Depite a Humongous Growth in The Telecom Sector, The Country has failed to build an Ecosystem that Promotes Telecom Manufacturing, Forcing Operators to Import most of The Equipment for their networks.
Telecom equipment manufacturing in India took off just after Independence. In 1948, the first Public Sector Unit (PSU) – ITI– was formed. In the initial stages it met 50% of the domestic demand for telecom equipment. However, in 1993-94, the government withdrew the defrayment of its R&D expenditure. ITI, which had six manufacturing facilities then, was hit hard by the government decision. That was the time when telecom sector had started opening up and demand for telecom equipment had begun to grow considerably. ITI was not able to match the rising demand.
Today, handset is the only telelcom device, which is manufactured in India. Top MNCs, including Nokia, Samsung and LG have manufacturing facilities in the country. Some domestic players, including Mircomax, Karbonn and Lava have plans to start manufacturing in India. But for them manufacturing only make sense when they can sell 1 million units per month or have at least 10% of the total market share, which seems a difficult target for them to meet in the next few years.
On the other hand, telecom service providers in India are not happy with the recommendations of the regulator. Service providers are against putting a cap on the telecom equipment purchase from foreign vendors. They fear that it will kill competition in the market and inflate equipment prices. Telecom service providers’ industry body Cellular Operator Association of India (COAI) has expressed concern over TRAI’s recommendations. “It is good that the government is promoting equipment manufacturing in India. But there should be no binding obligation on telecom operators to buy from them. If the standard of equipment manufactured by local players matches the global standards and prices there is no question of not buying from them” says R.S. Mathews, Director COAI.
Apart from the dearth of local telecom equipment manufacturers, there are other reasons that have held down manufacturing. The law of the land itself supports imports over home manufacturing. Manufacturing needs the support of various electronic components but ironically duty is levied on the import of components as against there being no duty on import of finished products. Testing of wireless equipment is another problem. Spectrum is needed to test a wireless equipment of which there is again scarce availability. “Testing of equipment is one of the biggest challenge that we are facing. We need to test equipment for months before commercial launch. However, Indian authorities allocate testing spectrum for a maximum for 30-day-period, which is not enough. Besides, the entire process of getting spectrum is painful and lengthy,” says a senior official of a telecom equipment manufacturing firm, pleading anonymity. His company test its equipment in a foreign location.
Numerous challenges lie ahead before telecom equipment manufacturing can be pushed from its present abysmal level. The biggest is getting the Department of Telecom’s approval on TRAI’s recommendations in its present form. Also, other than rolling out incentives and tax waivers, the government has to make the entire process of setting up manufacturing units hassle-free. At present one has to take several NOCs to set up an unit, unlike in the East-Asian countries where it is a single window operation and takes a maximum of one week to fifteen days. If the existing roadblocks are not removed then making India a manufacturing hub will forever remain a distant dream.
Today, handset is the only telelcom device, which is manufactured in India. Top MNCs, including Nokia, Samsung and LG have manufacturing facilities in the country. Some domestic players, including Mircomax, Karbonn and Lava have plans to start manufacturing in India. But for them manufacturing only make sense when they can sell 1 million units per month or have at least 10% of the total market share, which seems a difficult target for them to meet in the next few years.
On the other hand, telecom service providers in India are not happy with the recommendations of the regulator. Service providers are against putting a cap on the telecom equipment purchase from foreign vendors. They fear that it will kill competition in the market and inflate equipment prices. Telecom service providers’ industry body Cellular Operator Association of India (COAI) has expressed concern over TRAI’s recommendations. “It is good that the government is promoting equipment manufacturing in India. But there should be no binding obligation on telecom operators to buy from them. If the standard of equipment manufactured by local players matches the global standards and prices there is no question of not buying from them” says R.S. Mathews, Director COAI.
Apart from the dearth of local telecom equipment manufacturers, there are other reasons that have held down manufacturing. The law of the land itself supports imports over home manufacturing. Manufacturing needs the support of various electronic components but ironically duty is levied on the import of components as against there being no duty on import of finished products. Testing of wireless equipment is another problem. Spectrum is needed to test a wireless equipment of which there is again scarce availability. “Testing of equipment is one of the biggest challenge that we are facing. We need to test equipment for months before commercial launch. However, Indian authorities allocate testing spectrum for a maximum for 30-day-period, which is not enough. Besides, the entire process of getting spectrum is painful and lengthy,” says a senior official of a telecom equipment manufacturing firm, pleading anonymity. His company test its equipment in a foreign location.
Numerous challenges lie ahead before telecom equipment manufacturing can be pushed from its present abysmal level. The biggest is getting the Department of Telecom’s approval on TRAI’s recommendations in its present form. Also, other than rolling out incentives and tax waivers, the government has to make the entire process of setting up manufacturing units hassle-free. At present one has to take several NOCs to set up an unit, unlike in the East-Asian countries where it is a single window operation and takes a maximum of one week to fifteen days. If the existing roadblocks are not removed then making India a manufacturing hub will forever remain a distant dream.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
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Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
