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TEMA executive member responds to news item published in Business Standard today

NK Goyal, President, CMAI Association of India and Chairman Emeritus, TEMA

  • “The case referred by BSNL is in respect of tenders for COMASSS, MPLS, OTN equipment in all of which Fiber Home/ZTE from China quoted a “dumping price”. The basic question to be considered by India as a sovereign country is “Are we going to decide procurement for critical National Infrastructure assets only on the basis of price and leave aside the National Security aspects?

  • The debate is on price versus national security. It is often conjectured that that when a tender for border security management or internet network at critical/border areas or sensitive installations is invited, is the order placed on price offered by China or for the product and for the importance and need for access to that area/installations? The data mining/data theft has become a huge risk now. That is also the reason that Chinese CCTV cameras are getting highest market share, just because of price. It is interesting that even the tenders for J&K Police Station, Delhi police stations appear to favour  Chinese cameras, to which TEMA has consistently objected.
  • TEMA submits that every product cannot be just procured on lowest rates. Telecom is a National Security sensitive sector, where everything is connected and this connects to several sectors like, power, railways, airports, banks, payments, highways, health etc. Being connected, everything is at cyber risk, data lost, privacy, ecommerce, and financial services. It affects the entire country’s infrastructure. The acceleration of Telecom Technology Sector will impact all sectors of the Nation’s Economy and Social Living.  
  • China is known to quote rates not for the product but for the needs of China as a country to get the order at any cost. The price quoted by them is mostly a political/strategic price irrespective of the cost of product. The lowest cost from China is due to several factors. China has a mix system of incentivizing through states.
  • China also offers cheap financing facilities for supplies to foreign countries.
  • Land in China is property of the State, as either State-owned urban land or collectively owned rural land. Because the State controls rural land acquisition and monopolizes the distribution of urban land-use rights, the State remains the final arbiter of who uses the land and for what purpose. The Law on Commercial Banks provides that “commercial banks are to conduct their business of lending in accordance with the needs of national economic and social development and under the guidance of the industrial policies of the state.” 
  • BSNL network is important from national security aspects, as it is in use at border and other critical areas. It is well known that Chinese companies quote very low prices just to grab the business with sole purpose of getting access to the areas where equipment is to be installed. As we know under Chinese Intelligence Law, 2017, the Chinese vendors are duty bound to give access to China to the place where their equipment are installed.
  • So TEMA requests that taking a policy decision if price is an important factor for telecom network and in that case TEMA would go even to the extent that we should declare that our telecom networks would be from China.
  • As regards 4G for BSNL, TEMA has already requested the Government that let 80% of the equipment be procured from established foreign vendors ( taking whatever domestic equipment is available) and for 20% be reserved for domestic bidders.
  • As regards 2G equipment for BSNL, TEMA is of the view that 2G is going to stay and hence BSNL should be allowed to procure 2G equipment, if required.”

Domestic equipment vendors charge up to 89% more, BSNL tells DoT,Business Standard
State-owned Bharat Sanchar Nigam Ltd (BSNL) has listed out the major reasons why domestic equipment vendors have not been good news for the telecom company.

Responding to a Department of Telecommunications (DoT) query on various issues related to the make-in-India scheme, BSNL has blamed the uncompetitive rates offered by domestic vendors for their lacklustre performance in the past five years.

The rates offered by the local gear makers for some key BSNL contracts have been 49 to 89 per cent higher than those from global players, the telco said in a letter that was reviewed by Business Standard.

DoT had asked BSNL to identify and map local capacities and their competitiveness as part of a policy to provide preference to the make-in-India scheme.

BSNL has also stated that domestic vendors have not even participated in 20 of the 35 central tenders floated by the company in the last five years.

The BSNL letter has come at a time when the government wants domestic vendors to play a key role in the upcoming tender for 4G equipment.

The earlier tender was cancelled after domestic vendors complained to DoT that it was primarily to encourage foreign firms and was in contradiction with the government’s stated policy of encouraging domestic production.

However global telecom gear makers say that much of the 4G equipment of domestic players will need to undertake proof of concept before being used on a mass scale, resulting in a rollout delay for BSNL.

BSNL has highlighted the issue of price differential between local and global vendors.

For instance, for procurement supply, installation and commissioning, as well as operation and maintenance of optical transport networking (OTN) equipment, the bid by a domestic vendor was as much as 88.52 per cent higher than the lowest offer, according to BSNL.

The L1 bid from a global player was Rs 273.97 crore against Rs 516 crore from a domestic vendor.

Why domestic vendors failed to impress BSNL
* Local vendors quote rates far higher than those by global players
* They have not participated in 20 of the 35 tenders floated by BSNL in the past 5 years
* Technology providers such as C-DoT, IIT cannot be considered OEMs given that they do not have mass manufacturing capabilities
* At least 5 domestic OEMs participating in a tender must ensure sufficiency of local capacity for a telecom product

In another example for supply, installation, commissioning and AMC of MPLS-TP (multi-protocol label switching-transport profile) equipment along with EMS (element management system) and associated equipment, the L1 from a global player for the package was Rs 333 crore, while the Indian vendor quoted Rs 613 crore.

BSNL has also pointed out that domestic OEMs (original equipment manufacturers) declared for any equipment should have the capacity for mass production so that they are able to meet domestic demand also. Technology providers such as C-DOT, IIT Roorkee and ISRO, among others, cannot be considered equipment manufacturers as they do not make any product themselves, the state-owned telco has said. It has also argued that to decide sufficiency of capacity of a product, there should be at least five domestic OEMs participating in a tender.

Further to assess the competition, the price quoted by domestic OEMs in the tender shall be an important consideration. If the price difference is more than 20 per cent against L1 rates, one cannot conclude there is sufficient competition, according to BSNL.
Business Standard

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