Foreign telecom gear makers seek relief from DoT on eligibility criteria

Such a move could also close the doors for foreign gear makers for future telecom equipment tenders, until they increase local content in their products
Non-Chinese telecom equipment makers, led by European players, are pushing the Department of Telecommunications (DoT) to include service costs while calculating local content and value addition, so that they become eligible to be classified as local suppliers under the revised rules of the Public Procurement Order, 2017.

A decision on this could be crucial in deciding whether foreign gear makers can participate in the forthcoming request for proposal (RFP) to supply 4G gear for BSNL and MTNL.

State-owned BSNL was recently forced to cancel its RFP because of strong opposition from home-grown companies that said it violated the procurement policy and that foreign firms were being favoured.

Such a move could also close the doors for foreign gear makers for future telecom equipment tenders, until they increase local content in their products.

Under the revised guidelines issued last month by the Department for Promotion of Industry and Internal Trade (DPIIT), to be classified as a Class-I local supplier, firms need to have local content of over 50 per cent, which virtually rules out foreign firms. To be eligible to be a Class-II local supplier, the vendor will need local content of over 20 per cent, but less than 50 per cent.

Foreign telcos say they currently have value addition of between 12 per cent and 14 per cent (companies like Ericsson and Nokia have manufacturing facilities in India) based on the price of components, but if costs of services are added this would be more than 20 per cent.

“What we are requesting DoT is that they should also consider services like cost of installation, maintenance, logistics, which are substantial, apart from components, while determining value addition. These services that we incur in India could account for 10-20 per cent of the total cost of a component. However, if this is not done, we will not be eligible to be a local supplier despite having manufacturing units in the country,” said a senior executive of a gear maker.

Firms say that in case components that go into making a mobile radio were available within the country and were still imported, such firms should be hauled up. But, for instance, in the case of chipsets, which are key components in radios and are not manufactured in the country, they have no choice but to import from a third party vendor over whom they have no control. They argue that even in countries like China the value add on telecom equipment is not more than 20 per cent.

The DoT has to come out with a notification based on these broad guidelines, which will also include specific details of components and domestic content for each. Experts say that while the DPIIT has given an average range for value addition, the DoT can put in specific requirements of domestic content based on the number of players manufacturing the product, as well as the local availability of components.        

Through the Aatma Nirbhar Bharat policy, the government is focusing on encouraging home-grown players to play a larger role in telecom equipment manufacture.

Under the guidelines, where orders can be divided, if the lowest bidder (L1) is a Class-I local supplier, the entire order will go to the company. However, in cases where the L1 bidder is not a Class-I supplier, only 50 per cent of the order will go to them. The rest will be offered to the lowest bidder amongst Class-I suppliers, and such a firm would be asked to match the L1 price.

Where orders cannot be divided, the entire order will be given to a Class-I supplier if it is also the lowest bidder.  

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel