New Delhi: Despite the production-linked incentive scheme, manufacturing telecom hardware in India is 12-13% costlier than China, shows a study conducted by the Telecom Regulatory Authority of India (TRAI).
“Indian Networking and Telecom Equipment Manufacturing (NATEM) companies face relative cost disability up to 13.32% in comparison to the companies operating in China and up to 3.22% in comparison to the companies operating in Vietnam. This assessment includes fiscal incentives based on incremental production i.e. production-linked incentive (PLI) for NATEM in India. In case PLI benefits are not considered, the relative cost disability goes further up by at least 4%,” TRAI said, reported the Hindu BusinessLine.
TRAI noted that although exports have more than tripled to Rs 76,469 crore since the scheme started, the same cannot be said for what the regulator categorises as ‘Type 2’ telecom products. These are products which are utilised by operators to set up their telecommunication networks.
“While the Department of Telecommunications extended subsidies to the “Type 2” category of products to 42 companies- the results are far more limited, exports increased by only 30 crore – during the first year of the subsidy scheme,” said the report.
The significant disparity in manufacturing costs between countries like China, Vietnam, and India can be attributed to various factors.
For instance, TRAI observed that China offers programmes like “High- and New-Technology Enterprise (HNTE)” and “Made in China 2025” that provide multiple benefits to companies engaged in technological fields, including electronics production. These programmes encourage investments into research and development (R&D). They also encourage low-end manufacturers to transition into high-end goods production.
Similarly, Vietnam provides incentives such as reduced corporate taxes for manufacturers and lower import duties on components.
In India, subsidy schemes focus on providing incentives on the number of finished goods produced. In addition, India dissuades the import of finished products by bumping up import duties on fully assembled goods such as smartphones or networking equipment.
Thus, the regulatory authority has recommended the Union government to move beyond the PLI schemes.
Building local value addition incentives into its subsidy schemes to avail any benefits from the PLI is one of the suggestions by TRAI.
“In addition to the already announced 1% additional benefit, another slab of additional 2% benefit [can] be introduced for product lines that yield minimum local value-addition of 75%…,” in reference to the design-led PLI scheme for network equipment.
In addition, TRAI also wants the Union government to start rolling out PLI schemes for components as well.