Telecom operators will have to pay more to import equipment required for rolling out 3G and 4G networks with the Finance Ministry imposing 10 per cent customs duty on specific products not covered under the Information Technology Agreement.

The Agreement was signed in 1997 and does not include equipment required for new technologies based on Internet Protocol.

This means that equipment such as soft switches and gear used for Net telephony will attract 10 per cent duty compared to zero duty currently. Almost all of these equipment are imported as of now.

The Finance Ministry said the move to impose the customs duty was to encourage local manufacturing.

Local players represented by the Telecom Equipment Manufacturing Association (TEMA) said this will promote indigenous manufacturing of telecom equipment and create new jobs. “We expect five lakh direct and indirect jobs to be created within the next three years and industry production is expected to touch ₹25,000 crore,” said NK Goyal, Chairman Emeritus, TEMA.

The Government had signed ITA 1 on March 25, 1997 and committed imports to be duty-free for 217 items.

However, several items that were not covered under ITA 1 were also being imported at zero duty until now.

The move has, however, upset telecom companies and multination equipment vendors.

Rajan Mathews, Director General, Cellular Operators Association of India, said, “The additional duty will force telecom operators to pay more thus impacting roll out. Imposing customs duty will not bring local manufacturing.”

According to industry estimates, the demand for telecom equipment in India was ₹7,694 crore in FY13. Going forward, rural expansion and broadband growth are expected to drive demand and investments in this industry.

The requirement of 3G and 4G equipment is expected to be worth ₹10,130 crore and ₹12,660 crore respectively, in 2015–16.

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