The Indian government has extended the period after the state-run telecommunications companies need to compulsorily provide nearly 30% of their orders to ITI Ltd. by two more years, ensuring constant revenue for the ailing telecom equipment maker.
ITI, once India’s sole telecom equipment maker, has been sustaining mainly on contracts from Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. as companies such as China’s Huawei Technologies Co. and France’s Alcatel-Lucent captured the market with latest technology and low-cost products.
As per the reservation rule, BSNL and MTNL have to give 30% of their orders to state-run ITI. These account for 70% of ITI’s revenue.
As per the Government’s statement, ITI had sought a three-year extension of the quota policy, which expired on Sept. 20. The reservation period has been extended starting Sept. 21 because in today’s highly competitive environment, it is very difficult for ITI to survive on its own without the benefit of the quota.
ITI’s weak financial health has provoked the government to take several measures for reviving it in the past. The company has also asked for an additional money support from the government to upgrade infrastructure at its manufacturing plants.
According to the statement, the reservation rules also require BSNL and MTNL to give 70% advance payment against the orders placed with ITI, so that ITI does not face the problem of working capital for the execution of the orders.
BSNL offers telecom services in 20 of the country’s 22 service areas and is in the process of expanding its 2G and 3G mobile services, while MTNL operates in the other two service areas of Delhi and Mumbai.
The statement also revealed that the extension of the quota policy would be applicable for products manufactured by ITI and on turnkey projects, including network rollout.