The Government has notified its policy for giving preferential market access to telecom products manufactured in India.
All Government departments and agencies under its control will have to buy between 50 per cent and 100 per cent of the total requirement from local manufacturers depending on the type of equipment. Private operators have not been included in this notification, but Government sources said that a separate policy is being made for procurement by private players.
The policy has been introduced to tackle security concerns from imported products. Security agencies have repeatedly raised concerns about possible spyware and malware embedded into imported products, especially those coming from China. The worry is that such malware would enable unfriendly countries to control India’s communication networks or snoop into the traffic flowing through the network.
The other major concern is the huge import bill in buying telecom products from foreign players.
The Government is concerned that the foreign exchange balance is getting tilted against India due to the large amounts of imports.
According to Government estimates, telecom equipment worth Rs 76,940 crore would be required in 2012-13 which will grow to Rs 1,70,091 crore by 2019-20. This is roughly 8 per cent of the global demand.
Value addition
The Government has also set targets for value addition for each of the products ‘Made in India’.
“All the telecom products, which do not meet the minimum value addition criterion for that year, shall be treated as imported telecom products and dealt accordingly,” the notification stated.
For example, in the set top box category, manufacturers will get 50 per cent preferential market access and they will have to do 35 per cent value addition in 2013-14.
This will have big impact on technology companies that bid for Government contracts. They will not only have to set up a factory in India, but also add value here instead of just assembling products. This would need an ecosystem of component suppliers to also set up units in India.