Govt approves Preferential Market Access policy for domestic manufacturers

While the government wants 25-65 per cent value addition in telecom products, industry feels it might be difficult in the current scenario

In an effort to boost indigenous manufacturing of telecom products and keeping in view the security concerns of the country, the Union government has approved the Preferential Market Access (PMA) policy to support the domestic manufacturers and give preference to the domestically manufactured telecom and electronic products.

In furtherance to this approval, the Department of Electronics and Information Technology (DietY) has notified all ministeries (excepts the Ministry of Defence), departments and governments agencies to give preference in their procurements to those electronic products, including telecom products, that have gone through a minimum of 25 per cent of value addition in India in the first year. “Government wants value addition done to all electronics products including telecom products to be increased by 5 per cent every year to a maximum of 65 per cent over the next five years,” says Rahul Sharma, president, Telecom Equipment Manufacturers‘ Association of India (TEMA).

DietY has also clarified that the products procured by the ministries and departments have to be utilised by the ministries, departments and agencies themselves for government funded telecom projects and cannot be resold commercially. The policy will be in force for a period of 10 years.

DietY will also notify from time to time the formula for calculation of value addition for telecom products. “All telecom products which do not meet the minimum value addition criterion for that year shall be treated as imported telecom products and dealt accordingly,” says a government notification released on October 5, 2012, declaring the products and value addition norms to be followed by domestic manufacturers of telecom products. This notification is sequel to an earlier government notification dated February 10, 2012, wherein the preference to domestically manufactured electronic products was announced.

“Preferential market access is one of the key policy initiatives of the government and a step in the right direction,” says J Satyanarayana, secretary, DietY. According to government estimation, demand for various telecom equipment in India is worth Rs 769.4 billion in 2012-13, which will touch Rs 1700.91 by 2019-20.

Welcoming this government initiative, Sharma, who is also the business head, IMS, Sterlite Technologies Ltd, says, “This policy initiative will go a long way in promoting the domestic manufacturing of telecom products in India. This kind of government support will not only encourage the domestic manufacturers but will also motivate the global players to do real value addition, which is presently missing in their products manufactured in India.”

When asked how Sterlite will achieve the target of 25-65 per cent value addition in the next five years, Sharma adds, “We are ready for this kind of value addition for all our products. Today, we are already doing 55 per cent value addition in our optical fibre/optical fibre cable domestically.”

S Nair, DGM, procurement, HFCL, however, feels that this policy will not help the domestic manufacturers much, unless the government makes mandatory for the private sector as well to procure 50 per cent of their telecom product requirements from the domestic manufactures. Says Nair, “It will be very diificult to do 65 per cent value addition in telecom products with the technology available currently. Unless India acquires advanced technologies, this kind of value addition will not be possible. I fear that the domestic manufacturers will suffer in the process.”

While industry experts believe that this policy may help to leverage the domestic demand and provide a volume base that will help to reduce the cost of production, at the same time, these companies need long term finance at low interest rates to compete with the global players. Also, domestic companies should be given all export related benefits.

List of products and value addition for each product notified by DIT

PMA: Minimum preferential market access to domestically manufactured telecom products in indicated financial year

VA: Minimum domestic value addition to qualify as domestically manufactured telecom products in indicated financial year