The Department of Telecommunications (DoT) is supporting a proposal to reserve 30 per cent of all electronic equipment procurement for items manufactured in the country. This will include telecom gear and IT peripherals.

Though the proposal is for restricting the quota system only on purchases by government owned companies, DoT has said that the quota system in the telecom sector should be equally imposed on both private operators and public sector units.

The proposal to give preferential treatment to products made in India has been mooted by a committee formed by the National Manufacturing Competitiveness Council (NMCC) and the Advisor to the Prime Minister on Public Information, Infrastructure and Innovation.

DoT feels it would be unfair to ask only state-run companies to buy from Indian manufacturers in a competitive sector such as telecommunications. Also, DoT has suggested that in case a company fails to meet the 30 per cent obligation, it should be asked to pay 10 per cent of the shortfall value of Indian product as compensation charges. The money collected can be put in a fund aimed at encouraging local manufacturing.

The main objective of the proposed policy is to promote the manufacture of electronic equipment, with emphasis on the development of Indian Intellectual Property. Under this policy, preferential treatment will be given for a period of 10 years and shall come into effect one year from the date of notification.

For a product to qualify as manufactured in India, it has to have local value addition to the extent of 25 per cent in the first year of production and 45 per cent by the fifth year. Private companies and foreign equipment vendors have, however, opposed this move on grounds that such a reservation is against WTO norms.

The proposed policy has been approved by the Committee of Secretaries and will now be taken to the Cabinet for final ratification.