India’s Telecoms Regulatory Authority (TRAI) is proposing new rules to compel telecoms service providers to source the bulk of their equipment locally. Under the proposed rules, products that are manufactured locally – whether by Indian or foreign-owned companies – should be given preference in both public and private sector purchase decisions.

According to the TRAI, domestic telecoms procurement will have to account for 30 per cent of equipment purchased by 2013, rising to 80 per cent by 2020. The authority says that locally produced kit accounted for just 12-13 per cent of all telecoms procurement in 2010, with Indian companies accounting for about a quarter of that.

In its “Telecom Equipment Manufacturing Policy” recommendations, the regulator also proposed the establishment of a “telecom manufacturing fund” (TMF) geared towards providing venture capital funding for Indian manufacturers in the form of equity and soft loans. Further financial incentives to grow the local market could come in the form of favourable VAT and excise duty, which the TRAI proposes should be limited to 12 per cent.

It’s not the first time that Indian authorities have sought to address the issue of locally produced telecoms kit. Previous efforts saw foreign manufacturers with a footprint on the subcontinent simply importing part-assembled equipment which was then finished off locally. Under the proposed rule changes, companies that do not meet “value addition” criteria such as use of local materials or intellectual property will be categorised alongside foreign imports.

Last year, the Indian government imposed a ban on Chinese telecom equipment imports. The move, which only lasted a few months, was said to be for security reasons but was widely believed to be motivated by a desire to protect the local equipment market. The proposed construction of a $500m Huawei plant in Chennai appeared to help change the government’s mind on the matter. This year, Huawei said that it intends to make more of its kit in India and operates a R&D facility in Bangalore. Nokia Siemens Networks and Ericsson also operate locally sited plants in India, with the former manufacturing 3G kit in Chennai as well as exporting equipment made there.