Eight years after announcing $1 billion credit line for digital connectivity to 10 Asean (Association of South East Asian Nations), the government is expected to revive the project as the same did not work out earlier owing to disagreements on the credit line rules with such countries, according to people aware of the matter.
Reviving the project would be crucial for the government given its focus to push domestic telecom equipment companies as well as local companies in the related sector, for exporting products and enable connectivity in those countries. Another factor to revive such project would be growing base of chinese equipments in those countries, which in a way is weighing on India’s chances to tap the market.
Reason with regard to no activity in the Asean countries project announced by Prime Minister Narendra Modi in 2015, was that the Indian government only accepts ‘sovereign guarantee’ from any country to which it issues line of credit. However, Asean countries were only able to give ‘letter of comfort’ since the project would be implemented by the private telecom players. The Indian government did not accept such offer from Asean countries owing to fact that if the telecom companies in that country default on the payment, there would not be any chance to recover the money from the governments there.
Asean countries include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
The project, which meant to provide both physical and digital connectivity in Asean countries involved the Ministry of External Affairs (MEA), the Export-Import Bank of India (EXIM Bank) for disbursement of funds, the Department of Telecommunications (DoT) and Telecom Equipment and Services Export Promotion Council (TEPC).
“The government is keen to extend support to Asean countries as after one credit line, the countries will become self-sustaining and offer more orders to Indian companies. However, there are ‘line of credit’ rules which we have to follow with every country,” an official said, adding that this is not a grant, its a credit and the credit is supposed to be returned.
“There were many meetings held between some Asean countries and the government officials but no formal line of credit requests were received by MEA and EXIM Bank,” another government official said.
The domestic telecom players, represented by VoICE consortium, have also sent a proposal to the Department of Telecommunications (DoT) to revive the project and ease rules on line of credit in consultation with MEA, finance ministry, and other stakeholders.
“Some of the Asean countries suggested that telecom is now in a multi-operator competitive environment in all countries including the private sector and at best the government banks in the requesting country, can extend letter of comfort,” said Rakesh Bhatnagar, director general of VoICE consortium.
According to Bhatnagar, alternative options like Letter of Comfort from Government Banks of requesting country could be considered at least in the telecom sector instead of Sovereign Guarantee. Easing of rules will pave the way for domestic companies to tap the market of Asean countries, Bhatnagar said.
“DoT is analysing the proposal and will recommend this to the finance ministry and MEA if that is necessary for domestic players,” another government official said.
Experts, however, believe that China offered better terms than India to those countries and that is why some are in talks with China as well.