The Cabinet today approved a revised version of the Preferential Market Access (PMA) policy, which favoured domestic equipment makers for government procurements.
"PMA policy which is linked to telecom equipment and other electronic products having security implications has been approved," according to an agency report which quoted a government source.
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.
The revised proposal asked for including defence sector under the revised framework which was exempted in previous version of the policy.
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.
Preferential Market Access policy
A policy which reserves a stipulated percentage of government procurement of electronics for domestically manufactured items has also been given a go-ahead in the Cabinet on Thursday, news agency Press Trust of India reported citing sources. This is a revised version of the Preferential Market Access (PMA) policy, which was earlier kept in abeyance after the government faced pressure from multinational companies and trade groups.
Business Standard had reported earlier this week that 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 Defence.
While the move will mean that the relief extended to telecom equipment manufacturers will continue, the revised proposal, would have impact on foreign electronic goods makers which have also opposed the policy in the past calling it unfair and restrictive.
Officials of the Department of Electronics and Information technology could not be reached for a comment immediately.
The note had 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 of 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.
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 per cent of their procurement for goods that had a stipulated percentage of domestic value-add. This percentage was supposed to go up by five per cent every year.
Earlier business advocacy organisation US-India Business Council (USIBC) and several other organisations had said that the Government’s proposal for PMA could be inconsistent with India’s World Trade Organisation (WTO) obligations.
