Telecom policy shift may hit Indian firms: GTRI flags risk from easing of local content rules, warns of MNC dominance
Major relaxations proposed in local content rules for the telecom sector under the Public Procurement Order could undermine Indian manufacturers and favour multinational corporations (MNCs), the Global Trade Research Initiative (GTRI) said in a new report.
The Department of Telecommunications (DoT) has initiated a public consultation process, open till July 3, to revise the Public Procurement (Preference to Make in India) (PPP-MII) Order for the telecom sector. The consultation proposes technical amendments to the existing local content (LC) framework that could significantly reshape participation in government telecom procurement.
'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,' the GTRI said in a note prepared by Ajay Srivastava, a former Indian Trade Service officer, as quoted ANI.
The PPP-MII policy, updated last in October 2024, mandates a minimum 50% local content threshold for firms to qualify as 'Class-I' local suppliers and gain preference in government procurement.
GTRI noted that foreign telecom MNCs are lobbying DoT to dilute these norms as they are struggling to meet the existing criteria for Class-I suppliers.
To be eligible, firms must demonstrate that at least 50% of a product's value is sourced or manufactured in India.
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The policy applies to 36 key telecom product categories including routers, ethernet switches, GPON devices, media gateways, CPE, telecom batteries, optical fibre and cables.
The policy excludes imported parts routed through Indian resellers, royalties, overseas technical fees, and refurbished products from the local content tally. Although design and software work performed in India is allowed, the value is capped to prevent firms from inflating their LC percentage through back-end R&D while continuing to import most hardware.
'Global majors are finding it difficult to meet these thresholds,' the note said, adding, '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.'
GTRI cautioned that easing the LC rules could discourage Indian firms that have made long-term investments in domestic R&D, IP, and manufacturing.
'Such Indian firms would face the prospect of losing market share to foreign MNCs whose products remain largely imported and foreign-owned,' the note said.
The think tank also warned that lowering LC standards could promote superficial assembly or software wrapping of imported products just to claim Class-I supplier status, rather than genuine localisation.
'India's telecom sector would remain reliant on foreign technologies, with little strategic control,' the GTRI note added.
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