Guest Column: A Big Leap

Today, India's telephone network is second largest among the emerging
economies, after China. It has a spread of more than 140 mn. The wireless sector
has already overtaken the fixed line services in the country.

Our overall teledensity is 12%. While the urban teledensity is at a
respectable 36%, rural teledensity is, however, at a low-just above 2%. India
plans to reach 250 mn lines by 2007. By 2010 we hope to go up to 500 mn. The
demographic profile is in India's favour. All in all, we have the world's
largest 19-39 age group, which is waiting to break the tradition.

There has been a tremendous upsurge in the Indian telecom market, specially
the increased requirement of production of wireless equipment. The government is
supporting the cause of manufacturing in a strong way and is marketing India as
a destination for hardware manufacture.

It can also be observed from the following table that the market has vastly
increased, while the manufacturing of telecom products and their exports is now
again picking up the pace. Most of the development and progress has taken place
in the wireless sector. With the advent of the large international players, the
scope of exports over the time will increase for goods manufactured in India.
This will transform India into a regional manufacturing hub. Global giants have
put in the pipeline $8 bn as FDI in the telecom sector.

For 2007, target for the telecom sector includes covering of 70% of landmass
by telecom network, all villages to be connected, to achieve 250 mn telephones
and a teledensity at 22%, broadband at 9 mn and Internet at 18 mn. By 2010, the
target is to add another 500 mn telephones, 40 mn Internet users, and 20 mn
broadband users. Similarly, by 2015, a target of 800 mn telephones has been set.

Till last year, telecom industry was saddled with an inverted duty structure.
The government stepped in and rationalized the duties to help create a level
playing field for the working of this industry in WTO/ITA-1 regime.

The industry is now requesting the government to help in creation of an
environment conducive to global competitiveness. Localization in the past has
resulted in reduction of the cost of equipment, providing over 2 lakh knowledge
workforce, saving considerable foreign exchange and creating a positive
environment for telecom exports. Further localization and inflow of FDI's
would now result in foreign exchange savings. Another advantage is that of
employment generation. To achieve the above, some steps have been recommended.

Customs

Zero customs duty on all inputs to the component industry; clarification on
optical fiber cables; and level playing field on VAT

Domestic Taxation

Excise duty to be reduced from 16% to 8%; CST to be abolished, abolish state
Octroi and Entry Tax; nation-wide unification of state-level taxes on telecom
products; financing at international competitive rates; incentives for using
local manufactured equipment; and implement self-assessment.

Exim Policy For SEZ

Product specific SEZs intending to invest at least Rs 100 crore in an area
of 10 hectares should be eligible for support from the government.

Tax Free Transfer of technology

Co-ordinated public-private partnerships to meet specific future telecom
needs.

Standards and common testing facility

Advanced prototype center; telecom Export Promotion Council; it is important
to create focused Telecom Equipment Export Promotion Council at an early date.
The government may create a sizable export promotion fund and set up a
“Telecom Equipment and Services Export Promotion Council” with involvement
of DoT and TEMA.

India is ready for third generation (3G) services. Much indeed has been
achieved in a little time. However, millions of customers have to be served
before the Indian telecom juggernaut can even think of pausing.