Govt to offer sops for electronics manufacturing: Ravi Shankar Prasad

Press Trust of India Posted online: Tuesday, Jun 17, 2014 at 0000 hrs
New Delhi : The Finance Ministry is looking into the resolution of tax disputes faced by telecom firms such as Nokia and Vodafone even as the new BJP government looks at pepping up manufacturing to boost the economy, Telecom Minister Ravi Shankar Prasad said today.

Prasad, in his first formal press conference since taking over three weeks ago, said the government is working on expansion of telecom services, incentives for chip-making units in certain cities and the setting up of postal banks.

"The government has been repeatedly sharing its concern that retrospective taxation is something that needs to be avoided. As far as resolution is concerned, as I told you, the Finance Ministry is looking in to it," he said, referring to the tax disputes involving telecom firms.

However, he refused to comment on specific tax issues.

Vodafone faces a tax liability of over Rs 20,000 crore over its 2007 acquisition of Hong Kong-based Hutchison Whampoa's Indian mobile assets.

The British company has rejected the demand, saying any tax, if due, was on the seller rather than the buyer.

Nokia was forced to abandon the transfer of its Chennai plant to Microsoft Corp in April, part of the software company's acquisition of the Finnish firm's handset business, because of a tax standoff.

Prasad said the government plans to spend Rs 5,000 crore to set up about 8,000 mobile towers in the northeastern states and also monitor the deployment of mobile towers in nine Naxal-infested states.

"In north east, telecom infrastructure will be strengthened. The government will set up over 8,000 towers at a cost of Rs 5,000 crore," Prasad said.

On a recent report by Vodafone, which said India is among 29 countries that sought access to its network to intercept calls, SMSes and e-mails, Prasad said he has asked the Department of Telecom to look into it and work with its representative for early redressal of the matter.

The minister said he will focus on connecting 2.5 lakh village panchayats with broadband in the next three years.

"Mr Atal Behari Vajpayee's govt was known for national highways and Mr (Narendra) Modi's govt will be known for broadband highways," Prasad said.

He said that 50,000 village panchayats will be connected with a national optical fibre network in 2014-15, another 1 lakh in 2015-16 and the remaining 1 lakh in 2016-17.

Prasad said he has asked the postal department to work on a proposal for setting up postal banks.

"We are going to start a new scheme of postal banking. In my priorities, I have selected postal bank also...Earlier postal department had applied for licence before RBI which is on hold as of now" he said.

Prasad sounded bullish about boosting indigenous electronics manufacturing to curtail dependence on imports.

"Electronic manufacturing is going to be the key area of my priority...It is very much employment-based sector. We can give employment to 2.8 crore people," the minister said.

By 2020, the Indian electronic market is projected to reach USD 400 billion. Of this, USD 300 billion of products may be imported in the absence of a boost to local production.

Prasad said the government will push for setting up chip manufacturing facilities in the country and incentivise companies if they set-up production plants in identified cities including Ghaziabad, Vadodara, Ahmedabad, Gandhinagar, Nagpur, Nasik, Aurangabad and Thane.

In February, the government approved setting up two electronic chip-making plants entailing an investment of about Rs 63,412 crore.

The government has notified 50 brownfield electronics manufacturing clusters (EMCs) and has approved in-principle seven greenfield EMCs across 13 states and a Union territory.

The brownfield EMCs are also eligible for benefits of the modified special incentive package scheme (M-SIPS), under which the government will provide incentives up to Rs 10,000 crore during the 12th Five-Year Plan period (2012-17).

The scheme will provide subsidy for capital expenditure with a limit of 20 per cent for investments in Special Economic Zones and 25 per cent in non-SEZs.

The minister said he has received representations from Samsung, Nokia and industry bodies on electronics manufacturing.

Prasad said he will promote setting up an Electronic Development Fund to address financial issues of the sector. Part of the contribution to this fund will be made by the government and the rest will be from venture capitalists.

Talking about the performance of public sector telecom firms BSNL and MTNL, the minister said he will directly monitor the performance of their network.

"I have decided that an NOC (network operating centre) will be set up in my chamber in which number of BSNL-MTNL towers working or not working will appear on a screen before me," he said.

The minister said the government has in-principle approved implementation of mobile number portability nationwide and is awaiting the recommendations of the Telecom Regulatory Authority of India for further action.

Prasad did not elaborate on matters related to spectrum but touched upon the pending announcement of spectrum sharing, trading and enlargement, saying it should be "done in a transparent manner with twin objectives in mind -- consumer welfare and the country's growth in mobile telecommunication."