Can PMA Drive Local Manufacturing?

Preferential Market Access (PMA) policy first notified in 2010 was limited to government procurement of telecom equipment with security implications. Subsequently, it was extended to private industry with a view to give domestic manufacturing a boost. The policy gave preferential domestic market access to value addition done in India for input equipment. However, the move met with stiff resistance from MNC lobbies from across the globe particularly from Japan, Europe and the US citing India’s still-developing manufacturing eco-system. In December 2013, the government backtracked and revised the policy to exempt private sector from its PMA policy.

The most recent development on Preferential Market Access (PMA) policy includes a mandate to the Standardization Testing & Quality Certification (STQC) directorate, a part of the Department of Electronics & IT, to ensure network vendors meet local value addition targets for security-sensitive telecom and

IT products used in mobile networks. STQC will execute this monitoring via its test labs in Delhi, Bangalore and Mumbai. The vendors include domestic vendors and Indian units of global manufacturers of electronics and IT systems used in telecom networks. The “domestic value addition” (VA) is the degree of customization that goes into an imported telecom equipment input before it gets classified as Made in India and ranges between 35 to 65 percent over a period of five years.

The policy gave preferential domestic market access to value addition done in India for input equipment. However, the move met with stiff resistance from MNC lobbies from across the globe particularly from Japan, Europe and the US citing India’s still-developing manufacturing eco-system.

However, the real issue of giving a push for domestic telecom manufacturing remains. Electronics goods import is projected to rise from the current $40 billion to $300 billion by 2020, if efforts are not made to manufacture hi-tech products in India, according to Electronics Industry Association (ELCINA).

Even after a history of so many years in telecom India is yet to see a Fab unit. While preferential market access can make setting up a Fab attractive, given that India telecom market is about 7 percent of the global market demand what will actually crystallize the action is good quality reliable, continuous power supply, which is critical to running a Fab unit.