Manoj Bhan, EVP Corporate Affairs and Communications, Vihaan Networks Limited

Speaking at the Davos World Economic Forum 2023, Union Minister of Communications, Ashwini Vaishnaw reiterated what he had mentioned during the conference held with the chief executive officers (CEOs) of forty production linked incentive (PLI) beneficiary companies, that India will be a major exported of telecom equipment three years from now.  Besides that, he had also stressed upon the fact that India is slowly changing its stance from working around an import substitution strategy to becoming an export-oriented market.

Promoting domestic manufacturing and becoming self-reliant is one of the most important strategies to improve the economic growth of a country which is what the government of India is also aiming at, and visionary schemes like “Make in India” mission and the “Atma Nirbhar Bharat Abhiyan” are prime examples that deliberate on the big change that the country expects.

Policy support by the government of India

The government announced Make in India in 2014 and the Department for Promotion of Industry and Internal Trade (DPIIT) notified it through a Public Procurement (Preference to Make in India) Order in June 2017. Aligning with this order, the Department of Telecommunications (DoT) notified a list of 36 products which possess local capacity and sufficient competition, duly prescribing its local content (LC) and percentage of Preference to Make in India (PMI) in each product category.

Further, to gear up domestic manufacturing, the government announced a PLI, which is a cornerstone of the government’s push for accomplishing the vision of ‘Atma Nirbhar Bharat’. Also, the DoT announced a design-led PLI Scheme for telecom and networking products which provides additional incentive of 1 per cent over and above the existing incentives for products that are designed and manufactured in India. The objective of all the schemes is to make domestic manufacturing globally competitive and to create domestic champions. Since research and development (R&D) is key to making the Atma Nirbhar dream come true, government’s focus on homegrown technologies gives an edge to its vision of self-reliance.

Supporting BSNL

In July 2022, the government approved a revival package for Bharat Sanchar Nigam Limited (BSNL) amounting to Rs 1.64 trillion. The fund majorly focused on infusing fresh capital for upgrading BSNL services, allocating spectrum, de-stressing its balance sheet and augmenting its fibre network by merging Bharat Broadband Nigam Limited (BBNL) with it. If the revival package works out well, being the only public sector undertaking (PSU) telecom operator, BSNL can look at increasing its market share gradually.

Revival of BSNL is in a way beneficial for the domestic design-led industry as BSNL is the only operator in India which fully complies with the government’s PPP-MII Order commitments, in all their procurements.

Resolving the PLI scheme barriers

The PLI beneficiary companies will be eligible for the incentives, provided they meet both cumulative investment and net incremental sales for each year during the scheme period. As far as investment is concerned, it is the responsibility of the beneficiary company to invest and enhance production as per their PLI commitment, however, meeting the net incremental sales purely depends on the market opportunities.

To help companies meet the net incremental sales to successfully get the PLI incentives, the government must reserve some portion of the network roll-out, both expansion of existing networks as well as extending coverage to unconnected villages and upgradation of networks for the PLI beneficiaries, who successfully complete the Proof-of-Concept testing and register with BSNL as original equipment manufacturer (OEM) for those products.

Out of the total 42 PLI beneficiaries, there are a few companies in India which design and develop networking equipment based on in-depth R&D. Private sector companies which use R&D as a tool to design & develop technologies like LTE, LTE-Advanced, 5G and above, are strong pillars that a nation needs to adore.

Market scenario vis-à-vis growth potential

Having a look at India’s Export-import data for the FY 2021-22, the total export of telecom products stood at Rs 611.77 billion out of which over 58 per cent contributed to export of mobile phones, i.e., Rs 356.95 billion.  However, the case with telecom network equipment depicts a different picture where export is 4.28 billion, which apportioned to merely one percentage of the overall export.  This is a matter of concern as it directly related to India’s technological growth in the telecom equipment segment. Network equipment consists of hardware mainly used for telecommunications such as transmission lines, multiplexers, and base transceiver stations and in case of LTE, 5G etc., eNodeB, gNodeB etc. are used.

India has the second largest mobile subscriber base of 1175 million subscribers and an overall tele density of 84.69 per cent, of which, the tele-density in the largely untapped rural market stands at 58.01 per cent as compared to that in urban areas, which is 134.08 per cent. India makes the biggest market for telecom network equipment and reliable home-grown technologies are required to cater this growing subscriber base in the country.

According to a recent submission in the Lok Sabha, Hon’ble Minister of State for Communications stated that some 20,583 villages, or 17 per cent of the total villages in India, do not have mobile network coverage.  This is a completely untouched market. Moreover, expansion of network coverage and upgradation of existing sites where older technologies exist, makes it opportune for network technology companies to present their home-grown solutions for these regions.

Summing it up

According to the “Indian Telecom Services Performance Indicator Report” for the quarter April-June 2022, released in November 2022, the market share of private operators stands at 89.38 per cent while that of PSU Operators was merely 10.62 per cent. Private operators generally do not come under the purview of government’s PPP-MII Order commitment unless the network roll-out is under government funding schemes, like USOF, etc. This adds to loss of opportunity for manufacturing companies in India which eventually has been the root cause of the domestic manufacturing industry’s sufferings. While policy support cannot be ignored, its correct implementation in the right spirit is of prime importance. As the nation continues to move towards advanced technologies, local equipment finds mention in the forward-looking growth stories read by many senior dignitaries across the ministerial landscape of India.