Thursday, July 10, 2014: The time has come when we will get to know what Narendra Modi led government has planned for the growth of the country. Union Budget 2014 is all set to be unveiled. Here’s what the Indian electronics and IT industries expect from the upcoming budget.
M N Vidyashankar, president, India Electronics & Semiconductor Association
India is poised to become the next electronics manufacturing hub and we seek government’s support to help us taking the country to the next level.
IESA believes that the electronics industry can create an ecosystem in India, including High Tech manufacturing of Electronics subsystems, Electronics Manufacturing Clusters, Semiconductor fabs and ATMP Units, which can provide employment to 27 million people in the next 10 years. We believe India is moving in the right direction and appreciate the government’s initiatives to enable India as the manufacturing destination with continued focus on building more greenfield and brownfield electronics manufacturing clusters and incubation centres to create the ecosystem and promote the idea of entrepreneurship and innovation.
The present duty structure is a roadblock for the Indian manufacturing companies where components used to make finished electronic products attract Basic Customs Duty (BCD), but finished products do not. This makes it unviable to manufacture these products in India.
There is a high requirement for a Deemed Export status for electronic and semiconductor sector to address disabilities and have preference for local value added manufactured products. A faster approval mechanism of Electronic Development Fund with greater incentivisation to R&D and extended support of the government to the companies who have shown willingness to help us in creating the ESDM ecosystem in India would be welcome.
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Ajay Goel, member, Indian Solar Manufacturers Association and CEO, Tata power Solar
The Government has a plethora of visionary policies for the Indian solar industry, that either need to see the light of day in terms of timely execution or lack streamlined funding for existing programs. Our expectations are high, given the current government’s focus towards renewable energy. While the list is fairly long, the following three areas need immediate attention:
Streamline funding of MNRE programs: While there is an attractive subsidy available on paper, slow and haphazard disbursement of these funds severely impacts the cash flow of installers & manufacturers. In many instances, these funds have not been disbursed for more than a year. Unless funds are made available on time and in a structured way, demand will not rejuvenate and market will continue to either be stagnant or even compress. Manufacturers & Installers need the confidence that they will recover their cost, for them to commit to more in the future.
Uniformity in taxes and duties: There is an urgent need to review taxes and duties to encourage a more level playing field for Indian solar manufacturers. Indian solar modules, manufacturing of which attracts significantly high levels of taxes & duties, have to compete with highly subsidized imported modules. Further, while there is zero duty on imported modules, imported raw material & components needed to manufacture these modules attract duties. This is a gross inconsistency in taxation and duty structure and needs immediate addressing. Removal and streamlining of these taxes and duties will not only boost domestic manufacturing, but it will also help in reducing the cost of solar power.
Financing support Solar energy has the potential to alleviate the pressure on forex by acting as a hedge against coal, oil and gas imports. But for the industry to grow to its true potential, it needs strong financing support, which is completely missing. Availability of good and competitive financing support will alleviate the impact of high initial capital investment. If solar has to grow to its true potential, there is an urgent need for institutions to make it a priority sector for lending.
Veerasundar Veluswamy, EVP & Chief Financial Officer, CSS Corp
According to me, the new government need to focus on the following for the current fiscal:
Minimum Alternate Tax (MAT)
The rate for Minimum Alternative Tax (MAT) has steadily increased over the years (7.5% to 18.5% including surcharge & cess ). We are expecting removal of MAT for SEZ’s, 10A entities. As promised the entities should have tax exemption or the MAT rates should be reduced to 10% to minimize burden on corporate sector investments which are made based on assurance by Government
Advance rulings:
I wish the domestic transactions should also be brought under the scope of Advance ruling, just as the overseas transactions to provide better clarity regarding the applicability of taxes, thereby the process become more robust and time bound
Settlement of tax disputes:
Under the present structure it takes about 12-15 years to resolve a tax dispute of corporate sectors. The new government should set up an option to ease the process, mainly for negotiation and tax settlements.
This process would free up considerable bandwidth from the tax enforcement machinery & overstretched judicial system. I am sure this can save considerable resources spent by Corporate in defending their tax litigations
Streamlining of tax rates:
My budget wish list includes the reframing the tax rates. Currently the domestic companies are levied a tax rate of 34 per cent and foreign companies close to 43%. Government must take steps to align India’s direct tax rates in line with those in ASEAN in the next five years making India internationally competitive.
