Indian security agencies want Chinese suppliers banned from providing gear for networks in all but eight of the nation's telecom circles.
As a compromise, the Department of Telecom (DoT) has proposed that foreign firms with contracts to work on Indian networks must agree to monitoring by Indian security agencies and obtain a clearance from the Home Ministry.
The Home Ministry, which fears vendors infiltrating telecom networks via backdoors or Trojan horses, is also investigating whether SIM cards can be manufactured locally.
The proposed ban on Chinese firms will apply to all but eight states, but this too has been opposed by operators benefiting from cheap Chinese prices. A decision has been deferred until the DoT has further consulted with security officials.
Reliance recently signed a deal with Huawei over the management of its GSM network, while Loop Telecom has contracted ZTE for its pan-India GSM rollout.
Security fears over the two Chinese suppliers emerged two months ago when state-owned BSNL was not allowed to contract Huawei for rollouts in sensitive states bordering China. It was ordered to conduct a thorough security audit before any networks go live.
The DoT also wants all operators to submit network and disaster recovery management plans for approval.
The government plans to introduce any new rulings on security guidelines within four weeks, the Times said.