The Telecom Regulatory Authority of India (TRAI) has proposed that mobile phone companies be mandated to source 80 per cent of their network equipment and other related infrastructure from domestic manufacturers.

This includes the networks produced by the manufacturing units of foreign vendors located in India. The move is aimed at boosting domestic output in the sector and ensuring that India becomes a manufacturing hub for telecom hardware.

TRAI has asked the government to ensure that companies owned by Indians and located here get 50 per cent of all telecom network orders by 2020.

This implies that the regulator wants the manufacturing arms of international vendors such as Ericsson, Nokia Siemens , Alcatel-Lcuent and Huawei amongst others to account for only 30 per cent of all equipment orders by 2020. Besides, TRAI also wants telecom hardware imports to be restricted to 20 per cent of the country’s total requirements.

Currently, locally manufactured telecoms hardware accounts for a 12-13 per cent of the mobile operators’ needs. Of this, Indian companies account for a mere 3 per cent, TRAI estimates reveal. The regulator said that the cost of implementing its recommendations is estimated at about Rs 1 trillion over the next 10 years, but added that this investment would yield returns of almost ten times.

TRAI has also proposed that plans to boost domestic manufacturing be implemented in a phased manner. The regulator has suggested that by 2015, mobile phone companies be mandated to source 45 per cent of all telecoms equipment domestically. Of this, the regulator wants Indian companies to account for 25 per cent.

In addition to recommending that domestically manufactured products be given preferential market access, TRAI has also suggested a slew of incentives to kick start telecoms equipment manufacturing in India.

It has proposed that a Telecom Manufacturing Fund (TMF) be set up with an initial amount of Rs 30 billion, for providing venture capital to Indian companies entering this space in the form of equity and soft-loans.

All domestic manufacturers with annual turnover less than Rs 10 billion will get a subsidy for equity capital and working capital for a period of five years, TRAI?s recommendations added.