A fairly significant set of announcements relevant to the digital industry, in the Vote on Account announced today, looking, in particular, to boost manufacturing of digital equipment within India, by reducing excise duty:

– Excise Tax reduction from 12% to 10% in capital goods and consumer non-durables in Chapter 84 (details here) and Chapter 85 (details here), up to 30.6.2014, and to be reviewed at the time of the regular budget. Items with relevance to digital businesses:
a. Printers: Line printer, Dot Matrix Printers, Letter quality daisy wheel printer, Laser Jet Printer, Ink Jet Printer, Ink Cartidges (with and without print-head assembly)
b. Storage devices: Floppy disc drives, Hard disc drives, Removable or exchangeable disc drives, Magnetic tape drives, Cartridge tape drive, CD-ROM drive, DVD’s, Microprocessors, Motherboards, Other mounted printed circuit boards, Network access controllers, Graphic and intelligence based script technology (GIST) cards for multilingual computers
c. Cell phones and networking devices: Push button phones, cellular phones, base stations, modems, ISDN Terminals, ISDN Terminal adapters, Routers, Set Top Boxes for gaining access to Internet
d. Audio equipment: Attachments for telephones, Microphones, Loundspeakers, Headphones, Airphones, Amplifiers, Turntables, answering machines,
e. Video equipment: CD Players, Mini disc player, Laser Disc player, MP3 Player, Video Recorders, Betacam (digital or otherwise), Professional Video Tape Recorders with 3/4″ or 1″ tape, DVD Player, Smart Cards, Audio and Video Cassettes
f. SIM Cards, Smart Cards, Memory Cards, Proximity cards and tags
g. Broadcast equipment: Radio broadcast transmitter, TV broadcast transmitter, communications jamming equipment, Wireless microphone, Walkie Talkie, Amateur Radio equipment, VSAT Terminals, Satellite communications equipment
h. Receivers: Radio broadcast receivers not capable of operating without an external source of power, of the kind used in motor vehicles
i. TV Sets: Projectors, TV sets, LCD below 63 CM

Remember that excise tax reduction is applicable only to items that are manufactured within India, and not on imported items.

– The Ministry of Communications and IT has a budget of Rs 17,111 crore for FY14, up from Rs 12276 crore last fiscal, Rs 16783 crore in FY12 and Rs 8650 crore in FY11. Of this, Rs 800 crore will be spent on the Departments of posts (up from Rs 430 crore last fiscal), Rs 130001 crore in the Department of telecommunications (up from Rs 9311 crore last fiscal), and Rs 3311 crore in the Department of Electronics and Information Technology. Rs 800 crore will be spent on the National e-Governance Action Plan (source)

– Ministry of Information & Broadcasting has a budget of Rs 1105 crore, up from Rs 940 crore last fiscal and the same as Rs 1105 crore in FY12. (source)

– Manufacturing: Last week, approval was granted to establish two semi-conductor wafer fab units that will be the bedrock of the electronics hardware industry.

– India Inclusive Innovation Fund: India Infrastructure Fund Ministry of MSME will create the ‘India Inclusive Innovation Fund’ to promote grassroot innovations with social returns to support enterprises in the MSME sector. An initial contribution of Rs 100 crore has been made by the Ministry of Finance to the corpus of the Fund.

– Venture Capital Fund for Scheduled Castes: IFCI, in order to promote entrepreneurship among the scheduled castes and to provide concessional finance to them, will set up a Venture Capital Fund for Scheduled Castes. An initial capital Rs 200 crore is being invested in the first year, “which can be supplemented every year.”

– Community Radio: A new plan scheme with an allocation of `100 crore has been approved to promote community radio stations.”

Recommendation

– Reducing excise duty on Mobile handsets: “To encourage domestic production of mobile handsets (which has declined) and reduce the dependence on imports (which have increased), I propose to restructure the excise duties for all categories of mobile handsets. The rates will be 6 percent with CENVAT credit or 1 percent without CENVAT credit.”

What’s Not Been Completed (source)

Many of the projects announced by the Indian government during last years Budget announcement are still apparently work in progress (i.e. not completed).

– Incubators: In the last budget, it was announced that incubators would be allowed to receive investment from companies as a part of their CSR activity. The new Companies Bill obliges companies to spend 2 percent of average net profits under Corporate Social Responsibility (CSR). The Ministry of Affairs was supposed to notify that funds provided to technology incubators located within academic institutions and approved by the Ministry of Science and Technology or Ministry of MSME would qualify as CSR expenditure.

Status: Not implemented. The new Companies Act, 2013 has been notified, but draft Rules haven’t been finalized, which would notifying technology incubators as CSR expenditure. This will be done “once the schedule VII of the Companies Act 2013 is notified.”

– FM Radio Stations: The government had proposed to expand private FM radio services to 294 more cities, with 839 new FM radio channels will be auctioned in 2013-14. After the auction, all cities having a population of more than 100,000 would have been covered by private FM radio services.

