Budget recommendations prepared by the Department of Telecom (DoT) lays a huge emphasis on pushing the growth of local manufacturing of telecom equipment to plug the widening trade deficit gap in this market segment.
Budget recommendations prepared by the Department of Telecom (DoT) lays a huge emphasis on pushing the growth of local manufacturing of telecom equipment to plug the widening trade deficit gap in this market segment.
The government is looking at ways to reduce its net foreign exchange outgo, which stood at Rs 49,041 crore in the fiscal 2014 due to the trade imbalance in the telecom equipment segment.
For the current fiscal, this deficit could further widen with it having already touched Rs 47,047 crore by October last year.
This has been specifically mentioned by Shashi Ranjan Kumar, joint secretary (administration), DoT, in his latest note on budget recommendations to the finance ministry.
"The trade deficit has increased to Rs 47,047 crore by October, which is likely to worsen in the future unless immediate steps are taken to promote domestic manufacturing and incentivise exports," he wrote.
As per government data, India's imports of telecom equipment in last fiscal was Rs 69,516 crore against exports of Rs 20,475 crore, resulting in a net foreign exchange outgo of Rs 49,041 crore.
The fall in the domestic production of telecom equipment has occurred despite India's telecom sector growing at a healthy pace with more 942 million connections and more than 75% teledensity.
The DoT has, therefore, made several recommendations in its budget note to help boost growth of telecom equipment manufacturing within the country.
These include extension of investment linked incentives under section 35 AD of Income Tax (I-T) Act to the capital investment made for manufacturing of telecom equipment including their parts and accessories and capital investment made by telecom infrastructure service companies for setting up new telecom towers as well as replacement or equipment in existing towers with items manufactured in India.
The DoT has also suggested deferment of payment of excise duty for domestic manufacturers of telecom equipment or extension of differential duty structure applicable on mobile phones to cover all telecom products.
Further, it has also sought extension of special regime of excise duty of 10% under Chapter 85 for telecom products, which expired in December last year.
Besides these, the telecom department also wants the government to increase tax depreciation rate from 15% to 65% on batteries used by telecom infrastructure service company so that around 95% cost can be depreciated by them over three years.
Many recommendations in its earlier list did not find their way in this one. It does not have any mention of the Nokia's Chennai plant.
The department took inputs from various industry bodies like the Cellular Operators Association of the India, Association of Unified Telecom Service Providers of India and others before arriving at these recommendations.
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