India eyes cap on imported telecoms equipment

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By James Fontanella-Khan in Mumbai

Published: April 14 2011 20:27 | Last updated: April 14 2011 20:27

India’s telecoms regulator proposed a series of measures on Thursday to cap the amount of equipment made outside India used in its telecoms industry.

The protective move is an attempt to boost domestic manufacturing and keep foreign suppliers out of the country’s lucrative telecoms sector.

The Telecom Regulatory Authority of India said that by 2020 it wanted at least 50 per cent of all equipment – including mobile handsets, internet data cards and chips – to be manufactured by Indian groups and at least 80 per cent produced domestically.

The move, intended to turn India into an equipment manufacturing hub, could have serious repercussions for global hardware makers such as Nokia, Ericsson and Huawei.

India is the world’s second-biggest mobile market, after China, with 826m mobile subscribers as of February this year, and is adding about 20m subscribers every month.

The market is dominated by global companies, which supply more than 85 per cent of the equipment used by Indian operators and consumers. Among the 10 biggest hardware makers only one is Indian, according to analysts.

Nokia, whose biggest production plant is in India, clocked up Rs141bn ($3.2bn) in revenues last year from the subcontinent, making it the largest telecoms supplier there. It was followed by Huawei, the Chinese group, with Rs110bn. Wipro, India’s biggest equipment supplier, ranked only seventh, generating Rs64bn in revenues.

“The telecom ecosystem has so far failed to adequately spur the manufacturing segment and as a result . . . much of the equipment used for expansion of the Indian network is being imported from other countries,” the regulator said in its recommendation to the government.

“The proposed policy aims to significantly enhance the share of the domestic manufactured products . . . to cater to at least 50 per cent of the demand by the year 2019-20,” it added.

The regulator plans to introduce a number of incentives to boost domestic production, including special economic zones and 10-year tax holidays for Indian manufacturers.

The plan will be welcomed by small domestic equipment makers, such as VMC, Tejas Networks and UTL, which have complained about the government’s lack of support.

But it is likely to be strongly opposed by mobile operators, which depend on cheap and high-quality equipment produced by Chinese and European makers.

“It makes sense that the regulator wants to promote Indian equipment makers but it will take time and we might become the ones paying the consequences of this move to curb the entry of foreign equipment [in the country],” said a senior executive of an Indian mobile operator.

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