New Delhi: With global telecom vendors setting up manufacturing units here, India—which feeds its booming mobile phone services market mostly with imported equipment—could turn into a big exporter of such gear in the coming years if it can simplify rules governing telecom equipment manufacturing.

The Union government has set a target of $10 billion (Rs41,000 crore) for equipment exports by 2012. To help achieve this target, an export promotion forum, under the aegis of Telecom Equipment Manufacturing Association, or Tema, has been set up.

Manufacturers such as Nokia Oyj, Motorola Inc., LM Ericsson AB and a host of smaller contract manufacturers are setting up units in so-called special economic zones (SEZs) to take advantage of tax and other fiscal incentives designed to aid exports, but a mismatch in rules still end up favouring imports of components rather than local manufacture, experts said.

A company operating in an SEZ “still pays lower taxes and levies if it imports the equipment instead of manufacturing it locally...due to issues like corporate tax”, K.V. Madhan, an associate director with audit company Ernst & Young Pvt. Ltd, said at a function organized by Tema.

Still, the world’s fastest growing telecom market presents huge opportunities, a Tema official said.

“As a legacy, we suffer from the absence of a base for the industry in India due to the continuation of an inverted duty structure that favoured imports over manufacture. But the reforms introduced in 2006 will help us take advantage of the fact that this is the largest market for such equipment in the world and local manufacturing is required to cater to the huge demand,” said Tema chairman N.K. Goyal.

Communications and information technology minister Andimuthu Raja, who also spoke at the Tema function, said to achieve the projected target of 650 million phone customers in India by 2012, the country would need equipment worth $84 billion (Rs3.44 trillion).

PTI contributed to this story