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Industry’s take on Budget, 2018

Broadband India Forum (BIF) has congratulated the Hon’ble Finance Minister in a recent release for effectively addressing most of the key economic challenges and priorities before the nation in the Union Budget 2018-19.

For the telecom sector, the announcements have been unique and sports commendable actions. Decision to set up 500,000 Public WiFi Hotspots is a huge step in enhancing reach and availability of broadband and will help in realising vision of ‘Digital India’.

Government’s announcement to offer support for creating a test bed for 5G at IIT Madras, signalling the intent and commitment to harness the huge benefits from the Fifth Generation Technology that would provide ubiquitous ultra-broadband and connectivity. While announcing these developmental actions, Government has also kept a firm eye on the importance of Optic Fibre Cable for carrying data and declared sanction of Rs 10,000 crores for BharatNet project, the same amount as last year.

The sector would have benefited from a little more attention to towards reducing the enormous burden of duties & levies on telecom players. A key recommendation of the industry to reduce the GST on telecom service from the anomalous level of 18% to maximum 12%, in line with mobile phones was not addressed. Why this inconsistency? The latter cannot exist without the former service and the existing situation is anomalous and adversely impacting the end-user as well as the required rapid proliferation of broadband connectivity.

Further, hiking the import duties on finished mobile phones from 15% to 20% will adversely impact the industry. This action has apparently arisen from the expectation that this would boost Make in India. However, a simple examination of data on imports and exports and on value addition in Indian ‘manufacture’ clearly reveals that even the here-to-fore duty of 15% has been adversely impacting the cause of genuine Indian manufacture in the sense that true value addition remains very low at about 10% and only screwdriver technology of assembly of imported components flourishes.

In this process, the import bill for mobile phone components has risen from $1400 million in 2014 to $6800 million in 2016 to $9200 million in 2017 to expected $11,400 million in 2018, – a whopping 8-fold or 800% increase in 4 years. This, then, is surely not helping the cause of ‘Make in India’ and, on the contrary, is sharply inflating the import bill of the country. This has happened because the Government has missed adhering to its own Phased Manufacturing Plan (PMP) that had envisaged imposition of import duty on Printed Circuit Boards (PCBs) for mobile handsets which constitute 50% of the Bill of Materials (BOM). Not adhering to the PMP has now disadvantaged those local manufacturers who have made sizable investments to increase value addition, in the expectation that imported PCBs will attract duty from April 2018.

The Budget 2018 in toto is being considered as a balanced one as Government seeks to provide enhanced inclusive prosperity and foster growth. Looking at the positive outlook, the telecom sector expects more forward looking and positive policies from the NTP 2018.

Other Buget Reactions from the Industry:
Gagan Rai, Managing Director & CEO, NSDL e-Governance Infrastructure Limited
This is a budget for the masses due to several reasons. Firstly, 10 crore families will receive health insurance cover. Secondly, thrust on education by teachers’ training on a mass scale. Thirdly, agriculture has been encouraged and focus would be given to double farmer income by 2022. We also welcome the measures that the Government of India plans to undertake to hasten India’s movement to a digital economy.

There will be significant use of Aadhaar numbers even for the businesses, as all business entities will be allotted an Aadhaar like unique ID number.

The Government has also announced various benefits for students and the education sector in India. This will give focus to digital boards. Allocation of 1 lakh crore rupees in promoting learning based outcomes and research sector will give a further boost to education sector.

Overall, it is a well-thought and far-sighted budget. The masses will greatly benefit from a new ecosystem in infrastructure leveraged on the thrust of using technology as the spine for new India.

Ajey Mehta, Vice President India, HMD Global.
“HMD Global continues its strong emphasis on PM Modi’s Make in India campaign. While the import duties for mobile phones increased to 20%, along with a 15% duty on key components, this will have a minimum impact on our business, as all of our current portfolio of Nokia phones are manufactured in India.” said Ajey Mehta, Vice President India, HMD Global

Manoj Bhan, Executive Vice President – Corporate Affairs. Vihaan Network Ltd.
“The FY19 budget is a well thought out roadmap to attain 8% plus growth rate even as it addresses a number of social issues, particularly in the health sector. The launch of comprehensive National Health Protection Scheme is a crucial step towards ensuring the well-being of a large section of our fellow citizens. The budget has also taken a number of steps to support its theme of “ease of living.” As a member of domestic telecom fraternity, we applaud the government’s decision. While the budget has several announcements to boost digital India, it is disappointing to note there are no steps to support and boost domestic telecom equipment manufacturing that forms the backbone of telecom infrastructure going ahead we look forward for governments intervention on encouraging domestic manufacturing to be a part of network connectivity across India, thereby a leap towards a making ‘make in India’ mission successful in real terms.”

Rajan S. Mathews, Director General COAI
“We applaud the government’s vision and commitment towards Digital India and the Digital economy. The Hon. Finance Ministry Shri Arun Jaitley has recognized the importance of a resilient cyberspace and doubled the allocation for Centres of Excellence across the country to be championed by the DST. We, are also enthused to see that Niti Aayog, will now be spearheading a national program to direct efforts in Artificial Intelligence, Quantum Computing, Blockchain, Robotics, and Digital as a way of life. The industry welcomes these timely initiatives. The support extended to IIT Chennai for an indigenous 5G test bed is also a welcome move. We are also happy to see that the allocation of Digital India has been doubled and the government proposes to set up 5 lakh WiFi hotspots. On Ease of Doing Business, he has incentivized the states identifying over 3000 parameters and introduced competitiveness amongst themselves, through a ranking mechanism.

However, for realizing the Hon. PM’s vision of a fully connected and empowered Digital India, we reiterate that the telecom industry is deeply disappointed that none of our key asks have found mention in the Hon. FM’s budget. We had sought a reduction in levies and taxes, and an urgent intervention is critical for resuscitating the sector, which is currently experiencing its worst financial health and hyper competition. We reiterate our four key asks, reduction extremely high and unsustainable levies & taxes, reduction in BCD on 4G LTE Equipment, clarity on RoW related taxation at the state level, & clarification on lowering the tax rate to 1% on discounts extended to small dealers. While, the FM has emphasized the importance of moving to a digital economy, the actual digital highway, which is telecom has found no mention in terms of substantive support, unlike road, railway, highways, electricity, which have received substantial mention. We are saddened to see that telecom which is the bedrock for moving the Digital economy forward, continues to remain an Orphan.

The FM, while recognizing infrastructure as a key to growth has pushed the implementation of the Smart City Mission & 99 Smart cities have been approved but it is critical that telecom not be paid a lip service, as it is an essential, intrinsic infrastructure core, for a resurgent India & a thriving Digital Economy. ¬¬ Like the emphasis on Bharat Net, we hope that the substantial asks of the telecom sector can be addressed for speedy infrastructure rollout across the country to truly serve the poorest of the poor and truly bridge the digital divide between India and Bharat.”