The GSM cellular operators have opposed any incentive to local telecom equipment makers from a dedicated fund meant to subsidise rural telephony.
The domestic telecom vendors have termed the GSM operators' suggestion as "anti-India".
GSM operators, who contribute to the Universal Service Obligation Fund (USOF), are against this resource being used to subsidise or incentivise telecom equipment manufacturers.
In a letter to the Department of Telecom, the Cellular Operators Association of India (COAI) said: "The USO Fund should not provide subsidy support for indigenous telecom manufacturing sector as this fund is contributed to by the service providers.
"And if equipment manufacturers have to be subsidised or incentivised, it should be a separate activity or initiative outside the USO ambit," COAI Officiating Director General T R Dua said in his letter to the DoT.
The COAI, representing GSM operators including Vodafone, Airtel, Idea and Aircel among others, had written a letter to the DoT in response to telecom regulator TRAI's recommendations on rural telephony.
One of the Indian vendors expressed concern over COAI's stand and said "this is absolutely bizarre and anti-India view by the GSM players and the government must not accept such suggestions. Incidentally, the Indian telecom manufacturing industry has vanished as it never got any support from Indian service providers".