India-Made Electronic Hardware To Get Preference In Govt Buys.

The government is considering a radical proposal to shore up electronic manufacturing capabilities in the country. Several ministries are firming up a plan to mandate that 30% value terms for all government procurement should be 'Made in India' or Indian electronic products.

This will extend to tenders of all government ministries, PSUs, government-controlled institutions, PPP-funded projects and projects under institutional funding from the World Bank and Asian Development Bank, according to the draft proposal, a copy of which was viewed by ET.

This plan also has the support of the National Manufacturing Competitiveness Commission and the Prime Minister's Office and will soon be circulated to all ministries before it is placed before the Union Cabinet.

The Department of Information Technology (DIT), which first mooted this proposal, has said its studies have shown that the 'volume of electronic imports to India far exceeds the oil import bill'.

Prior to that the DIT set up an industry-led task force in 2009 chaired by HCL's Infosystems chairman Ajay Choudhry and former Nasscom president Kiran Karnik to suggest measures to stimulate electronic hardware manufacturing. A key recommendation of this committee had been provide preference for domestically-manufactured products.

The telecom sector will be the most impacted if this proposal is implemented as it accounts for maximum import of electronic hardware. The communications ministry is of the view that this proposal can complement telecom regulator Trai's recent suggestion that mobile phone companies be mandated to source 80% of their network equipment and other related infrastructure from domestic manufacturers by 2020. This also includes the networks produced by the manufacturing units of foreign vendors located in India.


Officials in the telecom department (DoT) say Trai's proposal is likely to be cleared soon with some changes to the timelines. Trai wants the government to ensure that companies owned by Indians and located here get 50% of all telecom network orders by 2020. This implies that the regulator wants the manufacturing arms of international vendors such as Ericsson, Nokia Siemens, Alcatel-Lcuent and Huawei, among others, to account for only 30% of all equipment orders by 2020. Besides, Trai also wants telecom hardware imports to be restricted to 20% of the country's total requirements. It had also charted out a timeline beginning 2015 to achieve these targets.

India is the world's largest market for international vendors and Trai has projected that the market for telecom equipment will double to $40 billion in 2020. Currently locally manufactured telecom hardware accounts for a mere 12-13% of the mobile operators' needs. Of this, Indian companies account for a mere 3%, Trai estimates reveal.

But large sections of the industry are set to oppose this proposal. During a meeting with telecom minister Kapil Sibal and officials from different department, Vodafone Essar's resident director TV Ramachandran said the plan was against the principles of free market economy, while adding that forced market access would be disincentive to competition and quality.

Source : economictimes.indiatimes.com