT can come out with its incentive policy to promote manufacturing.

At a time when government is trying to promote manufacturing of telecom equipment in the country, there is a clear divide between local and global players. While the domestic players like Sterlite Technologies, VNL and Tejas Networks are seeking preferential access to contracts, global firms including Nokia, Ericsson and Huawei are opposed to the move as any restrictions on them will hamper future investments.

The Department of Telecommunications (DoT) held a meeting on Wednesday with all the telecom network makers in order to learn about the pain points and discuss how manufacturing can be promoted in India. The idea of the meeting was to get suggestions from industry players so that DoT can come out with its incentive policy to promote manufacturing.

Accordig to sources, the meeting was attended by Ericsson, Nokia, Samsung, Huawei, Sterlite Technologies, VNL, Tejas Networks, etc. During the meeting, the local firms demanded that preferential market access (PMA) norms should be applied to private players also. The norms, which are currently mandatory for government contracts, provide a price advantage to local companies. The BSNL 4G tender is soon going to be cancelled because it did not include the norms and a new tender with PMA norms will be issued.

It must be mentioned that the global firms are at a disadvantage when it comes to PMA norms. Though companies like Nokia and Ericsson are manufacturing telecom equipment in India, the local content addition is around 40% only. But if the contract mandates 50% or above local value addition, it leaves all the global firms out of the race, leaving the floor open for domestic companies. As the cost of telecom equipment supplied by global firms is much cheaper while the quality is superior, the local firms are yet to make a mark in private sector. The local firms reiterated to the government that they can’t compete with global firms in terms of cost, and some kind of handholding should be provided, like mandating PMA to private sector operators.

Also, the firms conveyed to DoT that to increase manufacturing in India, there should be certain price advantage as compared to other countries. “Currently, manufacturing in India is 8-10% expensive, so the government should provide incentives in the same range. Also, as India is not such a big market for telecom equipment, the incentives should promote exports,” said one of the executives of a global firm.

It must be mentioned that the Digital Communications Commission (DCC), the highest decision-making body of DoT, in its meeting held on May 11 has already cleared the production-linked incentive (PLI) scheme to promote telecom equipment manufacturing in India. After taking the suggestions from industry, DoT will form its policy and send it to the Cabinet for approval. A PLI scheme for electronics manufacturing has already been notified by the government.

TEMA, an association of local telecom equipment players, said it requested DoT that telecom PLI scheme should include mandatory eligibility criteria, commitment and compliance on domestic value addition, exports, employment and technology absorption. The body further said the scheme should be for indigenous design developed manufactured products and not for assembly.

The government wants to become self-sufficient in telecom equipment manufacturing, primarily because of security concerns. Recently, there has been a debate globally about security of 5G networks and how countries are sceptical about using equipment from Chinese firm Huawei. As per reports, the UK government is also pursuing an alliance of 10 countries including India, to create an alternative pool of 5G equipment to avoid reliance on China and Huawei. The alliance, dubbed D10, will include India, Australia and South Korea along with G7 countries the US, the UK, France, Canada, Japan, Germany and Italy.

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