Indirect taxes and duties increase the cost of manufactured products in India by about 40 per cent, as compared to an international figure of about 15 per cent.

The telecom industry in India, therefore, is asking the government to bring about major changes in areas like tax structure and Exim Policy, besides approval of 'National Electronics / IT Hardware Manufacturing Policy', to ensure sustainability for domestic players.

"By 2007, there will be a demand for 1,60,000 crore (1,600 billion) telecom equipments in India. During the same time, the demand for telephones in India will also increase to 200 million from the current 85 million. To meet this demand, the government needs to modify the tax structures to benefit the domestic industry," N K Goyal, chairman of Telecom Equipment Manufacturers Association of India, said.

Tema is officially recognised by the government of India as the national apex body representing telecom equipment manufacturers. It has more than 125 member companies and covers about 80 per cent of Indian telecom manufacturing companies.

"Domestic manufacturers have to face the brunt of competition from global players because while finished telecom goods like cell phones carry only five per cent duty, there is 20 per cent duty on components used for manufacturing them. This apart, there is sales tax and excise duty on locally manufactured products also, leading to a high cost of production of telecom products for Indian players vis-à-vis international players," Goyal said.

Minister for information technology and communications, Dayanidhi Maran in a teleconference, assured the delegates at the e-Hardware summit in Hyderabad that the government would see that a level playing field is provided to domestic players.

Goyal, however, said, "Two years back also a draft paper on electronics hardware policy was made. But it has not been approved so far."

The draft paper on 'National Electronics / IT Hardware Manufacturing Policy' covers issues related to tariff policy, Exim policy, upgradation of local infrastructure, reduction in transaction time, inviting large electronic manufacturing service companies to set up operations in India, amending labour laws, enhanced rate of depreciation and so on. It is, at present, awaiting approval for the second part of the draft paper from the finance ministry.