Foreign telecom gear makers decry local sourcing mandate

By Anandita Mankotia

NEW DELHI: Foreign equipment makers have criticised the Indian government making local sourcing of 36 telecom products compulsory for all centrallysponsored schemes, saying there’s no business case for expanding their domestic production.

Domestic equipment makers, however, are all backing the preferential market access (PMA), seen as crucial to efforts to boost local manufacturing, curb imports and create more jobs in the South Asian nation.

“If we are successful in implementing it (PMA) well, this could be extended to the private sector, as economies of scale come about and supporting ecosystem is established in the country,” a senior government official told ET, comments which could send alarm bells ringing among overseas players.

For now, the telecom department’s notification applies only to government procurement, but that too is damaging prospects of the likes of China’s Huawei and ZTE, Finland’s Nokia and Sweden’s Ericsson that dominate the world’s second largest telecom market and supply products for state-run projects as well.

Speaking to ET on condition of anonymity, a senior executive at an overseas company said the government is one of the largest buyers in any market and India is no exception. “PMA was restricted to small government procurements, but now PMA is spreading all over the government,” the executive said, adding that PMA restricts options for customers and forces them to select specific technologies.

The latest notification on PMA overrides the previous one of 2012 and is more categorical in that it specifically includes all central government funded projects and all public-sector enterprises, Sanjeev Kakkar, Telecom Equipment Manufacturers Association (Tema), told ET.

He said the latest order should include parts of the smart cities projects which will be funded by the central government, besides involve awarding end-to-end turnkey projects apart from just sourcing equipment.

It should also cover contracts given out under the Bharatnet project -- being executed by Bharat Broadband Network — which aims to provide high speed broadband connectivity to all gram panchayats across the country.

While supporting the government’s Make in India Initiative, Huawei said it would be tough to replicate the success in manufacturing mobile devices in India to telecom equipment.

“Telecom infrastructure manufacturing is complex and needs to be carefully evaluated. We believe, for India to truly realize the potential of local manufacturing, it is critical to establish a mature ecosystem backed by sustainable supply chain and robust business demand,” the company said in a statement to ET.

Huawei said that while it was evaluating the DoT notification from a business and industry perspective, there needs to be “a balanced approach in order to avoid unforeseen difficulties and achieve steady growth”.

The executive from the foreign vendor quoted earlier said original equipment manufacturers (OEMs) will never be able to meet PMA norms as telecom equipment is part of a global supply chain and suppliers such as chip makers and other global component makers do not have their manufacturing base in India.

Second, the official said, by and large all global companies reside IPRs and designs in their parent country and India, through PMA policy, was trying to change the global business models. The PMA notice comes shortly after Trai proposed steps to boost indigenous production of telecom gear.