The PMA Debate

When the PMA policy mooted by the government said that the electronic sourcing contracts will henceforth be sourced from locally manufactured companies, it created a furore.

Many questions were raised such as-are Indian local manufacturers capable to address the scale and size of requirements or is there a proper electronic manufacturing ecosystem in place that can foster large scale electronic manufacturing locally?

While India's Department of Telecom (DoT) justifies the need for PMA on security grounds, but global trade bodies say India by adopting PMA violates its commitment given to the World Trade Organization.

Sample this, in March 2012, a strongly worded letter from Ron Kirk, United States Trade Representative, said, "We are deeply concerned over a new PMA notification released by the Government of India's Department of Information Technology (DeitY) mandating preferences for domestically manufactured electronic goods which may include software as well as hardware for the purpose of government procurement as well as for the products that have undefined security implications."

Kirk further stated in the letter: "The PMA notification indicates that this new requirement will apply to the procurements by the government and government licensees as well as to procurements of electronic hardware as a service from Managed Service Providers (MSPs).

Consequently, these rules could apply to private sector entities licensed by the government, including telecommunications service providers and banking and financial services companies. Furthermore, since the term MSPs is not defined and the scope open-ended, it is conceivable that procurements by such entities (whether or not related to the government) would be covered. We urge USTR to engage the Government of India (GoI) on this issue as soon as possible and to encourage like-minded foreign governments to do the same."

Since then many debates and revisions had happened but a final consensus is yet to emerge. For over a year now, India's PMA proposal has got its share of critics and the government has defended till now its move and the need for PMA on security grounds. But a lot of ambiguity still remains. Reflecting on India's PMA proposal, Ron Somers, president, US-India Business Council, remarked, "Many states with infrastructure and competitive costs are developing incentives to attract business. India is making itself an undesirable outlier."

As we look at PMA's evolution time line, it gathered momentum when in a notification on February 2012, DeitY said: "PMA is applicable for both government procurement and those procurement having security implications. It also remarked that the telecom services are sensitive and those approved by DoT will also come under the ambit of PMA. And in October 2012, the announced PMA guidelines got severe criticism from global trade bodies and telecom providers and in a February 2013, a review meeting was done."

Bone of Contention

The main concern for the international business community is that by bringing the global private telecommunications companies in the ambit of PMA will end the level-playing field and also is a violation of the WTO agreements India had signed. But DoT clearly dismisses such contentions and as per reports, the countries which oppose India adopting PMA themselves had adopted a similar polices in their home turf.

For instance, the US is going cautious with ZTE and Huawei products for its critical government systems. So there is an inherent fear that secret or malicious codes can be embedded at the hardware level in those products and information can be poached or breached. But since other countries like Taiwan, Australia have expressed concern over Chinese communication products the same logic applies to India as well and isolating India and terming it as violating WTO agreements looks unfair. And on India's part, if it wants to pass the PMA policy it needs to amply justify that imported telecom equipment poses a serious challenge for its national security.

But that calls for many debates and existing security controls and its effectiveness. And it is in this backdrop in April 2013, the PMO has suggested that the security and the manufacturing aspect to be separated. The note from the PMO also raised concerns about linking security and manufacturing and the likely impact it will have and it also asked will domestic indigenous manufacturing inhibit the development of newer products? According to news reports, as per DoT in the PMA document said that there is no separation between an Indian company and a foreign one and to qualify as ‘domestic', all companies manufacturing in India were judged on the value-addition quotient.

Clearly, there are many finer elements that needs to be amply clarified.