New Delhi: India has stopped giving clearances to telecom equipment imported from China after the ministry of home affairs and the Prime Minister’s Office issued advisories expressing security concerns.
“They (home ministry) had issued an advisory saying that there were security concerns, so we have stopped giving any approvals to equipment that is being imported from China, temporarily,” a senior department of telecommunications (DoT) official said, asking for anonymity due to the sensitivity of the issue.
The department was also asked, on Friday, for its views on an overall policy decision regarding a ban on equipment originating from China, another DoT official said, also requesting anonymity.
The move comes amid verbal skirmishes between the two nations over border territories, besides other irritants in the relationship. India had last year imposed anti-dumping duties on equipment coming from Chinese vendors, saying the products were being sold at below market prices.
“The Chinese companies can go to the WTO (World Trade Organization) protesting restrictive trade practices, but over and above that, it is well within the sovereign right of India to put in place such a ban citing security concerns,” said a regulatory expert working with some telecom operators and who has contributed to a number of studies on the sector by the government.
DoT had issued a notification earlier saying that all equipment from China needed the home ministry’s approval and if the government did not respond on the clearances within 30 days, the operator could consider the equipment cleared.
“Chinese equipment makers like ZTE and Huawei have been offering very competitive prices to India’s telecom service providers as well as long-term payment options, which cannot be matched by European counterparts Ericsson and Nokia Siemens,” said a telecom company official on condition of anonymity. “Not only will the cost go up, but also the time to roll out our services will get longer if this ban remains. This may also lead the other vendors to hike their prices” amid a tariff war in the Indian market.
“They have not given clearance to any equipment to at least four of the operators that buy from Chinese vendors,” an official with a telecom operator added.
At least 10% of ZTE’s revenue came from India, its largest market outside China. ZTE’s first quarter net profit rose 39.7% over a year ago to 109.9 million yuan (Rs72 crore).
Huawei’s 2009 profit rose to 18.3 billion yuan from 7.85 billion in 2008, on sales of 149.1 billion yuan.
India is the fastest growing telecom market and is second to China in the number of total subscribers. India added more than 20 million new connections in March, taking the total to 621.28 million, including 584.38 million mobile connections.
Huawei India said it had not received any official communication. The firm “is currently evaluating and understanding the latest development and seeking clarifications from the concerned authorities,” it said in a release. “Huawei is being used in telecom operators worldwide, including 45 of the top 50 global telecom operators in over 120 countries.”
The government informally asked telecom operators recently to avoid Chinese equipment. It also dissuaded Bharat Sanchar Nigam Ltd, a state-owned telecom service provider, from awarding any part of a 93-million GSM line tender to Huawei in zones with international borders.
In December, a ban on Chinese-made handsets without IMEI (international mobile equipment identity) numbers came into effect, disconnecting some 20 million connections. However, India has seen a number of “local” handset brands mushroom in the past two years, selling handsets made in factories based in China and Taiwan.
Ross Gan, a Huawei spokesman, said in December that the closely held Chinese firm had $1.7 billion (Rs7,548 crore today) in contract sales from India in 2008.
ZTE, China’s second biggest phone equipment maker, fell 4.2% to HK$28.30 (Rs161) in Hong Kong, after dropping as much as 9.9% earlier, after the Financial Times reported India blocked phone carriers from buying gear from Chinese vendors, Bloomberg reported.
In another alleged aggravation, hackers traced back to China infiltrated computers, including those of India’s government, underscoring the growing threat of cyber attacks, according to an April report by Information Warfare Monitor, a research group associated with the University of Toronto. The Indian government had said it was investigating the matter, while China’s foreign ministry said it doesn’t condone Internet attacks.
China and India, which fought a war in 1962, also vie for global energy resources. India’s trade deficit with China widened more than 40% to $15.8 billion in 2009.
Senior Indian security officials also said they were not aware of any ban on Chinese equipment, Reuters reported.
“I’m not aware of any such blanket ban. In fact, Chinese equipment is coming in,” G.K. Pillai, India’s home secretary, said.
“We want stringent security in place so the country’s security is not compromised. But we have not heard of any blanket ban on Chinese equipment,” said U.K. Bansal, India’s internal security chief.
Bloomberg and Reuters contributed to this story.