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The government has exempted the private sector from the revised version of its Preferential Market Access policy (PMA), which calls for domestic sourcing of technology products that can have security implications.
“The Cabinet approved revised PMA in first week of December. The only change is that it will not apply on private sector. The Ministry of Communications and IT will notify it soon,” a government source told PTI.
There was a proposal to include the defence sector under the revised policy but, sources said, the defence ministry had opposed the move and preferred to stay out of it.
The Prime Minister's Office (PMO) in July had asked the IT and Telecom Ministry to rework the framework and exempt telecom equipment or other technology products procured by private sector from the policy.
Industry experts feel the revised policy can jeopardise investments into the domestic sector.
"It may be noted here that an investment pipeline has already been created under the M-SIPS policy, and such policy shifts can jeopardise further investments into the sector," Indian Electronic & Semiconductor Association President PVG Menon said.
Modified Special Incentive Package Scheme (M-SIPS) is a investment based scheme that aims to attract investment in Electronics Systems Design and Manufacturing (ESDM).
Investors can be confused by the recent policy rethink, Menon said. "This is especially so at a time when we are on the threshold of getting significant investments into the ESDM sector, by both Indian as well as foreign companies."
The previous version of PMA Policy approved by the Cabinet on February 2, 2012 called for giving preference to domestically manufactured electronic products that have security implications for the country, covering the government as well as the private sector.
The earlier policy faced opposition, mostly from US-based groups.
On July 8, 2013 the PMO had said: "The revised proposal on PMA in the private sector for security-related products will not have domestic manufacturing requirements, percentage based or otherwise".
According to telecom regulator Trai, only 12-13 per cent of all local products made with the aid of foreign vendors were used in the sector during 2009-10. However, purely India-made products formed just 3 per cent of the market.
The country imports electronics items worth about $40 billion, according to electronics industry association ELCINA.
The National Electronics Policy forecasts such imports to touch a humongous $300 billion by 2020 if efforts are not made to produce hi-tech products in India.
