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Local Focus: TRAI releases recommendations to boost indigenous manufacturing

August 27, 2018

In the last two decades, the telecom services and passive infrastructure sectors in India have witnessed a robust growth as can be ascertained from the enhanced subscriber numbers, industry revenues and service coverage. Unfortunately, the Indian telecom equipment manufacturing sector has not been able to replicate this success, with the majority of the requirement for telecom equipment still being met through imports. Network equipment like switches, routers, base transceiver stations, multiplexing equipment and antennae are mostly imported.

Over the years, the government has taken several measures to promote local manufacturing. These include the Modified Special Incentive Package Scheme, which provides capital expenditure subsidy; duty differentials and tax/tariff concessions to provide protection against imported products; a special differential excise duty for mobile handsets, customer premises equipment, tablets, etc.; the preferential market access (PMA) policy; and the Electronic Manufacturing Cluster Scheme, which provides 50 per cent of the cost of upgrading infrastructure and logistics as government grant. Further, the government has consistently emphasised the need for promoting local research and development (R&D), and telecom equipment manufacturing through the multiple national telecom policies notified in the last two decades. The government also launched a Phased Manufacturing Programme (PMP) in April 2017 to promote local manufacturing of mobile handsets and reduce imports. The objective of this programme is to progressively increase domestic value addition for products in order to establish a robust handset manufacturing ecosystem in India. The programme so far has helped in reducing the country’s dependence on imports of fully finished cellular mobile handsets. However, due to inadequate investment in R&D and limited availability of local components, the value addition in the manufacturing of handsets in the country is still very low.

There is an urgent need to encourage local manufacturing of telecom networking equipment to boost self reliance and propel the government’s Make in India mission. To this end, the Telecom Regulatory Authority of India (TRAI) undertook a consultation in September 2017 to realistically assess India’s true potential in equipment manufacturing and arrive at its recently released recommendations to enable the Indian telecom equipment manufacturing sector to transition from import-dependent to becoming a global hub of indigenous manufacturing.

TRAI in its recommendations has stated that India should aim to achieve the objective of “net zero imports of telecommunication equipment” by 2022. A look at the recommendations…

Performance of local telecom equipment manufacturing

Currently, the local manufacturing segment suffers from inadequate monitoring and facilitation. There is lack of market access for indigenous manufacturers, ITA (Information Technology Agreement)-related issues, and non-availability of financing options. Rapid changes in technology further compound their woes.

This calls for focused attention and monitoring by DoT and TRAI has recommended that the same be done at the level of Member, Telecom Commission. Further, for time-bound progress, TRAI has suggested that the dedicated unit in DoT should be made responsible for facilitation and monitoring of telecom equipment design, development and manufacturing in the country.

Further, TRAI has suggested setting up a Telecom Research & Development Fund (TRDF) with an initial outlay of Rs 10 billion to promote research, innovation, standardisation, design, testing, certification and manufacturing of indigenous telecom equipment. This should be further augmented on an annual basis for at least the next five years to attain self reliance in the space of telecom networking and user equipment. Subsequently, the setting up of the Telecom Entrepreneurship Promotion Fund and the Telecom Manufacturing Promotion Fund should also be considered so that issues relating to private sector participation in the manufacturing of indigenous equipment and market access can be addressed effectively. TRAI has also highlighted the need for an institutional mechanism for effective disbursal and utilisation of these funds.

TRAI has suggested setting up of a multidisciplinary Telecommunication Equipment Development Board (TEDB) under the Telecom Engineering Centre (TEC), for making faster and coordinated decisions regarding funding and incentives for design, development and manufacturing of telecommunication equipment in the country. This should be modelled on the Technology Development Board, working under the chairmanship of secretary, Department of Science and Technology. TEDB should be responsible for facilitating innovation, R&D, testing and certification, and manufacturing in the telecom sector in the country. This board would be responsible for administration and disbursal of funds from the TRDF.

Skilled manpower

The existing curriculum at most of the academic institutions is not capable of preparing a workforce for the telecom equipment manufacturing sector of the future. The telecom sector is witnessing rapid change and faster obsolescence in technologies, which requires constant updation of the curriculum, and close coordination between the academia and the industry. TRAI has recommended the setting up of telecommunication technology and system design labs in universities/ technical institutes in collaboration with telecom equipment manufacturers and telecom service providers (TSPs).

Research, innovation and development

Investment in R&D in India is abysmally low as compared to the global markets. Global players spend close to 6-13 per cent of their total turnover on R&D as against 0.00008 per cent by Indian handset manufacturers and a mere 1.8 per cent by telecom equipment manufacturers. To improve this scenario, TRAI has recommended that permissions for new technology/product trials and running pilot projects should be simplified. Further, the government should incentivise the setting up of incubation centres for promoting new-age, tech start-ups in the telecom equipment design and manufacturing sector.

Patent framework and resolution of disputes

Intellectual property rights (IPR) legislations in India are inadequate and require strengthening. Patent dispute resolution is also very time consuming and a costly process. It discourages the entry of small and medium enterprises and technology start-ups in this sector. In view of this, TRAI has recommended that an alternate dispute resolution framework for time-bound resolution of patent licensing disputes should be institutionalised in the country. Further, a common portal should be developed for self declaration of standard essential patents by patent holders for telecom products. The portal should also have the facility for listing out registered telecom product design, manufacturing, marketing, and system integration companies along with their designs/products.

Standardisation, testing and certifications

The local telecom equipment manufacturers have submitted that India should have its own standards, testing and certification systems that are best suited to the country’s needs. They stated that the current system lacks clarity, and is inadequate and cumbersome. They are also of the opinion that lack of mandate to comply with the national standards (TEC ERs) is a major drawback of the existing system. They have submitted that on many occasions, public agencies quote specific qualitative requirements in the tender documents, which may not be available in the case of indigenously designed and manufactured telecom products. In view of this, TRAI has recommended that TEC should be made responsible for regulation and accreditation of telecom products testing and certification agencies in the country. Second, mandatory testing and certification of telecom equipment in the country should be started at the earliest. Private entities should be incentivised to expedite setting up of testing infrastructure facilities in the country. Also, TEC should harmonise local testing and certification procedures with global standards and test procedures.

Others

TRAI has recommended the appointment of a nodal officer in DoT/TEC to look into the cases related to lack of implementation of the PMA policy. Second, value addition claims of each product, specified under the PMA policy, should be verified independently and this information should be made available at a central repository/the government portal. The regulator has also suggested that DoT immediately review its PMA policy, issued in October 2012, in order to align the products as well as the norms for value addition with the existing local market realities. Further, TSPs should be encouraged to deploy indigenous telecom products, over and above the quantities mandated under the PMA, by offering graded incentives to them.

Conclusion

Broadly, TRAI has been lauded for the measures it has recommended for the promotion of local manufacturing of telecom equipment. However, there are certain concerns that remain unaddressed. According to T.V. Ramachandran, president, Broadband India Forum, the regulator has overlooked areas such as removal of barriers for setting up global R&D hubs in India, distinction in treatment between handsets and networking equipment manufacturing, forming a robust IPR framework, and significance of international patents for boosting innovation.

Going forward, the demand for telecom equipment for core and access networks as well as sensors and devices may further multiply owing to the progress under government initiatives such as Digital India, the Smart Cities Mission and Industry 4.0. TRAI’s recommendations are timely and must be implemented in true spirit to establish a robust telecom equipment manufacturing ecosystem in India, thereby giving a big push to the Make in India vision.

 
 

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