Chinese Bug-bear in India's Telecom Story

China's Li Keqiang - on a woo India trip

Chinese Premier Li Keqiang may have chosen India as his first foreign destination, but for India, China remains a bug-bear.

Security issues surrounding Chinese telecom equipment remain a major concern even as Beijing signals its intention for closer ties with its neighbour, seeking greater market integration.

India is working on setting up a testing lab in Bangalore in collaboration with the Indian Institute of Science to check imported telecom gear for bugs.

India imports telecom gear worth about $10 billion annually, much of which is from Chinese firms such as ZTE, Huawei, Dongfang and Cosco. Overall, electronics are the third top import item for India.

The idea of the lab, which the department of telecom says is necessary but not enough to check bugs planted in equipment, comes from a note prepared by the National Security Council (NSC) last month. The note raised concerns over the Chinese firms’ links with the People’s Liberation Army and security establishments, and the fact that some of the firms sold the same devices to Pakistan.

New Delhi decided to act after alerts from local intelligence agencies as well as security experts from the US, Australia and the UK about the possibility of malicious bugs or malwares in telecom gear. A few years back, India had virtually banned the import of Chinese gear but relented after some domestic telecom companies contended that China-made equipment reduced costs and that bugs could come with equipment made by rival European manufacturers, too.

However, India would also like to encourage domestic manufacturing. The government has been mooting the idea of developing a “made-in-India” telecom equipment park. The idea has not got off the ground for want of takers. This is being done to stem the huge drain of forex resources every year in buying costly telecom equipment and even basic mobile sets and components from abroad.

Telecom : the new frontier

The NSC note, too, specifically calls upon the government to step up “efforts to set up manufacturing and fabrication facilities” for telecom gear, including micro-chips, through sops, cheap financing and tax breaks.

Chinese companies already have facilities in India. Most of the Chinese telecom gear makers, including Huawei and ZTE, have set up local units where value addition is done.

India’s preferential market access policy for government procurement, which the cabinet cleared in February this year, does not discriminate between local or foreign firms; it only stipulates that at least 25 per cent value addition should be done locally, which should gradually go up to 45 per cent by 2018.

Chinese firms want to take advantage of this policy. In January, the Cellular Operators Association of India forwarded a representation from Huawei Telecommunications (India), which has become a member of the telecom lobbying body, to the government requesting it to recognise Huawei as a domestic telecom manufacturer and include its name in the lists of local firms circulated by the department of telecom.

The Chinese have already shown eagerness to invest in the domestic telecom market, which is one of their largest markets overseas. Premier Li is expected to take up Chinese firms’ desire to set up industrial parks in India to feed the market locally.

However, security experts point out that this does not necessarily preclude the chances of bugs being implanted in equipment. Bugs could be planted in any key component, whether made in China or India, or even while the gear is being put in place.