Says move a setback for firms wanting to set up shop here

The US Government has objected to India’s plans of making it compulsory for Government agencies to source electronic products, including personal computers, printers and tablets, from domestic manufacturers.

It has also expressed “grave concerns” about private companies being mandated to domestically source IT products in some instances due to security reasons.

“The US may give a non-paper to India listing out its concerns and how those might be addressed,” an Indian Government official told Business Line.

The US Under Secretary of State for Economic Growth, Environment and Energy Robert Hormats, in his recent interaction with Commerce and Industry Minister Anand Sharma, argued that the domestic sourcing regulations would be a huge setback for US IT companies that want to set up shop in India, the official, who also attended the meeting, said.

Since the domestic sourcing regulations would force some companies to let go of their global supply chains that they have developed over the years, steps needed to be taken to address this area of grave concern, the US official stressed.

Notification

The Ministry of Communications and IT, last Thursday, put out a notification making it mandatory to give preference to domestically manufactured laptop PCs and tablet PCs in Government procurement.

Notifications were issued in December for providing preference to domestically manufactured desktop PCs and dot-matrix printers in Government procurement. The time-line prescribed for adhering to the notifications, in most cases, is March 2014.

The proposed rules are meant to help develop a robust Indian technology manufacturing sector, the Indian Government said in a recent statement.

Wherever domestic sourcing restrictions have been placed on private companies, the Government has cited security concerns as the deciding factor.

“The Commerce Minister, too, explained to the US Under Secretary that the move is required to boost domestic manufacturers that were still struggling to grow,” the official said.

Technology hardware exporters based in the US and the EU have already written to the Government deploring the move, especially because it would not just apply to Government agencies but also private companies in some instances. Some have indicated that it could violate World Trade Organisation norms.

‘No norms breached’

Indian Government officials, however, are confident that no international norms are being breached. “India is not part of the Government Procurement Agreement of the WTO and thus is free to impose any procurement conditions on government agencies. The WTO also allows countries to impose sourcing restrictions for security reasons,” another official, who deals with WTO issues, said.

amiti.sen@thehindu.co.in

(This article was published on February 3, 2013)
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