Some takeaways from the Union Budget 2021-22

Union Finance Minister Nirmala Sitharaman delivered her third Union Budget in Lok Sabha on Monday, February 1.

Govt slashes revenue expectation from telecom sector; pegs receipts at ₹53,986 crore.
The government has lowered revenue estimates from the telecom sector while pegging expected receipts at ₹53,986 crore in the next financial year, according to the budget documents presented in Parliament on Monday.

The Finance Ministry in the Budget for 2020-21 had projected a revenue of ₹1.33 lakh crore from the telecom sector which was slashed steeply to ₹33,737 crore in the revised estimates presented in the Budget on February 1.

“Receipts under ‘Other Communication Services’ mainly relate to the license fees from telecom operators and receipts on account of spectrum usage charges. Department of Telecom collects recurring licence fees from various Telecom Service Providers licensed by it,” the document said.

The licence fee is levied at 8% of the adjusted gross revenue (AGR) — which is considered as income from sale of telecom services.

The lowering of revenue estimate comes at a time when the government has set the ball rolling for the spectrum auction in which radiowaves valued at ₹3.92 lakh crore will be put on the block.

Import duty on mobile phones and chargers increased.
The government proposed to impose import duty on components of mobile phones and chargers, to enhance local value addition.

“For greater domestic value addition, we are withdrawing a few exemptions on parts of chargers and sub-parts of mobiles. Further, some parts of mobiles will move from ‘nil’ rate to a moderate 2.5 per cent,” Finance Minister Nirmala Sitharaman said.

The FM announced review of 400 exemptions in customs duty including those applicable on the mobile devices segment.

She added that the custom duty policy must have twin objectives of promoting domestic manufacturing and helping India get on to global value chain and export better.

This may increase the process of smartphones as the manufacturers may pass on the increased 2.5 percent customs duty on import of electronic components, which go into manufacturing the devices to the consumer.

“Its impact on consumers will be in the range of 0.3% to 0.4%,” said Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA).

Under the new proposed regime, only exports are likely to be spared the hike in customs duty and any phones produced in India for domestic consumption will attract the hike in customs duty. However, the industry feels that the competitiveness, which had been delivered through the Production Linked Incentive (PLI) scheme, will now be eroded through the new announcement.

“Phased Manufacturing Program (PMP) was not working and exports were weak. That propelled production-linked incentive (PLI) for the sake of competitiveness to address disabilities. This spate of duties takes us right back-queering the pitch for electronics exports. We request the government to maintain the status quo.

The mobile and electronics sector should have been spared the general removal of exemptions where there were zero percent import duty. Zero custom duty does not mean zero taxation. These inputs suffer 18% GST also,” added Mohindroo.

Cellular Operators Association of India (COAI) director general (DG), SP Kochhar
“We are a bit disappointed that concerns of the telecom sector, which is the backbone of digital India, remained unaddressed. We were expecting a reduction in the burden of levies, such as LF and SUC on the telecom sector. The Government has also not considered the request of the Industry to exempt the GST from the payment of Govt Levies such as LF, SUC and spectrum installments etc.

As the telecom operators are going to launch 5G services in the country, it is imperative that 5G enabled telecom equipment are available to them at a reasonable price. Thus, there was the need for a reduction in customs duties on telecom equipment.

It would have been a much awaited relief if the government provided the right incentives to the sector.”

Mobile phone service providers had earlier sought a reduction in licence fees (LF), removal of goods and services tax on those fees, spectrum acquisition charges and spectrum usage charges (SUC) , besides a refund of input tax credits along with tax and custom duty exemptions

Govt allocates ₹14,200 cr for telecom infra roll out in 2021-22
According to the budget document, the finance ministry has earmarked an outlay of ₹5,200 crore to rollout the entire optical fibre cable (OFC) required for setting up the Defence communications network, issue purchase order for all equipment components for the entire project to commission nationwide dedicated full-fledged communication network.

The finance ministry has allocated ₹9,000 crore to boost telecom connectivity across the country which includes high-speed OFC or satellite-based broadband services across the 2.2 lakh village panchayats in the next financial year.

The government has set a target to lay 6.7 lakh kilometer of OFC, 1.2 lakh wifi access points and 6.5 lakh fibre-to-the-home (FTTH) connections to be installed in 2021-22.

The budget has made provision to install 600 mobile towers for 4G services in Arunachal Pradesh and two districts of Assam and another 600 mobile towers for 4G in Meghalaya. The finance ministry has earmarked an outlay of ₹5,200 crore to rollout the entire optical fibre cable required for setting up the Defence communications network

Andaman and Nicobar Island, which has been connected with OFC in August, will get 124 mobile towers for 4G service, naxal affected areas will get 1,000 mobile towers, aspirational districts will get 350 mobile towers and 354 villages uncovered in Ladakh, Jammu and Kashmir and in border areas will get one mobile tower each.

