The Department of Telecom wants mobile phones, modems and set top boxes to be brought under the special category while allowing 100 per cent FDI in Single Brand Retail Trade (SBRT).
The special category would mean that companies with 100 per cent FDI will have to mandatorily source 30 per cent of their components from local small and medium enterprises.
The DoT has made this suggestion in response to a proposal by the Department of Industrial Policy & Promotion (DIPP) to increase the FDI cap in retail.
“Opening of 100 per cent FDI in SBRT with 30 per cent mandatory sourcing from SMEs will boost manufacturing of CPEs and phones in the country,” it said in an internal note.
If cleared, this will have major ramifications for device manufacturers as most of the foreign brands, including Nokia, Samsung, have set up their own retail outlets in the country. These companies will have to source components for their products locally, something which they are not comfortable about.
“Procurement of 30 per cent (other than food stuff from SMEs) is not feasible for telecom and technology products and services. If at all, any such quota is to be established, it should be restricted to products made in India by any manufacturer not specifically by SMEs. In the value chain of telecom and technology products and services, the proportion of manufacturing by SMEs is miniscule and, therefore, any such restriction is not feasible,” said Mr Pankaj Mohindroo, President, Indian Cellular Association – the industry body representing handset makers.