The Telecom Regulatory Authority of India?s (TRAI) recommendations on the proposed ?Telecommunications Equipment Manufacturing Policy? are facing rough weather.
The regulator?s guidelines aim to significantly enhance the share of domestically manufactured products, which include products manufactured by companies registered in India. It mandates that telecom firms source 80 per cent of their network equipment and other related infrastructure from domestic manufacturers in a phased manner.
Further, TRAI has recommended that products of foreign equipment makers should account for only 30 per cent of all equipment orders by 2020.
Predictably, foreign telecom equipment makers have expressed their concerns over this recommendation. In fact, companies like Ericsson, Nokia Siemens Networks, Alcatel Lucent and Qualcomm have reportedly written to the Telecom Equipment Manufacturers Association (TEMA) stating that they had not been consulted on this subject.
Meanwhile, TEMA has expressed its support for the proposed policy. In a statement issued by the industry body, Ashok Aggarwal, director-general, TEMA said ?We feel that it is time for the government to initiate tough measures so as to bring the manufacturing sector to a level wherein we become self-reliant and a telecom equipment exporting nation with a special focus on promoting telecom equipment designed, developed and manufactured in India.?
The salient features of the proposed policy recommended by TRAI include:
? All government licensees are required to give preference to IPs and IMPs, in that order, before accessing low-value-added products (LVAPs) or imported products.
? Domestic product manufacturers with an annual turnover of less than Rs 10 billion will get subsidy for equity capital and working capital for a period of five years, at the rate of 6 per cent for IP manufacturers and 3 per cent for IMP manufacturers.
The following are the fiscal incentives that have been proposed:
? The total incidence of excise duty and value added tax (VAT) on domestically manufactured products to be limited to 12 per cent.
? Central sales tax (CST) of 2 per cent on domestically manufactured products to be removed or an equivalent tax/duty to be imposed on imported products.
? Comparative tax disadvantage to be removed for locally manufactured products by reducing VAT and imposing tax/ duty equivalent of 2 per cent on imports.
? Domestic handset manufacturers to be exempt from countervailing duties on imported capital equipment and excise duty on locally sourced capital goods.
? Deferment of excise/CST/VAT/goods and services tax (GST) for a period of five years at nominal interest to domestic product manufacturers having a total turnover of less than Rs 10 billion.
? A 10-year income tax holiday for domestic telecom product manufacturers having an annual turnover of less than Rs 10 billion as well as exemption from the minimum alternate tax obligation.
