Domestic equipment vendors charge up to 89% more, BSNL tells DoT

State-owned Bharat Sanchar Nigam Ltd (BSNL) has listed out the major reasons why domestic equipment vendors have not been good news for the telecom company. 

Responding to a Department of Telecommunications (DoT) query on various issues related to the make-in-India scheme, BSNL has blamed the uncompetitive rates offered by domestic vendors for their lacklustre performance in the past five years.     

The rates offered by the local gear makers for some key BSNL contracts have been 49 to 89 per cent higher than those from global players, the telco said in a letter that was reviewed by Business Standard. 

DoT had asked BSNL to identify and map local capacities and their competiveness as part of a policy to provide preference to the make-in-India scheme.

BSNL has also stated that domestic vendors have not even participated in 20 of the 35 central tenders floated by the company in the last five years.   

The BSNL letter has come at a time when the government wants domestic vendors to play a key role in the upcoming tender for 4G equipment. 

The earlier tender was cancelled after domestic vendors complained to DoT that it was primarily to encourage foreign firms and was in contradiction with the government’s stated policy of encouraging domestic production. 

However global telecom gear makers say that much of the 4G equipment of domestic players will need to undertake proof of concept before being used on a mass scale, resulting in a rollout delay for BSNL.

BSNL has highlighted the issue of price differential between local and global vendors. 

For instance, for procurement supply, installation and commissioning, as well as operation and maintenance of optical transport networking (OTN) equipment, the bid by a domestic vendor was as much as 88.52 per cent higher than the lowest offer, according to BSNL. 

The L1 bid from a global player was Rs 273.97 crore against Rs 516 crore from a domestic vendor.
 

WHY DOMESTIC VENDORS FAILED TO IMPRESS BSNL
 
* Local vendors quote rates far higher than those by global players
* They have not participated in 20 of the 35 tenders floated by BSNL in the past 5 years
* Technology providers such as C-DoT, IIT cannot be considered OEMs given that they do not have mass manufacturing capabilities
* At least 5 domestic OEMs participating in a tender must ensure sufficiency of local capacity for a telecom product

In another example for supply, installation, commissioning and AMC of MPLS-TP (multi-protocol label switching-transport profile) equipment along with EMS (element management system) and associated equipment, the L1 from a global player for the package was Rs 333 crore, while the Indian vendor quoted Rs 613 crore.  

BSNL has also pointed out that domestic OEMs (original equipment manufacturers) declared for any equipment should have the capacity for mass production so that they are able to meet domestic demand also. Technology providers such as C-DOT, IIT Roorkee and ISRO, among others, cannot be considered equipment manufacturers as they do not make any product themselves, the state-owned telco has said. It has also argued that to decide sufficiency of capacity of a product, there should be at least five domestic OEMs participating in a tender.

Further to assess the competition, the price quoted by domestic OEMs in the tender shall be an important consideration. If the price difference is more than 20 per cent against L1 rates, one cannot conclude there is sufficient competition, according to BSNL.