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Budget 2013: What industry wants?

Posted: 22 Feb 2013     Print Version  Bookmark and Share

Keywords:Union Budget  electronics sector  electronic manufacturing clusters  R&D  fabless 

The Union Budget for 2013-14 will be tabled in the parliament next week. Be it the "aam-aadmi" or India Inc., everyone wants a "dream budget." However, EE Times India focused on the Indian electronics sector, which like any other sector, is eagerly awaiting some good news to come its way. We present you a compilation of "wish-lists" from the industry on what they expect from the upcoming budget.

Guruswamy Ganesh, Vice President and Country Manager, Freescale Semiconductor India

Various reports peg India share at an estimated 11 per cent in the global electronics market by 2015. The semiconductor policy 2012 was well needed effort by the government to provide an impetus for the growth of semiconductor and electronics industry in India. While, it has come too late when other Asian countries have already made a mark, but the good news is that it’s finally here.

While on one hand Government is trying to woo the investors by announcing such policies enough attentions is not being paid at the present system that results in coercive tax measures that are hurting the industry sentiment with lot of time being spent on tax litigations. As per the Directorate of Transfer Pricing, there are about 3,500 transfer pricing litigation disputes amounting to near about Rs.1,11,299 crore for 2010-11 and 2011-12. This makes India the country with third largest number of pending cases related to transfer pricing in the world, says the global consultancy E&Y. The government proposed the Advance Pricing Agreements (APA) in 2012 to provide a solution to the ongoing transfer pricing litigations. However, the outcome of this will come in 3-4 years from now and by then the total quantum of money involved in pricing litigation will increase many folds. Tax litigations at tribunal level are increasing year-on-year due to the pro-revenue tax orders passed by the various tax authorities. While, as per the Income Tax law a period of 4 years is recommended to resolve such litigations the provision only provides for 6-12 months stay on the tax demand. At the end of the requisite stay period businesses are at the mercy of the tax authorities and subject to their coercive tax collection measures. Such anomalies in the law adversely affect countries image as an investor friendly economy.

Government need to take enough efforts to position India as in the world economy by coming up with serious tax reforms including introducing fast track tribunal benches for early resolution of litigation, time limits for deciding pending cases, fair judgement and accountability.

Vijay Krishnamurthy, CFO, SmartPlay Technologies

Current growth rate is likely to slip to about 5 per cent from about 7 per cent last year and hence there is an urgent need to bring the ailing Indian economy back on tracks. No surprises that there are several expectations from the Union Budget 2013. More than fiscal measures, what is needed is to provide reassurance to businesses – whether national or international – to undertake investment in India.

More business friendly initiatives are required from the government. In the context of the ESDM sector (which in some cases are common to other sectors as well), these are:

-- Abolition of MAT for SEZ units.

-- Speedy refund of input service tax in the case of STPI units. A definite timelimit of 3 months for refund should be committed if the refund application is complete in all respects.

-- The procedural formalities for claiming weighted tax deduction for research activities for IP creation is very cumbersome and time-consuming. Firstly the approval process is centrallised in Delhi with the DSIR and thereafter, it has to go through another approval process with the CBDT. This process needs to be decentralized, at least up to a particular value of deduction with provision for inspection by the Central agencies. This will speeden and encourage the IP creation process.

-- Provide greater subsidy through budgetary support and fiscal incentives to encourage the use of solar energy, which will provide a fillip to the ESDM industry and also augment energy availability. States should also be provided a subsidy for land allotment, which is a bottleneck for solar projects. The domestic industry should be get budgetary protection through higher import duties against cheap imports of solar panels and other equipment.

-- The SEZ Scheme has become mired in regulatory bottlenecks and creation of new SEZ’s has drastically slowed down after the initial promising start. Learning from this experience, the Government should encourage the setting up of dedicated industrial parks focused on semiconductor design and manufacturing units, which will provide the supporting ecosystem for units located there, similar to the Suzhou Park in China and the Hscinchu Park in Taiwan. A subsidy should be provided to the States if the industrial parks generate a threshold level of revenues, in order to encourage the States to take the initiative in this regard.

Vinay Shenoy, Managing Director, Infineon Technologies India Pvt. Ltd

—Setup tax and duty structures to encourage Just in Time manufacturing. Give a window of say 15 days from the time of landing of components in India.

—Setup National air freight network to various Tier II and Tier III towns to make it attractive to setup manufacturing in those locations.

—Establish a few "Gold Standard" electronic manufacturing clusters that offer labour, power and logistics at international quality levels.

—The electronics industry thrives on global scale, create strong incentives for export so economies of scale can be reached earlier.

Jaswinder S Ahuja, Corporate Vice President and MD, Cadence Design Systems
Union Budget 2013-14 is bringing with it a lot of expectations especially with a major surge in Indian economy. This year the focus of the budget should be around addressing the challenges and some critical issues in ever growing areas like infrastructure, agriculture and education in India. Currently India is in that phase where it is facing the most critical challenge of crossing the 'double digit growth barrier' while it is continually growing rapidly in the world economic picture. At such a crossroad, maintaining the balance between growth and inflation is the key point to achieve an all inclusive development. Last year has seen a tremendous revival of industry, mainly manufacturing but as per the latest report released by the Indian Semiconductor Association (ISA) in partnership with Frost and Sullivan, the Semiconductor industry is rising with the trend of domestic production going down. It forecasts total Semiconductor Market grows from Rs.32,950.82 crore ($6.03 billion) in 2011 to Rs.53,005.46 crore ($9.7 billion) by 2015.

What we really need to do is to boost the domestic industry and manufacturing and for that there are some essential issues related with government policies, tax exemptions and grants, which need to be addressed in the upcoming budget.

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