BSNL’s 4G tender is a good example of this, but there is a larger cost as supply costs rise; we need to be aware of this
Just how much of a burden the government’s Atmanirbhar strategy is costing the state-owned BSNL is best seen from its various letters of protest following the government forcing it to cancel its 4G tender and, instead, buy more from local vendors. Its latest letter to the telecom ministry on ‘mapping of local capacities and competition in telecom products’ makes the larger point that since BSNL has to compete with private sector players in the market, its equipment cannot, in any way, be inferior to theirs and that it cannot, in any way, have a higher down-time or even be using unproven technology.
The last comment is important since, after getting BSNL to cancel the tender in order to exclude Chinese vendors, the government was keen that it uses an altogether new model; instead of awarding the tender to one equipment vendor with a proven track record, it should buy individual components from vendors and have an aggregator—like a software firm—put it all together.
As it happens, BSNL has pointed out, a large number of Indian vendors have not even participated in BSNL tenders in the past and, in most cases, “the rates quoted are much higher than the rates available globally with international standards”. For the products which BSNL has listed, Indian prices are 50-89% more expensive than what foreign vendors are willing to supply at. In such a situation, since it is the government that wants Chinese firms out, surely it should be paying for the extra capital costs as forcing BSNL to buy more expensive infrastructure will mean it won’t be able to compete effectively.
Indeed, while finance minister Nirmala Sitharaman announced a new PSU policy some months ago—all PSUs which are in non-strategic sectors will be sold, and a maximum of four PSUs will be allowed in strategic sectors—the BSNL episode confirms that, even now, the government is not really interested in giving genuine autonomy to PSUs. Why else would a PSU be asked to delay its capex plans and to tailor them to government specifications?
Indeed, the issue of the costs of Atmanirbhar Bharat goes beyond BSNL and has larger implications for the entire economy. Former chief economic advisor Arvind Subramanian has, in a co-authored paper, pointed out that while India’s import duties fell from 125% to 13% between 1991 and 2014, they have since risen to nearly 18%, and this was done by hiking duties on around 3,200 tariff lines; the largest hike, the paper says, took place in 2018 when there were nearly 2,500 tariff increases; according to the authors, the tariff hikes applied to around 70% of India’s imports.
At a time when big trade pacts—like RCEP—are focused on lowering import barriers, actually raising them makes India the pariah. And, as we have seen from economic data, India’s high-growth years have been those with large export-growth as well; indeed, it is the high growth of exports that is not just boosting economic growth, it is also responsible for the big jump in investment levels in the economy. Not only is atmanirbharta forcing higher costs on those that import, but it is also hurting India’s ability to export.