The Department of Telecom is backing a proposal to reserve 30 per cent of all electronic equipment procurement to those items that are manufactured in the country. This will include telecom gear and IT peripherals.

Though the proposal is for restricting the quota system only on purchases by Government owned companies, the DoT has said that the quota system in the telecom sector should be equally imposed on both private operators and public sector units.

The proposal to give preferential treatment to ‘Made in India'' products has been mooted by a committee formed by the National Manufacturing Competitiveness Council (NMCC) and the Advisor to Prime Minister on Public Information, Infrastructure and Innovation.

The DoT reckons it would be unfair to ask only the State-run companies to buy from Indian manufacturers in a competitive sector such as telecommunications. “We have decided to give an in principle backing to the entire concept of giving preferential treatment but the proposals have to be tuned to meet legal and fair market practices,” said a senior DoT official.

The DoT has suggested that in case a company fails to meet the 30 per cent obligation, it should be asked to pay 10 per cent of the shortfall value of Indian product as compensation charges. The money collected can be put in a fund aimed at encouraging local R&D and manufacturing of electronics.

The main objective of the proposed policy is to promote manufacturers of electronic equipment with emphasis on development of Indian Intellectual Property. Under this policy, preferential treatment will be given for a period of 10 years and shall come into effect one year from the date of notification.

For a product to qualify as ‘manufactured in India' it has to have local value addition to the extent of 25 per cent in the first year of production and 45 per cent by the fifth year. If the product has Indian IPR then the company will get additional weightage and also income tax benefits available to investments for R&D.

The proposed policy has been approved by the Committee of Secretaries and will now be taken to the Cabinet for final ratification.

Telcos may take $5-b hit on new security norms. Mobile companies will have to cough up $5 billion to upgrade their networks if they want to comply with the proposed security related norms for importing telecom gear.

The cost is primarily due to the Department of Telecom making it mandatory for mobile operators to set up location based services on their network.

This is being done to allow security agencies to pin point specific users' location to 50 metres of a cellular base station.

Though the operators raised concerns about the huge cost of implementing the policy in a meeting held on May 2, the DoT is going through with it on grounds that it is a matter of national security. The Prime Minister's Office has asked the DoT to notify the rules by May 31. Under the existing policy, the foreign equipment vendors are required to submit their source codes, equivalent to sharing IPR.

The proposed new rules have done away with the stringent measures on the vendors but has put the onus on the operators.