The Department of Telecommunications (DoT) has asked the finance ministry to consider deemed export status for telecom equipment, including mobile phones and components, to encourage local production. This will also provide a major relief to domestic manufacturers who face strong competition from global suppliers, on account of high production costs.
Currently, majority of the global suppliers of telecom equipment to India are backed by export import (EX-IM) banks in their respective countries with low-cost working capital financing. On the other hand, the cost of producing telecom products locally in India is on an average 18-22 per cent higher than in overseas markets like China.
According to DoT, deemed export status will allow domestic telecom equipment manufacturers to avail of low-cost working capital finance and other export-linked incentives. This in turn would help them to compete effectively against foreign vendors. DoT has cited the instance of the power sector where indigenous equipment qualifies for the deemed export status.
The department has further stated that majority of the telecom gear is imported and also attracts zero duty. In such a scenario, the deemed export status will help reduce India’s import dependence in the telecom equipment space. As per department?s estimates telecom gear worth Rs 690 billion are imported annually in India.
DoT has also sought a 10-year tax holiday, including minimum alternate tax exemption for locally manufactured telecom products with Indian intellectual property rights.
