Indian Telecom Makers Want Preference in Equipment Purchase

Indian telecommunications equipment makers are demanding that the local telecom regulator, Telecom Regulatory Authority of India (TRAI) should make it compulsory for Indian telecom service providers to buy at least 30 percent of their supplies locally.

Despite the growth of India's telecom services industry, the country has not been able to build a domestic telecom product industry and is primarily importing equipment, with hardly any value being added in the country, the Telecom Equipment Manufacturers Association (TEMA) said in a submission to TRAI.

The reservation of 30 percent of the market for locally manufactured products will give Indian makers the scale to be globally competitive, TEMA said.

But the Cellular Operators Association of India (COAI), an association of GSM (Global System for Mobile Communications) service providers, has said in a note to TRAI that that such protection will make the local telecom industry uncompetitive, and lower the quality of their products.

Bharti Airtel, India's largest mobile service provider, said that any regulation or mandate on the use of Indian products in the telecom network would be counter productive and may slow the growth of the Indian telecom sector, even as most of the operators are planning to launch 3G and BWA (broadband wireless access) services.

The growth of India's telecom services industry was possible because new and innovative technologies were available at reasonable prices, it added.

COAI is however willing to go along with a scheme that will give financial incentives such as lowering of license fees or spectrum charges to operators who buy from local manufacturers.

The responses, more or less along predictable lines, were submitted to TRAI in reply to its request in June for suggestions on building up India's manufacturing of telecommunications equipment.

"We are interested that more development and manufacturing happens in India, whether it is by multinational companies or India companies," S.K. Gupta , advisor to TRAI, said in a telephone interview last month.

Service providers are also demanding that the Indian government should set up a telecom testing lab that would test equipment for any malware and spyware. The providers have asked for this lab to meet the security concerns of the Indian government about the use of Chinese equipment by Indian service providers.

A number of Indian service providers complain that their purchases of equipment from Chinese makers like Huawei and ZTE have not been cleared for security reasons since February. The Indian government has insisted on a security clearance before orders are placed for foreign equipment, but denies that there is a blanket ban on Chinese equipment.

While dismissing reservation for local manufacturers, COAI however suggested that there should be some amount of obligation on foreign companies to either transfer technology or to set-up a manufacturing base in India. A number of multinational telecommunications makers, including Nokia, have set up manufacturing facilities in India. Huawei and ZTE have also said that they are considering setting up manufacturing facilities in the country.

TEMA has asked that local manufacturers should be provided financing at internationally competitive rates, as well as a variety of financial incentives. It has also suggested incentives for service providers buying Indian products or locally manufactured products from foreign companies.

The main focus for Indian makers should be on designing their own products, as most of the value addition is in research and development and IP (intellectual property) creation, it added.

The discussions initiated by TRAI are still at a preliminary phase, and may not result in any policy changes soon, analysts said.

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