IT
IT Firms India’s biggest services export contributors received little attention in the budget. There were no sops to boost the future of information technology from Sitharaman this year for companies including TCS Ltd., Infosys Ltd., Wipro, HCL Technologies, Tech Mahindra, along with mid-sized firms like LTI, Mindtree, Persistent and Hexaware.

Some industry responses
Sunil Bharti Mittal, Chairman, Bharti Enterprises
“The first Budget of this new decade reimagines India in the form of Aatmanirbhar Bharat like never before, Coming in the backdrop of a global pandemic, it boldly spells the government’s growth agenda and march towards building a new and prosperous India. The Budget clearly has the stamp of our Prime Minister with a clarion call for ‘Sabka Saath Sabka Vikas’ and ‘Vocal for Local’. The efforts of the FM to restore economic growth while elucidating a clear road map in the health care, infrastructure and insurance sectors is bound to bring confidence to the industry and global investors, providing a much needed reassurance of the government’s strong support.” 

Anand Agarwal, Group CEO, STL
“This is overall a positive and progressive budget that aims to boost the economy through increased government expenditure, and focuses aptly on healthcare and people.  
We welcome the government’s strategy of infrastructure-led recovery through higher allocation and reforms in power, roads and ports. However, the time was apt to bring parity on spending between digital and physical infrastructure, especially at a time when we look to aggressively move towards becoming a $5 trillion economy. The budgetary allocation of INR 6,000 crore towards BharatNet is a step in the right direction, and an outlay towards building and modernising digital infrastructure would have set the foundation for achieving accelerated growth and bridging the digital divide. The government demonstrated a stronger focus on innovation through an allocation of INR 50,000 crore for the National Research foundation. A budgetary allocation for digital infrastructure can complement this focus, paving the way for disruptive technology innovations”
Navkendar Singh, Research Director, International Data Corporation (IDC)
“The benefits to local manufacturing and exports that the increase in customs duty will bring about will offset the price increase. From an export perspective, this will push companies to start putting major scales here to manufacture, he said. With mobile chargers set to get slightly more expensive, this can lead mass phone companies to offer phones without a charger in the box from the second half of the year, in line with the practice followed among phones priced above ₹50,000.”

Rajesh Maurya, Regional Vice President, India & SAARC, Fortinet.
“The budget has announced big-ticket projects to add to the digital capabilities with the next general census in the country being the first digital one and along with marque MCA 21 project this is likely to garner massive ‘crown jewel’ assets in terms of the sensitivity and quantity of data. As these projects are rolled out it will increase the importance of security as the government builds the tools and workflows supporting these services. These projects will need to prioritize solutions such as Zero Trust Access, automated endpoint security, users awareness training to counter a range of threats, and will also need to ensure that solutions such as software defined networking and multi-cloud services are implemented securely.

The real challenge in securing these digital assets that will continue to be targeted by both criminal and nation state (APT) actors is the availability of skilled resources. Fortinet is committed to closing the cybersecurity skills gap through our CSR training programs. The Fortinet Security Academy Program is provided free by nineteen leading universities in India to equip students with the skills necessary for a career in cybersecurity. By supporting these leading universities in India, we’re arming the next generation of security leaders with the skillset and knowledge the industry so desperately needs.”

Sanjay Jalona, CEO & MD, L&T Infotech.
“We welcome the increased focus on Innovation and on ease of doing business. This budget appears to have set the right pace for India’s journey to a digital first approach. From an IT services perspective, the industry is facing an intense global competition and needs tax incentives and digital infrastructure support to ensure seamless work from anywhere ecosystem, which is the new normal. This is a critical requirement for the sector that employs nearly 4.5 million professionals, contributes 8% of the country’s GDP, has created high-quality jobs during the pandemic, and is the face of Brand India across the world.”

Aalok Kumar, President & CEO, NEC Corporation India.
“The Government’s commitment to streamlining the country’s infrastructure from roads to railways to shipping to waterways to build a new India is consistent and commendable. The infusion of multiple thousand crores into the construction of national highway projects and dedicated freight corridors reflects the creation of a new connected India. Linking cities through metro lines and increased access to travel facilities will also boost the much-needed employment generation. While we were looking forward to specific initiatives and encouragement for the technology industry, the continued focus on driving digital transformation using artificial intelligence, machine learning, and digital records in governance, smart cities, transportation, logistics and aviation will have a contagion impact and empower the economy in the long run. We envision India’s future under the spirit of ‘AatmaNirbhar Bharat’ and look forward to partnering with the Government in meeting the relevant targets.”
CT Bureau