No special deal for domestic electronics cos

Tags: News

Govt buckles under foreign pressure, revokes initial nod

Following intense pressure from American telecom and IT equipment companies, the government has revoked its decision to give preference to locally made material, citing security

concerns.

The prime minister’s office said on Monday the revised electronics policy “will not have domestic manufacturing requirements, percentage based or otherwise.”

Telecom and IT minister Kapil Sibal will move a comprehensive revised cabinet note in a month to open the doors to foreign supplies with no preference to local manufacturers.

America’s Information Technology Industry Council has consistently opposed India’s policy decision to provide a preferential market access to domestic manufacturers to comply with WTO requirements.

The 52-member American lobby includes IBM, Apple, Microsoft, Intel, Alcatel Lucent and Ericsson.

To enforce Monday’s policy revision, decision prime minister Manmohan Singh used a special rule to put in abeyance, reverse or modify a cabinet decision. However, the revision needs to be ratified by the cabinet.

The revision also underlined the differences between officials in the PMO, cabinet secretariat, national secretariat and the Union cabinet.

A senior government official told Financial Chronicle on condition of anonymity that “the very purpose of preferential market access has been defeated.

“The cabinet’s earlier decision was to promote domestic electronic

manufacture, address security concerns often raised by NSC and at the same time balance out investments made by foreign companies.”

The policy, cleared by the cabinet decision in March, stipulated at least 25 per cent value addition in India in procurements made by private companies in global markets.

This has been opposed by multinational companies been thriving on cheap imports from group companies and associates abroad, while virtually paying no taxes or duties on such imports. Currently, the multinational do not add more than 8 or 10 per cent value in India.

Following PMO’s intervention, the IT department decision on six products and the telecom department’s notification relating to 23 products insisting domestic content are on hold.

The telecom department’s move to notify another 14 products based on security assessment and possibility of malware being incorporated is also placed on the backburner.

PMO said the entire policy of providing preference to domestically manufactured electronic goods would be revisited.

A PMO statement said, “Concerns have been raised in many quarters on different aspects of the preference policy, particularly the policy relating to procurement by the private sector for electronic products with security implications.”

Yet, PMO maintained that the government’s procurement would not be impacted by WTO obligations. It said WTO did not apply to private manufacture or imports relating to security.

As per the prime minister’s directive, the revised cabinet note by Sibal will have to define products, projects and sector with security implications if a preference policy is to be pursued.

The revised proposal will set security standards afresh and alternative modes of security certification and draw up a new roadmap for building domestic testing capacity. The earlier policy did not provide detailed mechanism for crerating capacity for domestic testing ‘to deflect foul play’.

NSC will define afresh as to what constitutes security in relation to products, projects and sectors.

badarinath@mydigitalfc.com

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