Diluting Local Content Norm In Telecom Supplies Not In Sync With Make In India

The Department of Telecommunications is preparing a critical policy shift that could reshape India’s telecom manufacturing landscape. Through its ongoing public consultation, the DoT is seeking feedback on proposed revisions to the Public Procurement (Preference to Make in India) Order for telecom equipment. While framed as technical adjustments, these changes threaten to undo years of progress made under Make in India and Atmanirbhar Bharat.

The revisions would allow multinational corporations such as Cisco, Ericsson, and Nokia, who have struggled to meet existing local content thresholds, to qualify as domestic suppliers in government procurement, without substantially changing their business models. This would come at the cost of Indian manufacturers like Tejas Networks, HFCL, C-DOT, and Lekha Wireless, who have invested in Indian design, manufacturing, and intellectual property.

What makes the move more concerning is that it comes at a time when India is beginning to reap the benefits of over a decade of industrial policy. Domestic firms have developed end-to-end 4G/5G telecom stacks and built the world’s largest rural broadband rollout using indigenous equipment. Rolling back support now could reverse this momentum and re-establish India as a mere assembly destination for imported technologies.

The DoT’s decision, due after the July 3 consultation deadline, will test the government’s commitment to genuine domestic manufacturing and IP creation. The choice is between staying the course on self-reliance or allowing global firms to rebrand foreign products as “local” through cosmetic localisation.

Under the PPP-MII framework introduced in 2024, firms need at least 50% local content to qualify as Class-I suppliers, making them eligible for exclusive bidding rights and price preference in public procurement. The rules apply to 36 critical telecom products, from routers and switches to fibre cables and GPON devices.

The DoT’s new proposals would soften these standards significantly. Among the changes under review: giving more weight to software and design work performed in India, lowering the local content threshold, and excluding key imported components, such as semiconductors and PCBs, from local value calculations. These shifts would make it easier for MNCs to win government contracts without committing to meaningful Indian manufacturing.

MNCs Stand to Gain
Companies like Cisco and Ericsson operate large centres in India focused on software development, R&D, and product integration. But most of this work is conducted under cost-plus contracts for their foreign parents. The intellectual property, strategic control, and majority of profits remain overseas.

Cisco’s India operations, for instance, earn margins of 5–10%, compared to over 60% for the global business. The hardware is mostly imported, and final assembly is often outsourced locally, adding little value. These firms have consistently failed to meet the 50% local content threshold required under the current PPP-MII rules.

Now, they are lobbying for a new definition of local content, one that gives full credit for India-based software work, even when the core IP is foreign-owned. They also want imported components excluded from calculations if they’re not available from Indian suppliers. Such changes would allow foreign-designed products, assembled or integrated locally, to be classified as domestic.

For Indian firms, this change would be devastating. Companies like Tejas Networks and HFCL have spent years building domestic capabilities, not just in assembly but in core technology. They own IP, design chips, manufacture key components, and contribute to strategic projects like BharatNet.

These investments were made based on the assurance that government procurement policies would favour genuine local manufacturers. If that assurance is withdrawn, these firms risk being displaced by global players offering superficially localised products.

More worryingly, such a move disincentivises future investment in Indian IP and manufacturing. Why commit to long-term R&D and capital expenditure when imported products can win government contracts by adding minimal software or integration work in India?

National Security
Telecom is not just a commercial sector, it is critical infrastructure. Control over telecom hardware and software affects surveillance, data protection, and national security. The recent experience with Chinese vendors has shown the dangers of relying on foreign-controlled networks.

Loosening the definition of local content would expose India to similar risks once again. Superficial localisation, such as writing code or assembling boxes in India, does not confer strategic control if the source code, firmware, and diagnostics remain foreign-owned.

In an era of growing digital and geopolitical threats, surrendering strategic autonomy in telecom through regulatory dilution would be a serious miscalculation.

A Policy Disconnect
The proposed changes also create a mismatch between the PPP-MII and India’s Production Linked Incentive  schemes. The PLI framework offers financial incentives to manufacturers investing in domestic production. However, if MNCs can qualify for preferential procurement by simply integrating imported products with Indian software, the purpose of PLI is defeated.

Class-I supplier status, meant to reward firms with 50% or more domestic content, would become meaningless. PLI beneficiaries, currently treated as Class-II suppliers, would find themselves at a competitive disadvantage in tenders against MNCs rebranded as local suppliers.

Instead of fostering deep manufacturing and technology creation, the policy would subsidise token localisation, undermining the coherence and credibility of India’s industrial strategy.

The PPP-MII policy, and before it the Preferential Market Access initiative of 2012, were created to nurture a self-sufficient telecom ecosystem. These frameworks were instrumental in helping Indian companies build capacity across the full stack—design, assembly, software, and component manufacturing.

Today, India is one of the few countries to possess its own 4G/5G technology stack. This success was not inevitable, it was the result of long-term policy vision and consistent government support. Diluting these policies now, just as Indian firms begin to achieve global competitiveness, would be short-sighted.

Choice Before DoT
The public consultation on the proposed changes closes on July 3. The DoT must now decide whether it stands by the principles of Make in India and strategic autonomy, or opens a backdoor for foreign companies to dominate domestic procurement under a loosely redefined local content framework.

While the existing policy can be improved through stronger verification mechanisms, clearer definitions, and streamlined procedures, its core intent must remain intact: to support products designed, owned, and manufactured in India.

India’s future in telecom must not be built on relabelled imports and outsourced design. It must rest on Indian capabilities, Indian control, and Indian innovation.