Govt to review preferential market access policy

In a reprieve to foreign telecom equipment players, the government has decided to review the preferential market access (PMA) policy that gives favours domestic equipment makers for Government procurements.

In a draft Cabinet note, the Ministry of Communications and Information Technology has also proposed that the Government should approve the part of the PMA policy that reserves 30% of Government procurement for domestically manufactured electronic goods.

The decision to keep PMA in abeyance came after US-India Business Council (USIBC) and 37 other associations of foreign telecom firms, including players from across Europe, Australia, Asia and the United States, wrote to Prime Minister Manmohan Singh repeatedly expressing concern over draft notification for PMA policy, seeking his intervention.

According to the draft Cabinet note, the Ministry has proposed that the extant policy shall not be applied to electronic products having security implications and a “separate framework” shall be developed for procurement of these products. However, all other provisions with respect to procurement of electronic goods for Government use shall remain unchanged. The policy will also apply to Defense.

The note has argued that the PMA in the Government sector was mooted to incentivise domestic manufacturing in the country as currently India has to depend on large-scale imports to meet its demand for electronic goods. The policy is one of the many initiatives taken by the Government in the past two years to kick-start the electronics manufacturing ecosystem in the country.

J Satyanarayana, secretary, Department of Electronics and Information technology, declined to comment on the Cabinet note, but said that the Government has stated in the past that the PMA policy will be reviewed.

“We welcome the continuation of the Government procurement policy as we feel that it is important to stimulate the domestic manufacturing activity,” said Chetan Bijesure, director and head-manufacturing division at industry body Federation of Indian Chambers of Commerce and Industry (Ficci).

In April this year, the Department of Telecommunications (DoT) had written to the Prime Minister’s Office stating that the suggestion of a moratorium on PMA implementation was similar to “chicken and egg story”, after the PMO had suggested that issues of security and manufacturing to be delinked in the PMA policy.

DoT has then said 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 replied to PMO.

Meanwhile, DoT was planning to add 23 new products in the reviewed the list of products that would be included in the PMA list. The department is expected to add six new products in the PMA list for Government procurements for 2014-15.

As part of the earlier proposal for PMA, even private telecom operators or licensees had to give preference to domestically manufactured telecommunications products that could have security implications. However, in the case of electronics, only Government agencies had to reserve 30% of their procurement for goods that had a stipulated percentage of domestic value-add. This percentage was supposed to go up by five% every year.

USIBC and other organizations had said that the Government’s proposal for PMA could be inconsistent with India’s World Trade Organisation (WTO) obligations.