Technology lobbies pulling in different directions on a policy that seeks to encourage local manufacturing of electronic devices has the government caught in the middle.
The policy dividing the technology industry relates to preferential market access which creates a market for locally manufactured electronic goods. And at loggerheads are technology services lobby Nasscom, hardware makers lobby Manufacturing Association for Information Technology and the Indian Electronic and Semiconductor Association.
"There are different interests in the industry when it comes to PMA policy," said a senior official in ministry of communication and IT who did not want to be identified. "We are taking into account all the viewpoints. But our final goal is to not let the domestic manufacturing be negatively impacted."
The preferential market access policy has also been a sore point in India-US trade relations, with US trade associations calling it discriminatory and forced. Ahead of the September visit of Indian prime minister to US, the implementation of the policy was partially suspended. Only government organisations were required to ensure that 30% of their hardware purchases were locally made. Private firms were exempted.
"We fully understand that government needs to support manufacturing. But the world was having problem with it as they were seeing this as a forced localisation, without achieving the main purpose of security," said Som Mittal, president of Nasscom. The push to localise electronics manufacturing has been in response to the projection that electronic goods would become the single largest item on India's import bill by 2020, replacing oil. The government recently gave inprinciple approval to set up two semiconductor fabs at a cost of nearly Rs 50,000 crore. It also plans to incubate startups through universities and provide for a fund to encourage entrepreneurship in the electronics sector.
"We are happy with the government's decision of considering PMA for their procurement, but we need more support to bring that multiplier effect," said PVG Menon, president, India Electronics & Semiconductor Association, which has been pushing hard for a local electronics manufacturing ecosystem.
Mait, the hardware lobby has significant representation from multinationals who are likely to be impacted, has been a fence-sitter, steering clear of a firm stand on the issue.
"Clearly there are two lines of thought. Now, we are ourselves assessing within members, what will be the impact," said Anwar Sirpurwala, Mait's executive director about the policy. "It is going to take us at least a month or two to come to a conclusion as the impact will defer from company to company."
Experts said that any wider implementation of the policy beyond government procurement calls for a well-evolved manufacturing ecosystem here.
"With PMA, they have shown a good intent. Unfortunately, 20 years back we completely abandoned electronic manufacturing and now we don't have any ecosystem. It's a vicious circle," said Hemant Joshi, partner at consultancy Deloitte Haskins and Sells.
"However, I think it was a good move that the procurement clause was removed for private sector and kept only for government. Because we have to think where all the supply will come from. The gap between demand and supply is huge."
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