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Key Points

The GTRI warns that relaxing local content rules for telecom procurement could disadvantage Indian manufacturers. Foreign firms like Cisco and Ericsson may gain an edge without boosting domestic production. Indian companies investing in R&D and manufacturing could lose market share. The policy shift risks making India reliant on imported telecom tech.

Key Points: GTRI Warns Relaxed Telecom Local Rules May Hurt Indian Firms

  • Proposed telecom procurement changes may benefit MNCs like Cisco
  • Indian firms risk losing market share to foreign players
  • Current 50% local content rule may be diluted
  • GTRI warns policy shift could discourage domestic R&D
3 min read

Proposed dilution of local content rules may hurt Indian telecom firms, benefit MNCs: GTRI

GTRI says diluted local content norms could favor MNCs like Cisco and Ericsson over Indian telecom manufacturers investing in domestic production.

"Department of Telecommunications is moving to relax local content norms... a shift that could favour MNCs while undermining Indian manufacturers – GTRI"

New Delhi, June 22

Major dilutions to local content rules for the telecom sector under the Public Procurement Order could negatively impact Indian firms by giving greater access to multinational corporations (MNCs) in government contracts without manufacturing in India, according to the Global Trade Research Initiative (GTRI) .

The GTRI in a note further said that the move will benefit major foreign MNCs active in the Indian telecom component industry.

Earlier this month, on June 3, the Department of Telecommunications (DoT) initiated a public consultation to revise its Public Procurement (Preference to Make in India) (PPP-MII) Order for the telecom sector.

The consultation, open to industry comments until July 3, proposes a series of technical adjustments to the existing local content (LC) framework -- changes that could have far-reaching consequences for the sector's future.

"Department of Telecommunications (DoT) is moving to relax local content norms for government telecom procurement -- a shift that could favour multinational corporations (MNCs) like Cisco and Ericsson while undermining Indian manufacturers who have invested in domestic production and innovation," GTRI's note added prepared by former Indian Trade Service Officer, Ajay Srivastava said.

It added that MNCs are "lobbying India's Department of Telecommunications (DoT) to ease local content (LC) requirements, as they struggle to qualify as Class-I local suppliers for government telecom tenders."

India's current PPP-MII policy, which was first updated in October 2024, mandates that any firm seeking preference in government telecom tenders must meet a minimum 50 per cent local content threshold.

Srivastava added in the note that in order to qualify as a "Class-I" supplier and enjoy pricing and selection advantages, firms must demonstrate that at least 50 per cent of a product's value is sourced or manufactured in India which has become a difficult task for MNCs.

The PPP-MII policy applies to 36 key telecom product categories -- including routers, ethernet switches, GPON devices, media gateways, customer premises equipment (CPE), satellite terminals, telecom batteries, and optical fibre and cables.

Under the current PPP-MII framework, several exclusions apply to the calculation of local content.

Imported parts routed through Indian resellers, royalties, overseas technical fees, and refurbished products do not count toward Indian value addition. Design and software work performed in India is permitted, but the value generated is capped, with restrictions in place to prevent companies from inflating LC percentages purely on the basis of R&D activities while continuing to import most hardware components.

Srivastava added in the note that global majors are finding it "difficult to meet these thresholds."

He further added that the underlying issue is that most of the work performed in India is done on an outsourcing basis for their foreign parent companies.

The parent companies retain ownership of intellectual property (IP) and earn the bulk of profits.

Highlighting the impact of policy change, GTRI note said that the move will put Indian telecom firms -- who have made long-term investments in Indian-based manufacturing, R&D, and IP development -- at a severe disadvantage.

"Such Indian firms would face the prospect of losing market share to foreign MNCs whose products remain largely imported and foreign-owned," the GTRI note added.

It further points out that dilution of standards would discourage Indian firms from investing in genuine IP creation, as Class-I status could now be achieved simply through superficial assembly or software wrapping of imported goods.

"India's telecom sector would remain reliant on foreign technologies, with little strategic control," the GTRI note added.

- ANI

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Reader Comments

R
Rajesh K.
This is concerning! After all the push for Make in India, why dilute local content rules now? Our domestic manufacturers have invested so much in setting up facilities and R&D centers. We can't let foreign companies take advantage without contributing to our economy. 🇮🇳
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Priya M.
While competition is good, the government must ensure a level playing field. MNCs should be encouraged to manufacture in India rather than just importing and assembling. Our youth need manufacturing jobs, not just service sector opportunities.
A
Amit S.
I work in telecom sector. Many Indian companies have really stepped up quality in recent years. We don't need to depend on foreign brands for everything. Atmanirbhar Bharat should mean supporting our homegrown tech capabilities!
S
Sunita R.
This seems like a step backward. First we push for local manufacturing, then relax rules when foreign companies complain? Consistency in policy is important for business confidence. Hope DoT listens to domestic industry concerns before finalizing anything.
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Vikram J.
There should be a balanced approach. While supporting Indian firms is important, we also need access to cutting-edge technology. Maybe phased implementation where local content requirements increase gradually would work better than sudden 50% mandates.
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Neha P.
As a consumer, I want quality products at good prices. But as an Indian, I want our economy to grow. Can't we have both? Maybe stricter rules for government contracts but more flexibility for private sector? 🤔

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