Make in India: Govt now wants manufacture of telecom equipment

After mobile handsets, the government has set its sights on the manufacturing of telecom equipment in India. It will figure in the new telecom policy, to be issued the coming March.

The government says such manufacture is important from the point of view of its ‘Make in India’ project but also due to security concerns.    

A primary reason for both has been relentless competition from China, known for large-scale production and export of low-cost equipment. There has also been import from Sweden, Finland and America.

“We are still importing 80-85 per cent of all telecom equipment. We will be waiting for Trai’s consultation paper but in the meantime, we are  moving to ensure we are able to get telecom manufacturing done in India and that will be a big policy thrust in the new policy,” Aruna Sundararajan, secretary of the department of telecommunications, told Business Standard.

Restraints

She said most telecom operators find it cheaper to get the equipment from outside the country. As import is duty-free, there is no incentive to make here.

“The first time a manufacturing incentive came in was in 2014 with the duty differential; that is how the handset people came in. We are trying to have a similar calibrated map for telecom equipment manufacturing. We are working with industry to develop that…C-DoT (Centre for Development of Telematics) is going to play a very big role because it has developed a range of technologies. BharatNet is the first big user of indigenously made equipment,” she added.

Trai feels a trade policy enabling import of equipment with low or no duty has kept both service providers and consumers happy. However, the lack of capacity building for domestic production is a serious challenge to India’s continued success in the sector. The regulator said apart from economic reasons, the security concerns arising out of excessive reliance on foreign made products suggest we should aim at self-sufficiency.

Hemant Joshi, partner at consultants Deloitte Haskins & Sells, says equipment manufacturing has not picked up because of the globally established players’ capabilities and record of trusted products; also, telecom companies are importing at a reasonable price. High investment is needed to set up equipment manufacturing units and achieving economies of scale.

Some says equipment manufacturing needs expertise in a number of domains like networking, communications, software stack and the like. In India, these skills are scattered.

Faisal Kawoosa, a principal analyst at CyberMedia Research, says a focus on manufacturing has been recent in the private domain. The star product has been mobile phones and all investment was skewed towards these. Hence, there has been the emergence of a breed of home-grown brands.

“The government showed a lot more interest in bringing mobile handset manufacturing into the country. This wasn’t the case with other equipment,” says Kawoosa.

Trai notes a phased programme to promote indigenous manufacturing of mobile handsets, its sub-assemblies and parts was notified by the ministry of electronics and information technology in end-April. However, no such plan or schedule has been developed for the telecom equipment making industry.

Ahead

Joshi says the government needs to take some strong steps to boost domestic production of telecom equipment. Such as fiscal incentives, incentives for setting up world-class research and development (R&D) facilities, flexible labour policies and helping to achieve economies of scale.

Also, says some, an anchoring of state-run bodies like Indian Telephone Industries (ITI) and C-DoT. “The government in China nurtured Huawei. The same needs to be done with ITI, along with some tweaking of public sector units’ orientation,” says Kawoosa.

The government has decided it needs to nurture state-run entities. A Rs 3,000 crore financial package was approved for ITI. More help has been assured.

“We see a big role for C-DoT both in terms of Make in India and security. We will be enhancing the role of C-DoT as we go forward,” says Sundararajan.
 

The Cellular Operators Association of India says the country needs a conducive environment to make this a global hub for manufacture of telecom equipment. “Manufacturing would have to grow by around 100 per cent a year (compounded) over the next five years. This will need significant amendments in the rules governing intellectual property, security and financing,” said Rajan  Mathews, director-general. 

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