Telecom Budget: Inclusion of tower infrastructure in viability gap funding a positive move

Telecom Lead India: Since the Union Budget 2012-13
did not offer much offer for the telecom industry, National Telecom Policy may
offer more. KPMG said inclusion of telecom tower infrastructure in the
viability gap funding and incentives for solar power is a positive move towards
strengthening of rural telecom infrastructure.



Jaideep Ghosh, partner, KPMG Advisory on telecom sector


The Union Budget 2012 has a neutral to mildly positive
impact on the Indian telecom sector. Overall emphasis on strengthening the
rural economy and inclusive growth will have a positive trickle down impact on
rural penetration of telecom services. Inclusion of telecom tower
infrastructure in the viability gap funding and incentives for solar power is a
positive move towards strengthening of rural telecom infrastructure; however
considering that impact of USO to enhance rural tele-density has been fairly limited
so far, the real impact of the measures announced will be keenly observed.
Exemption of customs duty on parts of mobile phone memory cards is unlikely to
result in a significant reduction in device prices and penetration, and likely
to have a neutral impact on device penetration. There were no major
announcements on broadband services, which the industry was expecting. However
many of these areas are likely to be addressed by the forthcoming National
Telecom Policy.


Hanuman Tripathi, group managing director, Infrasoft


The Finance Minister has announced no benefits for
corporates. With global downturn, IT sector should have been given some
benefits so as to boost the segment. The increase of service tax from 10 per
cent currently to 12 per cent will cause further burden. Delay in GST
implementation is merely increasing problems. It’s nice to see though that the
budget is friendly to the middle class to some extent with


* benefit of Rs. 22,000 on taxes on an income of Rs.
10 lakhs. 

* Interest income from banks tax free up to Rs.

* Income Tax deduction of 50 per cent on investments
of up to Rs. 50,000 in saving scheme named after Rajiv Gandhi.

While the economy is not growing at the proposed pace and
global economies are not in good shape raising continuously the cost of living
by hike in purchases of retail & food items, restaurants, travel etc is
going to only make life difficult for everybody especially for the middle
income segment. There is a commitment of government to IT enable several
sectors like LPG distribution, payments for government schemes and continued
investments in Aadhar (UID) which is heartening to note as it will create more
projects in domestic IT business. All in all, the relevance of doing Annual
Budgeting exercise by putting so much of government focus & expenditure is
increasingly getting lost as no substantial landmark changes have come forth in
budgets for years now; something that will boost corporate performance or bring
prices down in the country.


Satya Prabhar, CEO and founder,

Overall, the budget gives a feeling of Brick-and-mortar
sensitivity in an era where subsidies in technology infrastructure is crucial
to growth. Absence of specific subsidies in cost of Internet access a critical
concern. This is a key growth requirement, considering the fact that India is
amongst the weakest in Internet penetration. We Hope that the PPP in
infrastructure as a part of the 12th 5-year plan will give a fillip to
technology/telecom infra investments.”

Ashish Hemrajani, founder and CEO, Bigtree

The service tax exemption on the entertainment industry
is a very encouraging step. It would propel the industry towards bigger and
better things. This move can also be viewed as a way to offer some respite to
the previously challenging situation the industry faced due to heavy taxation.

Minakshi Batra, director India, IDA Ireland


India’s economic growth was marred last year with slower
recovery due to deceleration in industrial growth as well as external factors
like euro debt crisis and political turmoil in Middle East. Against this
context, the Union Budget presented by the Finance Minister today was realistic
in nature aimed towards bringing the increasing fiscal deficit under control,
ensure fiscal discipline and boosting the government’s revenues. 


The budget focuses on high growth sectors such as capital
markets, infrastructure and agriculture Reduction of custom duty for equipment
for expansion or setting up of fertilizer projects and better agricultural
credit will catalyze the growth in food and agricultural sector. The investment
in infrastructure is expected to go up to 50 lakh crore, with half of this,
expected to come from private sector. The first infrastructure debt fund
apportioned Rs 8000 crore will also augur well from an infrastructure industry


In terms of tax reforms, the proposals for 2012-13
mark progress in the direction of movement towards DTC and GST which will
bring about uniformity in taxation. The cascading effect of dividend
distribution tax has been removed; benefitting Indian MNC with operations in
other parts of the world. Over all, the Union Budget for 2010-2011 is quite a
balanced one and is a step in the right direction.

Vikram Doshi, tax partner, KPMG

At present, companies engaged in certain businesses are
eligible for a tax deduction of 200 percent on certain expenditure incurred by
them on in-house research and development facility. This deduction was
slated to expire on 31 March 2012. It is proposed in the Union Budget 2012
to extend this deduction by another period of 5 years. The industry had
demanded this benefit given that innovation has become an imperative in today’s
economy without which the industry will not remain competitive. This is a
welcome move especially given that implementation of Direct Taxes Code is now
delayed. The above proposals dovetail with government objective of
ensuring that R&D is given enough emphasis given India’s innovation
standing vis-à-vis the rest of the world.

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