Status: Not implemented, and auctions haven’t been held yet. “An Independent External Monitor (IEM) to ensure probity and transparency in the entire tender process has been appointed as per CVC guidelines. Further approval of CVC is awaited for appointment of another IEM for this purpose. Suggestions recommended by IEM are being carried out. RFP is yet to be floated.”

– Rs 200 crore for Science & Technology Innovations: was to be spend to fund organisations that will scale up certain Science & Technology innovations. The National Innovation Council was to formulate a scheme for the management and application of the fund.

Status: Not implemented. Apparently, the modalities of this scheme are “in final stages of development.”

– Core banking solutions at Post Offices: Rs 4909 crore was to be spend on converting post offices into banking solution providers, of which Rs 532 crore was to be spent in FY14.

Status: Work in progress. Infosys has got the project for a “Financial Services System Integrator” for implementing Core Banking Solutions and for installing ATM. The project has commenced on 28.09.2013 and the roll out has started from 3 Post Offices in Tamil Nadu. The Core Banking solution will be implemented during FY 2014-15″ in “all 155,000 locations.”

– Direct Benefit Transfer using Aadhaar

Status: Not completed, but the plan is to complete it during this term of the UPA government. The Direct Benefit Transfer (DBT) scheme has been operationalized in 121 identified districts for 27 identified schemes, and nearly 11 lakh beneficiaries have received the benefit directly into their bank accounts, with a a total of 54,20,114 transactions till 31.1.2014. “Rs 628 crore has been transferred. Another sum of Rs 3,370 crore has been transferred to 2.1 crore LPG beneficiaries. The latter scheme has been put on hold for the time being pending resolution of some difficulties that have been pointed out. However, let me reiterate that the Government remains fully committed to Aadhaar under which 57 crore unique numbers have been issued so far and to opening bank accounts for all Aadhaar holders in order to promote financial inclusion. Who needs Aadhaar? It is those who are at the bottom of the pyramid, the poor, the migrant workers, the homeless, and the oppressed who need Aadhaar, and we will ensure that they get Aadhaar. I have no doubt that in course of time even critics of Aadhaar will realise that Aadhaar is a tool of empowerment.”

“A digitized beneficiary lists is created, and a bank account is opened for each beneficiary, seeded with Aadhaar.” The finance minister has said that “I assure the House and the people of India that the DBT scheme will be rolled out throughout the country during the term of the UPA Government.”

– FDI vs FII Clarification: The Finance minister had promised that the ambiguity that prevails on what is Foreign Direct Investment (FDI) and what is Foreign Institutional Investment (FII) would be addressed by following international practice and lay down a broad principle that, where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be treated as FDI.

Status: Nothing finalized. “A draft report of the Committee comprising RBI, DIPP, SEBI, DoR under the Chairmanship of Secretary (EA) has been circulated for comments.”

– e-Payment systems in all banks: All banks, including some cooperative banks, were to be brought under CBS and e-payment systems by 31.12.2013, by implementing the Core Banking Solution and electronic payment systems (NEFT and RTGS).

Status: Not completed. 375 Unscheduled Commercial Banks (UCBs) out of a total of 1594 have implemented Core Banking Solution (CBS). The remaining banks are at various stages of implementing of CBS. RBI has also issued instruction to cooperative bank/UCBs to migrate to CBS by March, 2014. So far 14,309 ATMs have been installed as on 31.12.2013, against the target of 34668 during 2013-14. “Public sector banks have assured me that all their branches will have an ATM in place by 31.3.2014.”

GST: Not implemented. The Finance Minister has tried to absolve himself of any blame. “I am disappointed that we have not yet been able to introduce GST. I leave it to you to answer the question, who blocked the GST when an agreement on the game-changing tax reform was around the corner? We have also got ready a Direct Taxes Code that will serve us for at least the next twenty years. I intend to place it on the website for a public discussion without partisanship or acrimony. I appeal to all political parties to resolve to pass the GST laws and the DTC in 2014-15.”

What’s been implemented

– FDI Policy: “The FDI policy was liberalized to attract larger investments in telecommunication, pharmaceuticals, civil aviation, power trading exchanges and multi-brand retail. However, note that there is no policy on FDI on e-commerce yet, though the process has begun for changing it.”

– Space:  “India joined a handful of countries when it launched the Mars Orbiter Mission. We now have the capability in launch vehicle technology, cryogenics, and navigation, meteorological and communication satellites, and are largely self-reliant. Several flight tests, navigational satellites and space missions are planned for 2014-15.”

– Angel investment norms: SEBI was to prescribe requirements for angel investor pools by which they can be recognised as Category I AIF venture capital funds. Amendments to SEBI (Alternative Investment Funds) Regulations, 2012 had been given effect on 25 th September 2013.

– SME Exchange for IPO: “Small and medium enterprises, including start-up companies, will be permitted to list on the SME exchange without being required to make an initial public offer (IPO), but the issue will be restricted to informed investors. This will be in addition to the existing SME platform in which listing can be done through an IPO and with wider investor participation.

Status: Issued the SEBI (Listing of Specified Securities on Institutional Trading Platform) Regulations, 2013 on 08.10.2013 and circular on 24.10.2013.