Financial Daily from THE HINDU group of publications
Friday, Mar 01, 2002
`Section 72A should spur growth in telecom sector'
NEW DELHI, Feb. 28
THE telecom industry has by and large welcomed Mr. Yashwant Sinha's Budget recommendations even though it "lacked punchy statements and rhetoric".
According to Mr Sunil Mittal, Chairman and Managing Director, Bharti Enterprises, the Budget was compensated by strong delivery in a number of areas. "I hope that the FII investment to be allowed beyond the sectoral cap should definitely apply to the telecom sector, which needs large doses of investment to provide deeper penetration of telephony both in the mobile and fixed line segment," he said.
Mr Mittal noted that there is little Indian investment available for the telecom sector, therefore either the sectoral cap could have been raised or that FII investment beyond the sectoral cap must be allowed.
He also said that by getting telecom under the definition of "industrial undertaking" under section 72A, mergers and acquisitions in the telecom sector could now be more efficient. He also welcomed the waiver of CVD on mobile phones.
Mr Pranav Roach, President, Hughes Network Systems, hoped that FII and FDI investments for telecom would be delinked to help boost investment in this sector. "The Finance Minister has announced that except for specified sectors, FDI and FII investments will be delinked. Though it has not been specified whether today's announcements recommend any change in that policy, we do hope it does," he said.
The basic telecom operators, who have been complaining of partiality towards cellular operators, also have reason to cheer in this Budget. According to Mr Rajiv Mehrotra, President, Association of Basic Telecom Operators, and Chairman, Shyam Telecom Ltd, "For the last five years, the rate of customs duty on imported cellular equipment was much lower than that for basic services. In this Budget, the Finance Minister has rationalised this duty and brought `basic' and `cellular' on an equal platform. This will boost the basic telephony industry, which has not happened in the past four years."
He, however, expressed disappointment that Mr Sinha had failed to look into special excise and custom relief for the equipment for the rural short distance charging areas. This was essential because even though the tele-density in the urban areas is adequate, there is not enough in the tehsil and villages of India, he said.
Mr Arun Seth, Managing Director, BT Worldwide (India) Ltd, expressed surprise that at a time when the IT industry is going through a period of slow growth, the Government had proposed a reduction of tax exemption for software exports from 100 per cent to 90 per cent under section 10(a) and 10(b) even though this is applicable for the assessment year 2003-04. This will impact the profitability of all software companies.
Mr Shantanu Rudra, Chief Financial Officer, Mahindra British Telecom, said the IT industry was expecting support at a point of time when they need to gear up for success in an increasingly competitive environment. The Budget recommendations have been disappointing because there are no further incentives given for exports. On the contrary, there has been a partial withdrawal of tax benefits, he said.
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