EU frowns at India’s telecom sourcing rules

Amiti Sen New Delhi | Updated on October 06, 2014 Published on October 06, 2014

Oleksandr Lysenko/

Seeks clarity on value addition for a product to qualify as locally made

The European Union has raised concerns about India’s domestic sourcing norms for purchase of telecommunication products by Government departments and has asked for clarification on how much value addition needs to be done in the country for such items to qualify as locally manufactured.

Only for Govt purchases

Although India partially relaxed its policy to give preference to domestically manufactured electronic and telecom products by restricting them only to Government purchases and exempting the private sector in December last year, the EU is not happy.

In a representation made to the World Trade Organisation (WTO), the EU said that it was concerned about India pursuing the policy of local content requirements in various industrial sectors.

New Delhi, however, maintains that its policy on compulsory sourcing of at least 30 per cent of electronic and telecom products by Government Ministries and Departments was in strict compliance with WTO norms. Whatever clarifications it would give to other members on the matter would be strictly on a voluntary basis.

“We have changed our preference policy for domestic manufacturers in the electronics sector by restricting it to Government purchases after several WTO members including the US and the EU protested. What more do they want?” a Government official told BusinessLine.

“The EU wants us to spell out in greater details how we classify domestic production. Basically it wants to assess what part of its exports could take a hit because of the domestic sourcing condition and what would pass muster because of adequate domestic value addition,” the official said.

Since India is not a signatory to the WTO agreement on Government Procurement, its policies related to purchases made by the Government does not fall within the WTO’s ambit.

Electronic products (at about $ 31 billion in 2013-14) are the second-largest component in India’s import basket and the country wants to reduce its dependence on foreign products by encouraging local production.

The notification issued by the Department of Electronics and Information Technology in December 2013 has left it mostly to individual Departments and Ministries to specify local value addition requirements that a product should satisfy for it to qualify as domestically manufactured electronic product.

It has, however, specified the minimum levels of domestic value addition, ranging from 25 per cent in the first year of production to 45 per cent in the fifth year of production.

Published on October 06, 2014
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