A TRAI report has predicted that the equipment required for 3G, LTE and WiMAX services would be worth Rs 232.85 billion by 2015-16, and by 2020, this could rise to Rs 264.56 billion. This indicates the immense potential that the Indian telecom equipment market holds. Yet, India is far from becoming the telecom manufacturing hub many had anticipated, and meet 80 per cent of the domestic demand.
If China can do it in a short span of time, then why not India?” enquires, Rahul Sharma, vice president, Telecom Equipment Manufacturers’ Association of India (TEMA), while speaking to Srabani Sen of Electronics Bazaar. However, he points out that the manufacturers need to cross many hurdles to achieve the target of making India a global hub for telecom equipment manufacturing by 2020.
EB: Is TEMA happy with the National Telecom Policy 2012?
The National Telecom Policy 2012 seems to be quite ambitious, and has laid out several major objectives to make India a global hub for telecom equipment manufacturing. The recommendations aim to give Indian equipment manufacturers preferential market access and government subsidies to increase the market share of ‘made in India’ equipment, while cutting down on the market share currently enjoyed by foreign manufacturers.
The policy also recommends promoting innovation, indigenous R&D and manufacturing, to cater to the domestic and global markets by improving skills and competencies. Further, the policy wants to promote indigenous IPR creation, entrepreneurship, commercialisation and the deployment of state of the art telecom products and services during the 12th Five Year Plan period.
These objectives seem to be quite visionary, but TEMA feels that the policy needs more teeth. We want all these objectives to be achieved as soon as possible; hence, we have proposed to make the policy a part of the CVC guidelines, and suggested that the government appoint a nodal agency to review and monitor the implementation process on an yearly basis. TEMA also feels that the Telecom Engineering Centre (TEC) should be given more authority, as currently, it has several limitations.
EB: What is the market share of Indian telecom equipment manufacturers today?
There are about 100 telecom equipment manufacturers in India, including the MNCs, covering all the telecom segments—from batteries and cables to routers and switching gear.
Even a decade back, India was looked upon by the MNCs as an ideal destination for their R&D, leveraging their access to the increasing availability of skilled professionals. Later, the Indian telecom equipment companies started investing in their own manufacturing facilities and R&D centres. However, the MNCs are deriving more benefits from the country than local manufacturers. The MNCs need to do value addition here and contribute to the country’s GDP. TEMA has suggested that they start by adding minimum 45 per cent of value and take it up to 80 per cent by 2017. This way, they will not only contribute to the Indian economy, but will also create employment. It is also very much evident that besides contributing to about 3 per cent to the country’s GDP, telecommunication, along with IT has greatly accelerated growth of economic and social sectors. Also, IP will start being created within India. This, in turn, will help in two ways—the growth of the telecom market in India, and it will help many SMEs to compete with the MNCs. In fact, India is the only country where no preference is given to local manufacturers.
EB: What has the growth been in this domain? Is it as per your expectations?
The growth of the telecom equipment manufacturing domain could have been much better if it had been supported by the government in a better way. Take the case of any country, be it China or the US—the local manufacturers are given a lot of support and incentives to develop and grow. For example, in China, manufacturers are given a line of credit. India’s rate of interest on bank loans is also very high compared to many other countries.
As per the NTP 2012, there is huge potential to mark an increase in rural tele-density from current level of 39 per cent to 70 per cent by 2017 and 100 by 2020 as India still offers substantial scope for telecom and IT deployment. Also, it is one of the prominent objectives of NTP 2012 which talks about broadband for all and even download speed has been increased by 512 Kbps to 2 Mbps with a subscriber base of 175 mn by 2017 and 600 mn by 2020. Hence, these figures really highlights the kind of potential which Indian market holds and also the amount of work which needs to go in to achieve these objectives.
EB: What are the challenges being faced by the indigenous telecom equipment manufacturers?
There are several reasons that hinder the manufacturing of telecom equipment in India. Government policy supports imports over indigenous manufacturing. While duty is levied on the import of components, there is no duty on the import of finished products.
Lack of government support is a major roadblock for the Indian companies wanting to make investments in telecom equipment manufacturing. While the Indian government has offered various incentives such as extended tax holidays, full tax exemptions for exports from Software Technology Parks of India (STPIs), etc, to facilitate the growth of the IT services industry in India, there are no such incentives rolled out for telecom manufacturing companies in India.
TEMA has been communicating with the government about the need for a strong telecom equipment manufacturing base in the interest of our country—not only from the economic point of view, but also from the national security point of view.
EB: What are the possible solutions to these problems?
TEMA seeks a level playing field for the home grown telecom equipment manufacturers. We have stressed on preferential market access referred to in the policy. This needs to be objectively framed at the earliest to ensure that Indian products start getting market access. The government has to put in place an industry friendly tax regime and remove the obstacles in the way of getting the statutory clearances prior to setting up a plant.
In fact, we are not asking for anything out of context or outside the ambit of the National Telecom Policies. We have suggested some points to give an impetus to the telecom manufacturing industry. These are: clear implementation plans for the telecom manufacturing sector; setting up a nodal expert council to monitor the implementation of the National Telecom Policy 2011; preferential treatment for Indian products; the introduction of an R&D cess on all licensed telecom service providers, apart from granting them incentives to meet certain targets regarding the purchase of Indian products; compliance to national standards and certification of all telecom equipment by TEC; and remodelling of the tax structure.
If the government has a focused approach to implementing all the objectives mentioned in the policy, India will surely become a manufacturing hub in the coming years.
EB: What is TEMA doing to promote manufacturing in India?
Established in 1990, TEMA’s major emphasis is to promote local manufacturing. It advises the government and influences decisions related to the Indian telecom industry. TEMA proposes the names of technical experts from the industry to various telecom committees formed by the government and major national industry associations. Presently, we have 150 members and all of them support the association proactively. TEMA also helps companies to carry out export related activities.
EB: What sort of relationship does TEMA have with the Indian telecom equipment manufacturers industry?
TEMA was set up for the dissemination and exchange of information from the government, foreign agencies, embassies, trade missions, Indian missions abroad and leading international trade associations. It works for a favourable environment so that the market expands, manufacturing takes place in India, and local companies become technically competent vis a vis the MNCs.
—By Srabani Sen