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Rajan S Mathews
Director General
COAI

Domestic Telecom Equipment Manufacturing To Bolster The Indian Economy

India is today the second largest and the fastest growing telecom market in the world. Indian telecom equipment manufacturing industry is well in sync with the Indian government’s all-encompassing vision of transforming India into a telecom equipment manufacturing hub. Revenues from the telecom equipment sector are expected to grow to USD 26.38 billion by 2020.

In order to reign over the globally competitive economies of scale and the immensely multifaceted sector, Indian telecom industry needs to do a lot of groundwork. This includes developing specialized telecom clusters while addressing infrastructural, fiscal, and legal issues. Moreover, without IC fabrication facilities, only a meagre 15-20 percent value addition is possible in India, over the next 3 to 4 years. In order to go beyond, India would need to promote entire electronics cluster. Then, the Preference for Domestically Manufactured Electronic Goods (PMA) mandate should be in congruence with WTO guidelines. The government should look into value additions in terms of PMA guidelines in the recognition of transformational activities, designed to make policy more implementable.

The regulatory body suggested that India should look at an objective of achieving net zero imports of telecom equipment by 2022. It must be noted that, though India boasts of smartphone and internet penetration to the farthest corners of the country and a stellar growth in terms of telecom services, the telecom equipment manufacturing aspect is where India still has a way to go. For India to become a center for telecom equipment manufacturing, there are certain issues that need to be tackled realistically with the intention to make their goals translate to a pragmatic and actionable roadmap. The government may look at holistically promoting the overall manufacturing eco-system within the country which can be plugged into the global supply chain.

With 5G bracing up for a commercial roll out by late 2019 and early 2020, the need now is dire. In support of the government’s efforts in promoting domestic manufacturing, we believe that there are various ways to encourage domestic manufacturing in India like:

  • Develop specialized telecom clusters while addressing infrastructural, fiscal, and legal issues, including labour laws;
  • Provide incentives for export and throughput;
  • Strengthen IP protection and infrastructure;
  • Initiatives providing seed funds and infrastructure for early stage ventures need to incorporate global best practices;
  • Need for commercial financing options;
  • A fund which allows local players to offer competitive contract financing options to buyers should be established; and
  • Operators may be incentivized via license fee rebates.

Now is the time to provide exclusive funding to foster efforts in R&D and assist the industry which is trying to develop technology and related products to meet the demands from India and the globe.  It is a need of the time to promote domestic manufacturing in the country and to make it a success; however it needs to be ensured that till the desired ecosystem of domestic manufacturing is in place, providers of communication services and their networks remain competitive, inter-operable, and leverage innovation happening in the world irrespective of whether they purchase domestically manufactured equipment or import the equipment from overseas. Till that time, it would not be appropriate to prescribe any form of mandate to procure only domestic manufactured equipment so as to ensure that the rate of advancement of telecom service sector does not become dependent on the rate of development of domestic manufacturing.

For promoting domestic equipment manufacturing in the country, it is imperative to incentivise Indian telecom services providers and the industry stakeholders. A domestic operator who purchases and deploys domestically manufactured equipment should be incentivized in terms of reduction in regulatory levies and other related concessions.

Most of our members are associated with the Indian telecom industry for many years and are also leveraging on their combined strength with the manufacturing, global services organizations, and state of art research and development facilities. A number of the  eminent global manufacturers have invested in India, to develop the Telecom Manufacturing Eco System by transferring technologies as a part of our localization strategies and by setting up state of art manufacturing facilities for manufacturing products in India. Our members have manufacturing hubs globally and have expanded their presence to make India as a strategic supply base to cater global requirements, given the focus of the government and the fact that component level ecosystem for high tech electronic manufacturing will be a reality soon.

The recommendations issued by the Telecom Regulator regarding creation of Telecom Research and Development Fund (TRDF) and other related funds, Telecommunications Equipment Development Board (TEDB) etc. are highly encouraging for the telecom manufacturing industry. The recommendations with respect to ensuring availability of skilled manpower, to set-up Telecommunications Technology and System Design Labs, and incentivizing setting up of incubation centres will definitely facilitate in developing a dynamic ecosystem to boost the local equipment manufacturing in the country.

The industry had invested Rs 10.44 lakh crores in the telecom sector; however, it is reeling under a debilitating debt to the tune of Rs 7.64 lakh crore, while the overall revenue is falling to less than Rs 2 lakh crore. This was primarily caused by hyper competition in the sector leading to significantly squeezed margins. Therefore, in order to free the sector from acute financial distress and help it embrace newer technology innovation, brought in the form of 5G, AI, AR, VR, M2M, and the like, it is imperative for India to become a global telecom equipment manufacturing hub. Progressive government programs such as Make in India, Digital India etc. has been playing important roles toward this end. Now it is indispensable for private players and the government to partner and collaborate.

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