Proposed dilution of local content rules may hurt Indian telecom firms, benefit MNCs: GTRI
New Delhi: Major dilutions to local content rules for the telecom sector under the Public Procurement Order could negatively impact Indian firms by giving greater access to multinational corporations (MNCs) in government contracts without manufacturing in India, according to the Global Trade Research Initiative (
GTRI
) .
The GTRI in a note further said that the move will benefit major foreign MNCs active in the Indian telecom component industry.
Earlier this month, on June 3, the
Department of Telecommunications
(DoT) initiated a public consultation to revise its Public Procurement (Preference to Make in India) (PPP-MII) Order for the telecom sector.
The consultation, open to industry comments until July 3, proposes a series of technical adjustments to the existing local content (LC) framework -- changes that could have far-reaching consequences for the sector's future.
"Department of Telecommunications (DoT) is moving to relax local content norms for government telecom procurement -- a shift that could favour multinational corporations (MNCs) like Cisco and Ericsson while undermining Indian manufacturers who have invested in domestic production and innovation," GTRI's note added prepared by former Indian Trade Service Officer, Ajay Srivastava said.
It added that MNCs are "lobbying India's Department of Telecommunications (DoT) to ease local content (LC) requirements, as they struggle to qualify as Class-I local suppliers for government telecom tenders."
India's current PPP-MII policy, which was first updated in October 2024, mandates that any firm seeking preference in government telecom tenders must meet a minimum 50 per cent local content threshold.
Srivastava added in the note that in order to qualify as a "Class-I" supplier and enjoy pricing and selection advantages, firms must demonstrate that at least 50 per cent of a product's value is sourced or manufactured in India which has become a difficult task for MNCs.
The PPP-MII policy applies to 36 key telecom product categories -- including routers, ethernet switches, GPON devices, media gateways, customer premises equipment (CPE), satellite terminals, telecom batteries, and optical fibre and cables.
Under the current PPP-MII framework, several exclusions apply to the calculation of local content.
Imported parts routed through Indian resellers, royalties, overseas technical fees, and refurbished products do not count toward Indian value addition. Design and software work performed in India is permitted, but the value generated is capped, with restrictions in place to prevent companies from inflating LC percentages purely on the basis of R&D activities while continuing to import most hardware components.
Srivastava added in the note that global majors are finding it "difficult to meet these thresholds."
He further added that the underlying issue is that most of the work performed in India is done on an outsourcing basis for their foreign parent companies.
The parent companies retain ownership of intellectual property (IP) and earn the bulk of profits.
Highlighting the impact of policy change, GTRI note said that the move will put Indian telecom firms -- who have made long-term investments in Indian-based manufacturing, R&D, and IP development -- at a severe disadvantage.
"Such Indian firms would face the prospect of losing market share to foreign MNCs whose products remain largely imported and foreign-owned," the GTRI note added.
It further points out that dilution of standards would discourage Indian firms from investing in genuine IP creation, as Class-I status could now be achieved simply through superficial assembly or software wrapping of imported goods.
"India's telecom sector would remain reliant on foreign technologies, with little strategic control," the GTRI note added.
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