India forced to review market access policy

Prime Minister, Manmohan Singh chairing the meeting of the High Level Committee on Manufacturing in New Delhi on July 9
Prime Minister, Manmohan Singh chairing the meeting of the High Level Committee on Manufacturing in New Delhi on July 9

NEW DELHI: The government has put on hold the requirement for private telecom firms to source domestically manufactured electronic equipments, as it reviews and revisits the controversial ‘preferential market access’ policy.

Amidst pressure from international trade associations and domestic telecom industry, the government has decided to “revisit and review” the entire policy on Providing Preference to Domestically Manufactured Electronic Goods (PMA Policy).

The decision has been welcomed by top US IT advocacy organization the Informational Technology Industry Council (ITIC) and the US India Business Council.

The decision was taken at a meeting on July 5 which was attended by National Security Advisor Shiv Shankar Menon, Principal Secretary to the Prime Minister Pulok Chaterjee, Cabinet Secretary Ajit Kumar Seth, Telecom Secretary MF Farooqui and Information Technology Secretary J Satyanarayana.

“No notifications on PMA in the private sector on security related products will be issued till the PMA Policy is reviewed and any notifications in the draft stage will be withheld,” the Prime Minister’s Office (PMO) said in a statement.

“The overall policy on PMA will be recalibrated and submitted to the Cabinet,” it said.

Though the statement did not specify steps to be taken by state-owned firms, industry felt the PMA mandating a phased increase in procurement from domestic industry will be implemented by them.

The Cabinet had in February last year approved the PMA policy seeking preference to domestically manufactured electronic products, in procurement of those electronic products which have security implications for the country and in government procurement for its own use.

“The National Security Council Secretariat will provide a definition of ‘security’ for usage in the context of security related issues concerning products, projects or sectors,” the statement said.

The statement said at the meeting held in PMO, “a decision was taken to review the Policy for Providing Preference to Domestically Manufactured Electronic Goods (PMA Policy), particularly PMA in the private sector.”
The PMA Policy has two aspects, one relating to government procurement and the other to private sector procurement. There are no international commitments affecting government procurement.

“However, private sector procurement policies are covered by India’s obligations in the WTO. However, restrictions are permissible even in the private sector in essential security interests,” it said.

Concerns had been raised in many quarters on different aspects of the PMA Policy, particularly policy relating to procurement by the private sector for electronic products with security implications.

“Notifications giving the guidelines regarding PMA procurement by the private sector of electronic products with security implications are yet to be issued,” it said adding the Department of Telecommunications had proposed to notify 14 telecom products under this category.

But now all of these have been put on hold.
“The entire policy on Providing Preference to Domestically Manufactured Electronic Goods (PMA Policy) will be revisited and reviewed,” it said. “The revised proposal on PMA in the private sector for security related products will not have domestic manufacturing requirements, percentage based or otherwise.”

The revised proposal for PMA would incorporate a detailed provision for project / product / sector specific security standards, alternative modes of security certification, and a roadmap for buildup of domestic testing capacity.

“The revised proposal will incorporate a mechanism for a centralized clearing house mechanism for all notifications under the PMA Policy,” it said adding the Department of Electronics and Information Technology will bring a final note to the Cabinet on the revised policy within 4 weeks.

Industry body
Meanwhile, industry body Telecom Systems Design and Manufacturers Association which represents Indian telecom gear makers has alleged that “certain vested interests at the behest of foreign manufacturers are trying to challenge the policy and lobbying hard, perhaps with the aim to paralyze government’s efforts to protect the national security interest”.

TSDMA said that current telecom systems are highly sophisticated, using complex chips with millions of elements along with long software codes. The association said “it is very easy to implant spyware/malware in hardware and software, which is impossible to detect but can easily intercept sensitive information or cause catastrophic damage to critical equipment.”

India’s telecom industry relies heavily on imports to meet its requirements. According to telecom regulator Trai, only 12-13 per cent of all local products made with the aid of foreign vendors were used in the sector during 2009-10.

However, purely India-made products formed just 3 per cent of the market.
The policy is seen as a key step to push domestic production of electronics equipment. The country imports electronics items worth about USD 40 billion, according to electronics industry association ELCINA. The National Electronics Policy forecasts such imports to touch a humongous USD 300 billion by 2020 if efforts are not made to produce hi-tech products in India.-PTI

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