PMO's views on preferential market access akin to chicken & egg story: DoT

PMO recently suggested issues of security, manufacturing be delinkd in PMA policy

Responding to a note from the Prime Minister’s Office (PMO), the department of telecommunications (DoT) has said the suggestion of a moratorium on the implementation of Preferential Market Access (PMA) was similar to a “chicken and egg story”.

Recently, the PMO had suggested issues of security and manufacturing be de-linked in the PMA policy. It had expressed concern over the linkage of manufacturing and security and said this would lead to distortions in the market, encouraging indigenous manufacturing at the cost of new and better products. DoT said the linkage of local manufacturing, development of intellectual property rights for new technology and security was justified. Under PMA, there was “no distinction” between an Indian company and a foreign one and to qualify as ‘domestic’, all companies manufacturing in India were judged on the value-addition criterion, DoT said.

DoT said as telecom products had major security implications, ideally, all manufacturing should be indigenous. For this, DoT proposed a phased approach.

The policy of the department of electronics & information technology had a phased approach to PMA. As the government aimed to cater to the global market, DoT would take steps according to the National Electronics Policy, 2012, and the National Telecom Policy, 2012.

The PMO had suggested the PMA policy be implemented in a phased manner to avoid delay in procurements and a compromise in quality or technical specifications. In its response, DoT said the PMA policy didn’t propose any price preference or compromise on specifications. Domestic manufacturers of electronic products would be preferred if they met technical specifications and had low prices. The DoT also said in India, manufacturing wasn’t “cost competitive” and had a “six to eight per cent” landed cost disadvantage. While issues such as duty inversion and poor infrastructure had to be addressed, specific incentives to the private sector would help build manufacturing capabilities.Policies like Modified Special Incentive Package Scheme and Electronic Cluster Scheme would address such issues, it added.

As per the notification of the DeitY on February 10, 2012, PMA is for both Government procurement and in procurement having security implications. Telecom services are very “sensitive” from security aspects, and as telecom services are provided by entities licenced by DoT, the obligation should apply to all telecom licencees, including their managed service providers, the response noted.

DoT had notified the PMA policy on October 5, 2012. But, after receiving strong opposition from international trade organisations and associations of telecom service providers, a DoT Committee had again met on February 7, 2013 to finalise the draft notification for security sensitive telecom products with rationale, the DoT response added.

Recently, PMO has suggested changes in the PMA policy the US-India Business Council and 37 business groups and companies from around the world had asked the Indian government to rescind the PMA policy and avoid “market-distorting policies”.