Domestic, global telecom gear makers spar over new 'value addition' norms

Angry protests by domestic companies force telecom dept to put its formula, welcomed by foreign companies, on hold

A battle is brewing between domestic telecom players and global telecom gear makers over the contentious eligibility conditions for participating in tenders under the Public Procurement (Preference to Make in India) policy and government contracts.

The former allege that the method of calculating ‘local value addition’ introduced by the Department of Telecommunications (DoT) in its August circular works against them and is ‘anti-Atmanirbhar Bharat’ (selfreliant India). This protest has impelled the DoT to put the August notification under abeyance, as stated in a subsequent memorandum on September 27.

In the August circular, the DoT clarified that printed circuit boards assembled in India from imported parts and components would qualify as ‘local content’ while calculating value addition under the public procurement for Make in India products policy. It also said the policy will be reviewed when the semiconductor FAB in India policy is operational.

Domestic telecom equipment makers opposed the circular and wrote to communications minister Ashwini Vaishnaw on September 3 through the offices of the Telecom Equipment Manufacturers Association of India (TEMA).

The association argued that the August order was a violation of the DPIIT policy of September 2020 which clearly states that class 2 suppliers of equipment to the government should have a minimum 20 per cent domestic content; for class 1 suppliers, the minimum domestic content is 50 per cent.

“Under the DoT order, companies won’t even require 0.1 per cent domestic content. The policy is completely against domestic industry and anti-Atmanirbhar,” said TEMA.

It also pointed out that the DoT, by making a review of the policy linked to India having its own FAB plant has ensured that 100 per cent import of components will continue for many years because of the uncertainty around when a fabrication plant will come up.

TEMA also alleged that this indefinite permission for 100 per cent import of components to continue will ‘suppress the zeal’ of Indian companies such as Tejas, Coral and Vihan Telecom which have the capability to build telecom equipment with far fewer imports.

In the other corner of the ring are global telecom gear makers who say that with a value addition of not more than 10-15 per cent in their manufacturing plants in India, they were not eligible at all under the public procurement scheme. This left them with no market access to government contracts, including important ones such as BSNL’s 4G bid.

“The government can provide us with semiconductor components locally but currently there is simply no option but to import,” said a senior executive of a global gear maker. He added that, thanks to the August circular, his company’s value addition would have gone up and it could have been eligible to be categorised as a class 2 supplier for government contracts. “But now, with the order under abeyance, we are back to square one,” he said.  

Global gear makers say that the low value addition in manufacturing is also a consequence of R&D expenses in India and software not being considered under the value addition norms for MNCs manufacturing in India.

Not only that, they say the DoT’s August order would have ensured that the elements in calculating ‘value addition’ for public procurement would have been in harmony with those for the policy implemented by the Ministry of Electronics and Information Technology.

“Now, with the abeyance, the two departments have different criteria which creates more complexity,” said a global telecom gear manufacturer.      

TEMA has also gone a step further, suggesting that changes be made in the production-linked incentive (PLI) scheme for which eligible players, which include domestic players like Tejas Networks and HFCL, have already applied.

“TEMA would also like to submit that the PLI scheme envisages only two criteria: investment and turnover. In the absence of domestic value addition and local content, we suggest that global gear makers need to follow the public procurement policy guidelines to avail themselves of the benefits,” said TEMA chairman emeritus N K Goyal.

BONE OF CONTENTION
 

DoT notification said printed circuit boards assembled in India from imported parts and components would qualify as local content while calculating value addition under the public procurement for Make in India products policy.