Transfer Pricing – Notify Safe harbour provisions
The provisions have been introduced in the Act with retrospective effect from 1 April, 2009, empowering the CBDT to notify safe harbour rules for determination of arms length price. Although introduction of safe harbour rules is a welcome step, which brings certainty and reduces tax litigation, CBDT should revisit the transfer pricing adjustments as no rules have been prescribed by the CBDT so far.
Shantanu Das Gupta, vice president- corporate affairs & strategy, Asia South, Whirlpool of India
The industry applauds the government’s move to hold excise duties where they are. We would also like to see:
1. A clear implementation roadmap for GST
2. Policies that bolster domestic manufacturing and develop the local supply base of materials and components.
3. Removal of aberrations in import duties. Parts and components imported from FTA countries still attract duty, while entire products can be brought in at zero duty! This ought to be corrected to ensure a level playing field for all.
Sanjeev Ranjan, Managing Director, International Copper Association India (ICAI)
The biggest challenge the Finance minister will face in his budget preparation will be on how to balance Growth vs Inflation and at the same time help in creating new jobs especially in the manufacturing sector. Currently manufacturing contributes just 16 percent to India’s GDP which needs to be at least 25 per cent if we are to address 12 million people joining the workforce. In the face of rising oil prices, poor monsoon and CPI already nearing double digits, the challenges become even more testing. Considering that the government has taken over mid-way in the year, we will look more from directional point of view on what policy interventions are being planned in short to medium term.
We believe, clear transparent policies and their implementation is a must, if any investment cycle is to be started in any segment. Policies on FDI investment in real estate, infrastructure including power sector with well-planned initiatives to help restart stalled projects particularly in the Power, Coal, Roads, Railways will be of great help to the growth of economy.
We expect government to announce fiscal incentives for new capex where we can see encouraging participation from sovereign debt funds of countries like – Japan, China, Germany, France, Saudi Arabia. This will do well to balance the shortfall in $1 trillion investment plan which the 12th five year plan talks about for infrastructure development.
Partha Iyengar, country manager, Gartner Research, India
From an IT industry perspective (and the overall industry as well), the budget needs to address the following key areas:
Infrastructure creation
The IT industry has reached a point where infrastructure bottlenecks at a city and country level directly impact business growth. The industry has grown to a point where it is unable to create its own enabling infrastructure (Power, roads, connectivity, telecom quality, et al), which it has done in the past!
An Innovation enabling environment
This involves creating the financial, IP protection, VC and capital markets capabilities and ecosystem to promote innovation activity in India
Streamlined business environment
The beginnings need to be made to create a high performing business environment with clear, unambiguous tax laws, legal framework, transparency and speedy resolution of conflicts. Some of these are huge initiatives (e.g. streamlining the legal resolution process), but a strong statement of intent needs to be made in the first budget of the Modi government.
Project Indian clout globally for industry
This is not so much a budget issue as another statement of intent, where the government indicates it’s willingness to ‘go to bat’ for the IT industry and industries overall when there are global direct or indirect trade barriers being erected (e.g. the H1-B issue in the US). The Indian government should not be apologetic about retaliating at a country to country level if unfair trade practices hinder Indian IT and business interests.
Anurag Garg, Vice President-Solar Business, Schneider Electric India
With the NDA Government preparing to present the Budget, clean forms of power such as solar energy need adequate outlays, tax holidays and other positive policy incentives. These will then require speedy implementation to bring about on-ground changes. We also hope a macro-economic framework will be put in place, linked to global renewable policies that permit solar equipment manufacturers a level-playing field, while simultaneously allowing the sector to become investor friendly.
A strong policy framework should give the utilities the position whereby they can offer to supply solar deployment or lease schemes to their consumers. Rather than being passive recipients of power, the utilities can play a critical role in the rooftop solar value chain. Moreover, regulators should make allowance for robust pricing of network upgrades, including smarter DMS, and factor them into their tariff plans.
Greater harmonisation in the policies of the Centre and the States is also imperative, based upon the best practices of different policies. This will ensure that no stakeholder works at cross purposes and will thereby foster a stable policy regimen across India that attracts more investments and greater interest from developers. All budgetary policies should also consider the long-haul interest of investors and suppliers that underpin the long-term viability of projects, instead of incentives that promote short-term interests.
