15/04/2011 07:00

ITI limited qualifies for trade with positive bias.  Even though outlook is bright for the sector, the company has been running  in operating loss for years, thus not for investment.


Telcos Should Source 80% of Equipment from Local Cos: Trai

Source: ET

Move aimed at helping India become a manufacturing hub


Telecom Regulatory Authority of India has proposed that mobile phone companies be mandated to source 80% of their network equipment and other related infrastructure from domestic manufacturers. This includes the networks produced by the manufacturing units of foreign vendors located in India.
The move is aimed at boosting domestic output in this strategic sector and ensuring that India becomes a manufacturing hub for telecom hardware. Trai wants the government to ensure that companies owned by Indians and located here get 50% of all telecom network orders by 2020.
This implies that the regulator wants the manufacturing arms of international vendors such as Ericsson, Nokia Siemens, Alcatel-Lcuent and Huawei amongst others to account for only 30% of all equipment orders by 2020. Besides, Trai also wants telecom hardware imports to be restricted to 20% of the country’s total requirements. If the telecoms department accepts Trai’s recommendations in its upcoming policy to promote domestic manufacturing, it will have serious repercussions on foreign vendors. India is the world’s largest market for international vendors – the market for telecoms equipment is expected to grow from $12.5 billion in 2009-10 to $40 billion in 2020, as per Trai’s projections.
Currently locally manufactured telecoms hardware accounts for a mere 12-13% of the mobile operators’ needs. Off this, Indian companies account for a mere 3%, Trai estimates reveal.
The regulator said that the cost of implementing its recommendations is estimated at about . 100,000 crore over the next 10 years, but added that this investment would give returns of almost ten times.
Trai has also proposed that plans to boost domestic manufacturing be implemented in a phased manner. The regulator has suggested that by 2015, mobile phone companies be mandated to source 45% of all telecoms equipment domestically. Off this, the regulator wants Indian companies to account for 25%. In addition to recommending that domestically manufactured products be given preferential market access, Trai has also suggested a slew of incentives to kick start telecoms equipment manufacturing in India.
It has proposed that a Telecom Manufacturing Fund (TMF) be set up with an initial amount of . 3,000 crore, for providing venture capital to Indian companies entering this space in the form of equity and soft-loans.
All domestic manufacturers wi th annual turnover less than . 1,000 crore will get subsidy for equity capital and working capital for a period of 5 years, Trai’s recommendations added. Other proposed tax breaks include limiting excise duty and VAT on domestically manufactured products to 12%, deferring excise, CST, VAT and GST for a 5-year period for local companies with sales of less than . 1,000 crore along with a 10-year income tax exemption.