Telecom Imports Putting Pressure on Security, Forex Reserves

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Of all the current sources of telecom imports, China is the largest. At the same time, China also poses the biggest threat to the country’s domestic security. The need to kick start electronics manufacturing in India has to be one of the government’s key domestic priorities.  The government must protect the interests of its own telecom manufacturing enterprises and the security of the data and information of its citizens, probably the way China does. Here’s an analysis, for Different Truths.

The Telecom Regulatory Authority of India (TRAI) may be trying to push the manufacturing of telecommunications equipment in the country for both economic reasons and alleviating security concerns, but the progress made so far in this regard is far from encouraging. India has become one of the world’s top importers of telecom gears. And, it may remain so for years until the government takes some firm actions to ensure that both the memory chips and other key inputs, including batteries, are made in India.

Unfortunately, vested interests both at home and abroad do not want to see such a transformation. For instance, few can explain why the government accepted the bids from such entities as knowledge- and cash-strapped Jayprakash Associates and HSMC Technologies to manufacture an important high technology and investment intensive semiconductor product as this. Both the projects are as good as dead.

The government granted extension till April 30, 2016, to the two consortia for submitting documents pertaining to the setting up of the electronic chip manufacturing plants with a cumulative investment of Rs 63,412 crore. The proposed promoters were given one after other extensions for project implementation without result. Jayprakash is said to have already dumped the project, which was to come up in Uttar Pradesh in collaboration with IBM and Tower Semiconductor of Israel for want of money. The investment cost was estimated at Rs. 34,399 crores. Similarly, there is no progress of the proposed Rs. 29,013-crore HSMC plant in partnership with STMicroelectronics, Europe’s largest semiconductor maker, and Silterra Malaysia Sdn Bhd, scheduled to come up at Prantij in Gujarat. The government had agreed to provide incentives such as 25 percent subsidy on capital expenditure and tax reimbursement, exemption from basic customs duty for non-covered capital items and 200 percent deduction on expenditure on R&D. Three precious years have already been lost while the country’s telecom imports continue to increase rapidly. They could touch $400 billion over the next two years.

The imports are galloping.  The total imports related to the telecom sector are already well over Rs. one lakh crore per year since 2015. Nearly 95 percent of the telecom gear demand in the country is met through imports. The companies such as Huawei, ZTE, Nokia, Ericsson, and Juniper are doing a brisk business in India’s Rs 1.35 lakh crore equipment market. TRAI chairman R. S. Sharma himself is on record stating that “other than the economic benefits, security concerns arising out of excessive reliance on foreign-manufactured products also suggest that India should aim at achieving self-sufficiency in telecom equipment manufacturing.” The department of telecom (DoT) data suggest that the import had increased at an annual rate of 16.30 percent in the past four financial years. Few disagree that domestic telecom manufacturing is absolutely imperative for the country’s security, apart from arresting the drain of hard-earned foreign exchange on random imports.

The massive reliance on imported gears is posing a big threat to Indian telecom networks against cyber attacks. The DoT agrees on the need for locally made security products to protect government-run networks such as Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). But, somehow or other it is not quite happening. Only recently, telecom secretary Aruna Sundararajan had indicated that the government was working on a strategy to safeguard telecom infrastructure and was planning to deploy indigenous security products developed by the Centre for Development of Telematics (C-DoT). The department says that nearly 100 manufacturing facilities have come up in the past three years. But, they are mostly assembly plants. The country has still a long way to go in manufacturing basic telecom gears. Until that happens the country’s important telecom sector will indirectly or directly remain under the domain of foreign manufacturers and suppliers.

Of all the current sources of telecom imports, China is the largest. At the same time, China also poses the biggest threat to the country’s domestic security. The need to kick start electronics manufacturing in India has to be one of the government’s key domestic priorities.  The government must protect the interests of its own telecom manufacturing enterprises and the security of the data and information of its citizens, probably the way China does.  Last year, the Ministry of Electronics and Information Technology (MeitY) started a review of IT products imported from China in the wake of growing concerns over data security. The government had reportedly issued notices to a number of local and foreign gear manufacturers to file reports confirming their compliance with officially laid standards. The notice had a direct bearing on big players from China such as Xiaomi, Gionee, Oppo, and Vivo, who has swept the Indian smartphone market and held a combined market share at 54 percent, as of June 2017. Chinese products in the telecom segment are already under the government scanner in countries such as the US, EU members, the UK and Australia. India, on its part, has elevated its efforts towards a data protection framework, recognising its importance and keeping the personal data of citizens, including controversial Aadhaar data, secure and protected.

Incidentally, China itself is believed to have been wary of the personal information of its citizens being misused. China’s new Cyber Security Law of 2017 placed restrictions on the transfer of personal information and business data overseas. China has secured access to the Windows source code6 and has made numerous attempts to gain access to the source code of Apple7 as well.  While it is upto the government and departments of home affairs, DoT, MeitY, TRAI, and PMO to take a position on the country’s data security and formulate a comprehensive policy, the finance and commerce ministries on their part can play a strong role to incentivise domestic production of critical and high-end electronics gears.

Nantoo Banerjee
©IPA Service 

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