India to give Preferences like Tax Cuts to Indigenously Manufactured Telecoms Equipment

India decided to give preferences, including tax cuts, to indigenously manufactured telecoms equipment. The decision was taken despite concerns raised by the United States and the European Union, which mentioned that such concessions would violate WTO commitments.

Telecoms department (DoT) five-member committee afer examinig the issue concluded that these concessions as well as reservations for local mobile equipment manufacturers were necessary from a national security perspective. The committee cleared the proposal that mandates domestic operators to source 65% of their annual hardware and network-related equipment from Indian companies by 2020. The reservations for domestically-manufactured equipment is to be part of the new telecoms policy 2011.

The Telecom Regulatory Authority of India (TRAI) had earlier proposed that mobile phone companies be mandated to source 80% of their network equipment and other related infrastructure from domestic manufacturers by 2020. The new mandate goes a step forward to include network and other hardware produced by the manufacturing units of foreign vendors located in India. TRAI had also recommended that companies owned by Indians and located here get 65% of all telecom network orders by 2020.

Manufacturing arms of international vendors such as Ericsson, Nokia Siemens, Alcatel-Lucent and Huawei amongst others are to account for only 15% of all equipment orders by 2020. TRAI also sought that these proposals be implemented in a phased manner. by 2015, mobile phone companies are to source 45% of all telecoms equipment domestically. Off this, TRAI wants Indian companies to account for 25%.

TRAI recommended that domestically manufactured products be given preferential market access. It also proposed a slew of incentives to kick-start telecoms equipment manufacturing in India.

Regarding 65% reservation for Indian products, the committee clarified that this should involve products whose R&D is done in India, or if be outsourced, the control and ownership of the same reside with the registered Indian entity. Indian products can only be sourced from firms whose management and board consist of majority Indian citizens.