COAI writes to PM, says proposed PMA policy needs to be reviewed

Within a few days after the Department of Telecommunications (DoT) has replied to Prime Minister’s Office against its proposal to tweak the proposed policy on Preferential Market Access (PMA), Cellular Operators Association of India (COAI) has written to Prime Minister Manmohan Singh stating that the policy needs to be reviewed, especially the manner it is being applied for telecom products.

In a letter, dated April 30, 2013, COAI director general Rajan Mathews has stated that the association, which bats for GSM telcom operators like Bharti Airtel, Vodafone and Idea Cellular, “believes that there is no co-relation between mandating PMA and security of telecom networks and services.”

“We believe that the attempt to link the local manufacturing to security consideration is inappropriate as security can not be guaranteed simply by requiring equipment to be manufactured in India through a mandate of PMA. Indeed, it is not where but how a product is manufactured that matters,” Mathews pointed out.

According to COAI, implementation of PMA, as it has been proposed at present, will significantly hamper the growth of manufacturing industry in India and will add impediments to the growth of India’s telecom sector, slow down network rollout and add a considerable pressure on monitoring and reconciliation of the manner of procurement.

“As it is quite evident that the telecom sector is already facing a significant crisis of investor confidence caused by an increasingly uncertain regulatory environment and mandates such as PMA will further undermine prevailing investor confidence levels,” Mathews said, adding that extension of PMS to private sector procurements would severely impact the business models of international information and communications technology (ICT) competitors and reduce competitiveness of India’s own ICT sector.

COAI has further suggested that developing telecom clusters with proper infrastructure, supported by fiscal and legal issues, including labour laws would encourage manufacturing.

It has also suggested that the Government should set up a fund to help domestic companies to offer competitive contracts financing options to buyers.

COAI has also asked the Government to incentivise telecom operators via licence fee rebates, without elaborating the proposal further.

Last week, DoT has replied to a recent PMO note stating that the suggestion of a moratorium on the PMA implementation is similar to “chicken and egg story”. The PMO had recently suggested that issues of security and manufacturing to be delinked in the PMA policy. PMO has expressed concern over linkage of manufacturing and security and is apprehended that it would lead to distortions in the market, encouraging indigenous manufacturing at the cost of new and better products.

In response, DoT has stated that linkage of local manufacturing, development of intellectual property rights (IPR) for new technology and security is justified. Under PMA, there is “no distinction” between an Indian company and a foreign company and all companies manufacturing in India are judged on value addition criterion to qualify as domestic, the DoT response noted, adding that 100% foreign direct investment is already allowed in manufacturing.

According to DoT, there is a possibility of malicious codes being implanted during the stage of manufacturing and after manufacturing but before or after putting the equipments into the networks, as telecom networks are characterised by dependence on software, interconnectivity and remote access which make the network susceptible to vulnerability and attacks.