GTRI Warns Against Dilution Of Local Content Norms In Telecom Sector

New Delhi, Jun 23 (KNN) The Global Trade Research Initiative (GTRI) has raised concerns over proposed changes to India's Public Procurement Order for the telecom sector, cautioning that these amendments could adversely affect domestic manufacturers while offering greater leeway to multinational corporations (MNCs) operating without significant local production.

In a detailed note authored by GTRI Founder Ajay Srivastava, GTRI observed that the Department of Telecommunications (DoT) is considering substantial relaxations to the local content requirements under the Public Procurement (Preference to Make in India) (PPP-MII) framework.

The proposed changes, currently under public consultation until July 3, aim to revise technical parameters governing local content (LC) definitions and supplier classifications.

According to GTRI, such changes would provide foreign MNCs—including major players like Cisco and Ericsson—easier access to government telecom tenders, despite limited value addition in India.

The current PPP-MII policy, updated most recently in October 2024, requires suppliers to demonstrate a minimum 50% local content in order to qualify as Class-I local suppliers, thereby gaining preference in procurement.

GTRI emphasised that meeting this threshold has been challenging for foreign firms, many of whom operate through outsourcing arrangements in India while retaining intellectual property rights and profit margins abroad.

The note also pointed out that MNCs are actively lobbying the DoT to ease the local content rules, which they argue are difficult to comply with under the current framework.

The PPP-MII policy applies to 36 critical telecom product categories, including routers, ethernet switches, GPON devices, media gateways, telecom batteries, and optical fibre cables.

However, several exclusions apply to the LC calculation, such as imported components procured via Indian intermediaries, technical royalties paid overseas, and refurbished products.

While design and software development undertaken in India is considered, its contribution to the LC is capped, preventing inflation of the LC score through R&D alone.

Srivastava noted that many foreign telecom firms find it difficult to meet these requirements, as a significant portion of their India-based operations is service-oriented, supporting parent firms headquartered abroad.

He added that this imbalance undermines the intent of the policy, which is to foster genuine manufacturing and innovation within India.

GTRI warned that the proposed relaxations could place Indian firms—who have invested heavily in domestic manufacturing, R&D, and intellectual property—at a competitive disadvantage.

The note stated that dilution of standards would allow superficial assembly or software integration of imported products to qualify for Class-I status, discouraging meaningful investment in local innovation.

The policy shift, GTRI argued, could erode India's strategic autonomy in the telecom sector, leaving it increasingly dependent on foreign technologies with minimal control over critical infrastructure.

(KNN Bureau)