Local bias in telecom gear policy softened
Oct 17 2013 , New Delhi
US firms’ pressure forces govt to ease norms
The government on Thursday also rescinded its decision to give preference to global companies with their own factories in India or in joint ventures with Indian firms making such telecom and electronic equipment.
By the earlier decision, 25 per cent Indian content was mandatory in telecom and electronic equipment supplied to the defence forces. This decision has been dumped in the watered-down preferential market access (PMA) policy by Thursday’s Union cabinet decision.
This formalised a change the prime minister’s office (PMO) spoke of on July 8 when it had said that the revised electronics policy “will not have domestic manufacturing requirements, percentage based or otherwise.”
The cabinet cleared the revised proposal, moved by telecom and IT minister Kapil Sibal, opening the doors to foreign private equipment suppliers without any clause for preference to local manufacturers or locally-produced equipment.
The American IT industry has doggedly opposed India’s earlier PMA policy, citing WTO obligations.
The prime minister earlier invoked the rarely used Rule 12 of government’s rules of business, which allowed him to put in abeyance, reverse or modify an earlier cabinet decision. But such revision itself needed to be ratified by the cabinet. On Thursday the cabinet gave the ratification.
Dilution of the PMA policy was also attributed by some officials to a reported commitment given by the prime minister to president Obama during his visit to Washington DC last month.
A senior official had in July told Financial Chronicle on condition of anonymity that “the very purpose of the PMA has been defeated. The cabinet’s earlier decision was to promote the domestic electronic manufacturing industry, address security concerns often raised by NSC and at the same time balance out investments made by foreign firms.”
The cabinet’s original decision in March had stipulated at least 25 per cent value addition in India. This was opposed by MNCs thriving on ‘cheaper imports’ from group companies and associates abroad and paying virtually no tax or duty on such imports. The MNCs do not add value beyond 8-10 per cent in India.
Following PMO’s intervention, the IT department’s decision on six products and the telecom department’s notification relating to 23 products insisting on domestic manufacture were scrapped. The telecom department’s move to notify another 14 products based on security assessment and prevention of malware, especially in equipment from China, was also stalled.
The PMO statement in July had justified a reversal of policy by claiming that “concerns have been raised in many quarters on different aspects of the PMA policy, particularly over the one relating to procurement by the private sector of electronic products with security implications.”
Following that, at the prime minister’s instance, a revised cabinet note moved by Sibal provided the definitions of products, projects and sectors with security implications. Besides, the prime minister had directed all ministries and departments to put on hold any notification relating to private sector procurement where domestic manufacture was insisted upon.
The revised proposal approved by the cabinet sets security standards afresh in a project or product and alternative modes of security certification. It also draws a roadmap for buildup of domestic testing capacity. The earlier cabinet decision also provided a detailed mechanism to set up capacity for domestic testing to detect ‘foul play’.
By Thursday’s decision, the government has centralised all powers in the PMO to notify private procurement with security implications. While doing so, NSC will define afresh as to what constitutes security in relation to products, projects or sectors.