DoT to PMO, Link local sourcing to security

The telecom department (DoT) will inform the Prime Minister's Office (PMO) that it is vital to link domestic manufacturing with national security, as it attempts to address concerns that its new policy that mandates a minimum 30% domestic sourcing of all telecom and electronic products, would lead to distortions in the market.

The Prime Minister's Office had recently raised concerns on the draft Preferential Market Access (PMA) norms and suggested that the 'security' and 'manufacturing locations' be delinked from the policy, while warning the new rules could create market distortions. The PMO had also said that security objectives could be met through audits, tests and these issues needed to be handled separately, even as it suggested a moratorium on the implementation of this policy until satisfactory assessment of domestic manufacturing capabilities had been made.

As per the proposed policy, 80% of all security-sensitive telecom and electronic products must be sourced domestically by 2020. The DoT, in its draft reply to the PMO, a copy of which was reviewed by ET said that telecom is a critical information infrastructure where any disruption would impact all economic and strategic sectors in the country, and added that security of such networks were of paramount importance. While noting the PMO's argument that audits and testing could address security issues, the department said it is 'important to ensure that the environment in which the telecom product is manufactured is under sovereign control so that the problem is controlled at the root itself'.

"Thus, linkage of local manufacturing, development of IPR for new technology and security is justified for greater assurance. It is clarified that 100% foreign direct investment is permitted for manufacturing and there is no compromise either on quality or price preference to domestic units.

Under PMA, there is no distinction between Indian and foreign company. All companies manufacturing in India are judged on value addition criterion to qualify as domestic ...ideally, 100% manufacturing of these products (that have major security implications ) should take place indigenously.

However, realising the fact that this cannot be achieved in one go without disrupting the supply, in most cases, phased approach has been proposed to be adopted," states the DoT's draft communication to the PMO. Trade lobbies across the globe have asked India to clarify whether PMA given to domestic telecom gearmakers on security grounds will only apply to government contracts or also include private procurements.

The draft response to the PMO adds the rules will apply to both government contracts as well as orders by private companies, but states that the 'list of products having security implications were being decided by an expert committee with rationale, and only active wireless products that are vulnerable to security of network' would have to be manufactured indigenously.