The Telecom Regulatory Authority of India (TRAI) has issued its recommendations on promoting networking and telecom equipment manufacturing in India.
According to TRAI, the objective of these recommendations is to move forward from the concept of increasing domestic production and to focus on local value addition in global value chains. Some of the main focus areas covered in the recommendations include facilitating local value addition in participation with cross-country value chains; due emphasis on telecom software as a separate product line in accordance with the contemporary softwarisation of network elements in new-generation networks; facilitating exports from India; nurturing entrepreneurship by promoting micro, small and medium enterprises (MSMEs) and start-ups; and promoting a robust component ecosystem in India.
TRAI has recommended that there should be a concurrent PLI scheme focusing on components and subassembly manufacturing to facilitate collaborated manufacturing activities. The scheme should imbibe local value addition norms in its future format and higher incentives proportionate to value addition should be available. The applicable thresholds relating to turnover and committed investment by a PLI beneficiary should apply differentially in accordance with the type of networking and telecommunications equipment (NATE) products to make the scheme more inclusive.
In respect of preferential market access (PMA), TRAI has advocated a nudge approach and has recommended that telecom service providers (TSPs) should be provided with a reduction in applicable gross revenues against the volume of indigenous NATE procured in the respective networks. It shall widen market access for indigenous manufacturers. Besides, recommendations have been made to enhance transparency in public procurement, check on deviations and time-bound grievance handling. Keeping in view the various relative cost disabilities faced by the industry, it is recommended that a dedicated master fund called the NATE Development Fund (NATEDF), on the lines of the Electronics Development Fund (EDF), should be established. It shall cater to the financing requirements of the industry players including venture capital funding, interest subvention and financial assistance to MSMEs to bridge current gaps.
Further, TRAI has recommended specific provisions to extend financial support to the industry towards procurement of fixed assets and plant and machinery for new production units or capacity augmentation of the existing units. To spur innovation, lower corporate income tax is also recommended to encourage the industry’s drive towards beneficially owned resident intellectual property rights (IPRs). This would apply if the enterprise is continuously engaged in R&D-driven manufacturing and attains half of its turnover based on IPRs owned. NATEDF should provide for venture capital funding in public-private partnership mode to promising start-ups in need of accelerator support. Start-ups and MSEs should be provided with opportunities towards standard-setting processes and reaching out to potential markets drawing support from the Market Access Initiative (MAI). NATEDF should be used to provide pre-shipment and post-shipment credit facilities as well.
With an emphasis on the optimal use of resources, TRAI has recommended that telecom products development clusters (TPDCs) should be established within the approved electronics manufacturing clusters (EMCs) or nearby with a host of common facilities.
To facilitate trade, recommendations have been made to resolve identified issues by extending benefits of the advance authorization and Export Promotion Capital Goods (EPCG) Scheme for the exporters and manufacturers of NATE and common facility centres in export promotion councils (EPCs). Institutional authority to certify the origin of NATE products manufactured in India has also been recommended.
To leverage upon open architecture of new-generation networks, TRAI has recommended identifying telecom software as an independent functional deliverable. Further, it is suggested to adopt policies that enable the valuation of intangible assets such as software and open up new financing options recognising IPRs already valued as collateral.
