The revised version of the policy, which does not cover the private sector, has drawn mixed reactions from the industry
By Richa Chakravarty
Tuesday, February 04, 2014: February The Cabinet that approved the revised version of the Preferential Market Access (PMA) policy has exempted the private sector from the mandatory use of a certain percentage of domestically manufactured electronics. The defence sector has also not been brought under the revised policy as the Defence Ministry had opposed being covered by the PMA policy. Local sourcing of electronics will be mandatory for all other government ministries and departments for a period of 10 years. This move has, however, raised concerns within the industry as experts feel the revised PMA policy can jeopardise investments in the electronics industry.
The previous version of the PMA policy was approved by the Cabinet on February 2, 2012. This version had mandated that the government and the private sectors should use a certain percentage of domestically manufactured electronic products, in a bid to encourage investments in the electronics industry and to protect the security interests of the country. However, on July 8, 2013, the prime minister’s office (PMO) had objected to this policy, leading to its revision.
The PMA policy has two aspects— one relating to government procurement and the other relating to private sector procurement. There are no international commitments affecting government procurement. However, private sector procurement policies are covered by India’s WTO obligations, and WTO rules permit restrictions in the private sector in cases of essential security interests. However, under the revised PMA policy, the private sector has no such restrictions and is free to opt for electronic products that are not manufactured locally, which could have security implications. This has led to some concern in a section of the Indian industry.
Mixed reactions in the industry
While industry experts feel that the government has demonstrated its good intentions, they feel that this move protects the multinationals. Shares Sanjiv Narayan, managing director, SGS Tekniks Manufacturing Pvt Ltd, “The PMA is an important element for all domestic manufacturers but there were political compulsions to exclude the private sector from its ambit. It is a setback for all the manufacturers as we were looking forward to the revised PMA policy. The government has taken up a ‘compromise formula’ by excluding the private sector, which has watered down the process.”
Investments are already in the pipeline and any such shift will only put the mission in jeopardy. PVG Menon, president, India Electronics & Semiconductor Association (IESA), told Business Standard, “Investors can be confused by the recent policy rethink. This is especially so at a time when we are on the threshold of getting significant investments into the ESDM sector, by both Indian as well as foreign companies.”
While one school of thought feels that the revised PMA policy might affect the ultimate goal of curbing hardware imports, the other school is of the opinion that it offers domestic manufacturers healthy competition to survive. “I feel it is a very good idea to exclude the private sector from the policy. One cannot put barriers on market forces. This builds healthy competition for Indian players on the technology, quality and infrastructure front. The government has laid down a full-fledged plan and has clauses attached to it for multinationals and foreign players, for example, the ‘value addition’ clause. Our product (capacitors) has been duty free for the past 10 years and we have been surviving well in the market along with other manufacturers. It is time for us to pull up our socks and let market forces play. However, my only concern is on how and when the policy gets implemented. That needs to be focused on now,” opines Anil Bali, vice president, Deki Electronics Ltd.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine
