The Government of India has had under consideration the question of reviewing the existing policy for manufacture, import and export of computers and computer-based systems. As a first step in that direction, the following revisions are made to the existing policy and procedures for manufacture, import and export of computers and computer based systems.

The revision is broadly aimed at accomplishing the following basic objectives:

1. Enable manufacture in the country, of computers based on the latest technology, at prices comparable with international levels and progressively increase indigenisation consistent with economic viability.
2. Simplify existing procedures to enable users to obtain computers of their requirements either from indigenous sources or from overseas sources mainly regulated through fiscal measures.
3. Promote appropriate applications of computers, which are of development catalysing nature with due regard for long term benefit of computerisation to the country as a whole.

The revised policy and procedures given below pertain to computers and their associated sub-systems like peripherals and software and computer-based systems in which the computer is a major sub-system.

A. Manufacture

1. All-regulatory measures concerning manufacture like scrutiny of applications for letters of intent, industrial licences, foreign collaboration, Phased Manufacturing Programmes (PMP) and CG & Raw-material imports, will be exercised by the existing Inter-Ministerial Standing Committee (IMSC) under the Department of Electronics (DoE) which has been designated for this extended purpose. The Computer, Computer Communication and Instrumentation (CCI) Wing of the Department of Electronics will continue to be the Secretariat for this Committee. All applications should also be made directly to the CCI-Wing of DoE.
2. Manufacture of micro/mini computers including personal computers, micro computers and VLSI-based minicomputers including those based in 32-bit chips equivalent (excluding 32 and higher bit super mini/miniframe architecture) will be permitted to any Indian company, i.e. wholly owned Indian companies and companies having foreign equity not exceeding forty per cent in the private or public sector.
3. The manufacture of CPU of mainframes and super mini-computers will be reserved for a period of two years for manufacture by the public sector. The precise definition of mainframe range of computers and super mini-computers will be laid down from time to time by DoE.
4. A new classification "Computer and Computer-based Systems" will be introduced for the items covered under this policy. This new classification will be entitled for investment allowance and other incentives available to new industry. Software development and manufacture is classified as "Industries". The industry will be exempted from the purview of the location policy etc., in view of its specialised high technology nature.
5. The existing capacity restrictions on the organised sector relating total production value of Rs 2 crore per year and of five systems per year below Rs. 3 lakh will be deleted. Manufacture of micro and mini-computer systems will be permitted without any restriction on capacity except a minimum requirement of a viable capacity and a phased manufacturing programme (PMP), which will result in manufacture with as high indigenisation as is economically viable. The PMP for progressive realisation of economically viable indigenisation as well as progressive updating of technology would be ensured by the Department of Electronics through the IMSC.
6. For companies supplying CPUs, peripherals and other sub-systems on original equipment manufacture (OEM) basis, liberal import of know-how shall be permitted and the excise duty will be kept at relatively low level with appropriate set-off.
7. A price purchase preference to public sector enterprises for Government and public sector purchase of computers would be available as per prevailing Government policies applicable to this sector.
8. For Research and Development units recognised by DoE, import of designs and drawings will be allowed on OGL.
9. Adequately Liberal import of designs and drawings, system software and utility software will be initially permitted for manufacture and later regulated by PMP and raw material clearance All applications for such imports should be sent to the CCI-Wing of Department of Electronics and will be examined by the IMSC.
10. The Department of Electronics through IMSC will take appropriate measures for the promotion of standardisation around certain LSI/VLSI chips and peripherals with due regard to indigenously made products.
11. Import of software, where allowed, shall be preferably in the form of source code. Special encouragement will be given to central purchase of source code of software and distribution within the country.
12. To be able to manufacture the final product at internationally competitive prices, it is necessary that components should be made available to manufactures at as near international prices as possible. Suitable revision of the duty structure on components will be recommended by the Department of Electronics from time to time based on the following principles; components which are not being manufactured in the country and which are not expected to be manufactured in the near future, will be identified and permitted to be imported at very low levels of import duty. For other components, which are manufactured in the country or can be manufactured within a short period, liberal manufacturing facilities will be allowed to be set up taking advantage of the economics of scale. Such components will be protected from imports with sufficiently high protective duty. Such duty structures will be recommended from time to time by the Department of Electronics to the Ministry of Finance.
13. The procedure for import of raw materials and components for actual use of the manufacture would be simplified and expedited. Up to a specified time limit after the registration of import application with the Department of Electronics, the clearance of raw materials will be governed by the IMSC, which shall give a decision within two months of the registration of the application.
14. Computers manufactured in the country will be protected from imports through fiscal measures like high protective import duty levels recommended by DoE through the IMSC from time to time. Recommendations will be made to the Ministry of Finance to progressively reduce the import duties in order to encourage reductions in the cost of indigenous manufacture.
15. Procedures will be evolved by DoE through IMSC for making indigenous manufacturers competitive with respect to imports by educational institutions, R&D organizations, defence establishments and other categories of organizations for which direct import of computers do not attract import duty.
16. A letter of approval will be canceled if the party DoEs not take effective steps within a period stipulated by the DoE through IMSC.

 

17. All local manufacturers would be encouraged to provide capability for bilingual (Hindi and English) input-output facility in the computers manufactured by them from 1986 onwards to meet the demand from those who are required to use Hindi under the Official Languages Act.
18. Promotion of applications of computers in any social or economic sector will be carried out by encouraging setting up of System Engineering Companies in the public and private sector without undue constraint as long as the computers and computer sub- systems are brought from indigenous sources are available.
19. Within the ambit of the above mentioned policy framework all details of procedures will be laid down by the DoE through the IMSC from time to time. The DoE through the IMSC is also empowered to steer the implementation and interpret the policies and procedures from time to time.

B. Import

1. The Inter-ministerial Standing Committee (IMSC) under the DoE will examine the applications for import of computers including import for facilitating software exports. For this latter purpose, IMSC will also have a representative of Commerce Ministry as a member. All applications should be directly sent to the CCI-Wing of the DoE.
2. Import of computers, computer-based systems and computer sub-systems like peripherals for integrating with an imported CPU will be permitted only to actual end users.
3. With liberalisation of domestic manufacture, domestic computers will be enabled progressively to compete with imported computers on which a sufficiently high protective import duty will be levied.

Actual users will be permitted to import standardised EDP systems as complete systems costing less than Rs 10 lakh c.i.f. on the basis of liberal procedures by paying a sufficiently high protective duty. This will become effective on 1 April 1985 when the duty rate will also be announced.

The Department of Electronics will recommend progressively lower levels of duty on such imports from time to time in order to make local manufacture progressively more competitive with respect to equivalent imported systems.

4. For import of computers and predominantly computer based systems costing more than Rs. 10 lakh c.i.f., the actual user would be required to apply to the Department of Electronics who would examine the application from the point of desirability of applications, necessity and indigenous availability.

If the use of the computer is desirable and is not available indigenously, the user will be permitted to import at a low level of duty from a standardised list, which would be announced periodically by the Department of Electronics. This list would contain between 12 and 18 models and will be periodically updated. The standardised List will be maintained to enable the advantage of bulk purchase and facilitate maintenance and exchange of software. To take advantage of the substantial reduction of foreign exchange for bulk purchase, the Department of Electronics would negotiate with the vendors of the models in the standardised list and execute a rate contract where possible, for a fixed duration of time.

5. Where import of computers or computer sub-systems are needed as part of a justified proprietary purchase or as any special purpose computer not available from indigenous sources, clearance of the Department of Electronics is necessary. A low level of duty would apply.
6. After the clearance has been given by the Department of Electronics for purchase under (4) or (5) above, the user would be free to negotiate directly and take all further procurement action.
7. If for some justifiable special reason, the user wishes to avail of DoE's assistance in the actual procurement of the computer, they may approach DoE for the purpose and come to a proper understanding with DoE on how the computer is to be procured.
8. Import of application software not available commercially in the country would be permitted to actual users with low duty levels on a case to case clearance by DoE. The actual user may avail of OGL facility with a sufficiently high protective import duty for any software after informing, in writing, the Department of Electronics. In addition, where possible, DoE would arrange for centralised import of software for distribution to manufacturers and users on a no profit no loss basis.
9. Maintenance of imported computers and predominantly computer based systems imported will be done either in-house by the actual user or by any other agency designated by DoE. The DoE designated agency of CMC or the user responsible for the maintenance of imported computer systems, will be permitted to import spares, tools test equipment and software support for warranty maintenance on the basis of CCF licence if so required.
10. All import applications will be processed by the DoE through IMSC within two months of the registration of applications in the CCI Wing of DoE in complete forms as per proforma notified from time to time.
11. All actual users who have imported computers or purchased indigenous ones who are required to use Hindi under the Official Languages Act, will be encouraged to augment their computing facilities for input-output processing of data in Devanagari in addition to English within two years from the date of this Notification, whichever is earlier.
12. Within the ambit of the above mentioned policy framework, all details of procedures will be laid down by the DoE though the IMSC is also empowered to steer the implementation and interpret the policies and procedures from time to time.

C. Software Development and Export

1. DoE will set up an extensive research, design and development facility. This organisation will be given special encouragement to not only develop know-how through indigenous efforts, but also import know-how on a centralised basis where found advantageous and absorb as well as improve on this know-how on a continuous basis. This organization would cumulate a standardised menu of know-how for making them available to interested users and entrepreneurs.
2. DoE will set up a Software Development Promotion Agency to give an impetus to the growth of manpower intensive software development efforts for both exports and local requirements including import substitution as an integrated effort.
3. Effective software export promotion on a sustained basis can be effective in the long run only if it is planned as a part of an overall software promotion scheme covering both export and internal requirements including import substitution. Also, planning for software development is integrally connected with the plan for hardware development and system engineering. The Software Export Promotion Policy of January 1982 will continue to apply hut will include the following modifications:

1. The general structure of 100 per cent export schemes applied as hitherto
2. Categories 'A' and '8' schemes will be modified as outlined in the Import-Export Policy, April 1984-March 1985, Volume 1, Chapter 5, para 22.
3. Category 'C' in the existing Software Export Scheme will continue in its present form except for the following additional pro- visions:

(a) The following two options will be available to the exporter:

·(i) either complete duty exemption with custom bonding.

(ii) or, duty payment without custom bonding.

(b) 50 per cent of export earning will be available to the exporter on the same basis as for categories 'A' and 'B'.

(c) All facilities and incentives available under the 100 per cent software export scheme will be available to Category 'C' scheme also.

4. Software exports shall also be promoted through satellite based data links with overseas computers. This will be carried out by DoE in coordination with the Ministry of Communication/P &T Department.
5. The National Computer Network, INDONET, will be made available predominantly to promote software export from public and private sector enterprises with special consideration for software houses in the small-scale sector.
6. For import of computers under any of the software export schemes, a special low duty window will be provided.

D. Implementation

1. All the revised policies and procedures outlined above come into effect immediately on the date of issue of this Press Note.
2. Import of computers on the basis outlined in 8(3) above will come into force with the announcement of the Import and Export Policy for the period April 1985 to March 1986.
3. Notifications concerning specific duty levels applicable until further notice from Ministry of Finance will be issued by them separately.
4. All cases governed by policies and procedures outlined above which are still awaiting notifications in various Government Departments on specific issues, will be processed by DoE in the interim as per present policies and procedures.