The Prime Minister’s Office (PMO) has recently suggested that the Department of Electronics and IT (DeitY) should delink issues of “security” and “local manufacturing” mentioned in the preferential market access (PMA) policy guidelines, issued by DeitY.
PMO has said that in the name of encouraging indigenous manufacturing, Indian markets should not suffer from lack of new and better products from outside India. Instead, it suggested to ensure audits, certification and setting up standards to handle “security issues”. This can be done by interacting with the industry and taking suggestions on ways to address the security issues.
In a note to the Department of Telecommunications (DoT) and DeitY, PMO suggested a “moratorium on implementation of the policy till adequate assessment of manufacturing capability for products that qualify for domestic value addition was made.”
The PMA policy notified in October 2012 was brought in to give a fillip to local manufacturing. It says that the government will procure a certain percentage of its requirements from domestic manufacturers. On the other hand, domestic manufacturers have to value-add to their production.
The PMO note also said that the point on domestic value-added criterion was not practical as component manufacturing in India is limited. “Value addition calculations based on bills of materials were complex and could lead to creative accounting, with large compliance burden and bureaucratic oversight,” it said.
The note said that the PMA policy states that “procurement by the government and also by its “licensees”, which effectively meant it would be applicable on private telecommunication companies and banks,” which should not be done.
The PMO note came after strong opposition from foreign companies against PMA policy.
Changes suggested by PMO:
*Delink security issues and manufacturing location.
*Audits, certification, setting up standards and a dialogue with the industry to address security concerns
*Freeze on policy roll out till assessment of manufacturing capability for products that qualify for domestic value addition
*Incentivise capability building for products not made in India
*Policy stipulates high percentage of value addition over a short period, not allowing time for manufacturing efficiencies
