India Proposes Import Caps and Tax Breaks to Boost Domestic Sector

The Telecom Regulatory Authority of India (Trai) has proposed that mobile operators be mandated to source 80 percent of their equipment from domestic manufacturers by 2020, reports the Economic Times. By this point, the regulator wants the government to ensure that Indian companies account for 50 percent of all telecom network orders, severely curtailing the ability of major international vendors such as Ericsson, Nokia Siemens Networks, Alcatel-Lucent and Huawei to pick up business. The newspaper notes that the market for telecoms equipment in India is expected to grow from US$12.5 billion in 2009-10 to US$40 billion in 2020, according to Trai's projections. Trai estimates that locally-manufactured kit accounts for just 12-13 percent of current mobile operator expenditure with Indian-owned companies accounting for just 3 percent.

The new regulations are to be implemented in a phased manner. Trai has suggested that by 2015, mobile operators be mandated to source 45 percent of all telecoms equipment domestically, with Indian-owned companies accounting for 25 percent. It has also proposed that a Telecom Manufacturing Fund (TMF) be set up with an initial amount of INR3,000 crore (US$675 million), for providing venture capital to Indian companies entering this space in the form of equity and soft-loans. All domestic manufacturers with annual turnover less than INR1,000 crore will be eligible for subsidies for a period of five years. Other proposed tax breaks include limiting excise duty and VAT on domestically manufactured products.