However, the imposition of the countervailing duty (CVD) on these equipment has been offset by the cut in customs duty to a low five per cent from the present 22 per cent.

The cut in basic customs duty on telecom transmission apparatus like optical fibre and telephonic/telegraphic switching apparatus from 30 per cent to 25 per cent will lead to marginal reduction in input costs for telecom service providers. The Budget has recognised the importance of telecommunications by pegging it with other core infrastructure areas like power, refinery and coal mining.

Mahendra Nahata, chairman, Himachal Futuristic Communications Ltd (HFCL), said, "the rationalisation of customs duty to five per cent on integrated circuits (ICs) will benefit telecom manufacturers as the average will now work out to be a little lessthan 10 per cent."

However, he was critical of the reduction in basic custom duty from 22 per cent to five per cent."There was no reason to go in for such a drastic reduction at a time when local manufacturers are hard pressed due to the absence of a level-playing field vis-a-vis imports," he said.

Nahata stressed that local manufacturers had a strong case for additional benefits and said the Budget should have taken stronger steps towards that direction.

Telecom manufacturers expressed regret that despite communication minister Jagmohan writing to finance minister Yashwant Sinha, certain equipment like wireless in local loop (WLL), synchronised digital hierarchy (SDH) equipment and digital loop carrier (DLL) had not be removed from the list of specified equipment qualifying for concessional rate of customs duty, even as these equipment are being manufactured locally.

Sunil Mittal, chairman, Bharti Enterprises, said the finance minister had made a much bigger statement by acknowledging the importanceof telecom in India. "Telecom companies will now be eligible for the same tax holiday's as enjoyed by companies in other sectors and provide a boost to the sector," he added. But, Mittal was dismissive of the imposition of CVD and simultaneous cut in custom duty. "Thankfully local manufacturers have not gained much out of this Budget as the basic and cellular service industry cannot rely on them alone," he added. "Apart from the lack of specific proposals to bail out an industry that is going through a difficult phase, the duty restructuring has actually worked out to the detriment of the telecom industry," he added.

But there is bad news for prospective cellphone customers. As part of the rationalisation of customs duty, the rate of duty on GSM mobile phones will actually go up, said Mittal. Cellular operators had been demanding reduction in duty, in order to promote usage of cellular phones. Vinay Rai, managing director, Group Usha, said there was nothing significant in Sinha's Budget for thetelecommunication industry. Rai was of the opinion that the entire telecom sector including local manufacturers as well service companies had been let down as little had been done for them in this Budget.

Telecom Equipment Manufacturers Association president Ashok Kanodia said the small changes in duty structure would have no positive impact on the telecom equipment manufacturing industry.

The Budget has also provided for rationalisation of provisions relating to licence fees. The Bill proposes to provide that in a case where fee is actually paid before commencement of business, the "relevant previous years" would mean previous years beginning with the previous year in which such business commenced and the subsequent previous year or years during which the licence fee is in force. It has also proposed that no such deduction under sub-section (1) of Section 32 shall be available for such expenditure for the same year or any subsequent previous year. The proposed amendment will take effect retrospectivelyfrom the April 1, 1996 and will accordingly apply in relation to the assessment year 1996-97 and subsequent years.