TRAI recommendations: A step in the right direction but implementation holds key
Last week, the Telecom Regulatory Authority of India came up with much needed recommendations to promote manufacturing of telecom equipment within the country. Even as the Indian telecom sector has seen exponential growth in the last decade and emerged as the second largest market for telecom services globally, local production of telecom equipment has remained a conspicuous laggard. As a result, global manufacturers of telecom equipment have stablished an iron grip on the domestic market, thereby making the country heavily dependent on imports.
The figures speak for themselves. In the financial year 2014-15, import of telecom equipment was nearly $15 billion or 95,000 crore rupees that shot to a staggering $22 billion or 150,000 crore rupees in financial year 2017-18. In comparison, the export of telecom equipment has been minuscule in this period at just above $1 billion and this has resulted in huge drain on our precious foreign exchange year after year.
The TRAI recommendations on promoting local telecom equipment manufacturing are thus critical in this regard as they identify the focus areas and lay down the roadmap to boost design led, high value domestic manufacturing in this important segment.
Among the notable proposals is the suggestion that all telecom products meant for use in the telecommunication network or by consumers and marketed in the country should be classified as either fully finished imported products or indigenous products. The indigenous equipment should be further classified into Made in India Products, Designed inn India Products or Designed and Made in India Products. This distinction will bring much needed clarity and ensure that all products are not measured with the same yardstick.
The TRAI has stopped short of suggesting any quantum for tariffs on import of telecom equipment or incentives for domestic manufacturing and has instead suggested working out the incentives after detailed analysis of various market conditions. On the basis of the categories that have been proposed, the government should look to impose high tariffs on fully finished imported products, treat assembly and manufacturing differently and reserve highest incentives for telecom equipment that is both designed and manufactured within the country.
Interestingly, the TRAI recommendation not only proposes incentivising indigenous design and manufacturing of telecom equipment not covered under Information Technology Agreement of 1997 but even bats for encouraging local production of those telecom products that are currently part of ITA. It is high time we break free from the imperious provisions of zero duty imports under ITA that has throttled domestic manufacturing and given our huge domestic telecom market to multinationals on a platter. A number of nations around the world are now promoting their domestic industries by implementing preferential policies and imposing tariff and non-tariff measures, India’s approach should be no different when it comes to developing world class domestic manufacturing capability.
At a time when DIPP under Commerce Ministry is tying up loose ends to make the Public Procurement (Preference to Make in India) (PPP-MII) Order, 2017 more stringent, the TRAI recommendations to appoint a nodal officer under DOT to look into the cases related to lack of implementation of PMA policy is very timely and reiterates its concern over the non-implementation of the policy, which was originally notified by DOT in 2012.
In fact, given the ever increasing complex web of technologies and security risks, TRAI’s latest recommendations propose that the PMA policy should be implemented for all public telecom networks along with greater emphasis to incentivise the TSPs for deploying more indigenous telecom products beyond the PMA mandated quantities to address national security concerns. Stringent application of such norms will ensure that the country’s security is not compromised and sensitive and critical segments like defence and banking due not fall prey to espionage and cyberattacks. Further, the target of achieving net zero imports by 2022 cannot be achieved unless access to larger market is ensured for domestic players in fair and competitive manner, who have been suffering because of ITA 1 and other financial & infrastructure limitations. Export oriented strategy can supplement the efforts, but emphasis should remain on linking incentives with movement up the value chain.
The TRAI suggestions have also identified specific areas where the wheel must move so that local production of telecom equipment gathers momentum. For example, the regulator is of the view that indigenous telecom equipment manufacturing should be monitored in Department of Telecommunications at least at the level of Member, Telecom Commission. It also calls for setting up of a dedicated units within DoT for monitoring of design, development and local production. The recommendations also entail setting up of a 1,000 crore rupee Telecom Research and Development Fund for promoting research, innovation, design, testing and manufacturing of telecom equipment in the country.
TRAI has recommended that the progress monitoring of telecom manufacturing in the country should be done by a senior officer at the level of Member, telecom commission. It is important to have a dedicated unit in DOT for facilitation and monitoring of progress of domestic design and manufacturing in telecom. Till late 1990s, Member (Production) was responsible for the progress of domestic telecom equipment manufacturing. The role of Member (Production) has become more critical in today’s context,who can oversee the development of entire telecom ecosystem from domestic production/manufacturing/R&D perspective and meet the indigenization goals of the Government under “Make in India” in a more timely and proactive manner. In this context, the government must consider revival of Member (production) position as recommended by TRAI.
There is no doubt that TRAI recommendations hit all the right notes with the aim to create a vibrant, research and design based eco system to achieve net zero import of telecom equipment by 2022. This essentially means that in less than 4.5 years, TRAI wants export of telecom equipment to at least match imports. Even though ambitious and aggressive, the target is achievable only if the government/DOT accepts and implements TRAI recommendations with a steely resolve and provides sustained support including incentives with assured market access. For, another set of mere suggestions with a back burner approach will certainly not help the cause of domestic telecom equipment makers and the nation.
Article published by Economic Times on Aug 09, 2018.