• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G. Rambabu

This is the first fiscal that no proposal has been filed. This trend is likely to continue, given the WTO commitment under Information Technology Agreement whereby all telecom/IT products will be under zero duty regimes from 2005.

New Delhi , Dec. 9

DESPITE the impressive growth in the telecom sector, in particular mobile services during the current fiscal, there has not been much momemtum in the manufacturing sector.

There has been practically nil investment proposals filed with the Government this fiscal even as the existing facilities have also been recording negative growth.

According to a status report on telecom investments prepared by the Department of Telecommunications (DoT), this dismal performance is mainly on account of the sharp decline in prices of telecom equipment over the past couple of years and the Government's FDI policy on trading activity.

The DoT report notes that as against the total production of telecom equipment during 2000-01 valued at Rs 15,400 crore, the figure has climbed down to Rs 14,400 crore in the year 2002-03, and for the current fiscal so far, it is just Rs 8,500 crore. It also points out that during August 1991 to 2002, 116 industrial entrepreneur memoranda (IEM) for Rs 5,276 crore were implemented for manufacturing telecom equipment. However, it is the first fiscal that no proposal has been filed.

This trend is likely to continue, given the WTO commitment under Information Technology Agreement (ITA) whereby all telecom/IT products will be under zero duty regimes from 2005. Perhaps industry fears that domestic manufacturers' product will not be competitive with the global manufacturers, it notes.

The Department has pointed out that though the services sector has grown over 23 per cent during the period due to change in technology from wireline to wireless, indigenous manufacturers have failed to meet the demand for wireless equipment which is heavily import dependent. Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) are the largest buyers of telecom equipment. Since GSM and CDMA technologies-based equipment are not manufactured, even indigenous manufacturers are becoming traders, importing and supplying the equipment to BSNL/MTNL.

Private sector operators, on the other hand, imported most of the equipment owing to various reasons including suppliers credit etc. Presently indigenous R&D, mainly C-DoT, is also not contributing significantly which could have provided an impetus to domestic manufacturing capabilities.

"Another apparent reason for the lack of comparable growth for this sector is the FDI policy on trading. The Government allows 100 per cent FDI in cash and carry wholesale trading activities. Even companies like Siemens, Ericsson Motorola who had initially set up manufacturing facility are now resorting to trading activity. Nokia was given initial approval for test marketing of cellular phone subject to setting up of manufacturing facility has also obtained approval for cash and carry wholesale trading. Thus trading of telecom equipment has increased, simultaneously leading to a negative growth in manufacturing," the DoT report observes.

Article E-Mail :: Comment :: Syndication

Stories in this Section
`Storage networking has huge BPO potential'

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line