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A Million PCs Now

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DQI Bureau
New Update

And from now on. The National Task Force on Information

Technology has presented a report that will put growth into overdrive. Industry insiders

say that even if some of its recommendations get implemented, the IT industry will be on

retro-rockets well into the next century.

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You wish it, and it is there. You couldn't imagine it

possible, and even that is there. The first report prepared by the National Task Force on

Information Technology and Software Development is every IT industry-person's dream

document. Imagine this:

  • 100 percent depreciation on computers
  • Internet freed from VSNL's monopoly
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  • A plethora of tax exemptions under the Income Tax act
  • A special corpus fund to tackle Y2K within the Government
  • Venture capital funds
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  • And even income-tax deductions on the purchase of computers.

  • Going Global On Ambition-target 2008
    • Create a world-class info-infrastructure.
    • Target $ 50 billion worth of annual software and services

      exports by 2008.
    • One PC (with Internet connection) per 50 people by 2008.

    All this and much, much more are indicative of a very

    early Christmas for the industry. The report presented to Prime Minister Atal Behari

    Vajpayee earlier in the month seeks to set India on a high growth path in the Information

    age. Originally set up to prepare a document that would help realize Vajpayee's promise of

    making India one of the "world's largest generators and exporters of software,"

    the document has covered a much wider ambit and sought to address a whole range of issues.

    Issues, which if taken care of, will allow the IT industry of the country to start talking

    about the kind of volumes that make markets. To ensure continuous growth in the industry,

    the document looks at three crucial aspects.

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    • Info-Infrastructure Drive: To accelerate the drive for

      setting up a world-class info-infrastructure with an extensive spread of Fibre-Optic

      Network, Satcom Network, and Wireless Network for seamlessly interconnecting the Local

      Informatics Infrastructure (LII), National Informatics Infrastructure (NII), and Global

      Informatics Infrastructure (GII) to ensure a fast nation-wide onset of the Internet,

      extranet, and intranets.
    • Target ITEX 50: With a potential of a $ 2 trillion global IT

      industry by the year 2008, policy ambiance will be created for the

      face="Arial" size="2">Indian IT industry to target a $ 50-billion annual export of IT

      software and services (including IT-enabled services) by this year, over a commensurately

      large domestic IT market spread across the country.

    • Freedom From Monopoly
      • VSNL monopoly on international gateway to end.
      • Last-mile linkages to be freely permitted.

      IT For All By 2008: Accelerate the rate of PC/set-top

      box penetration in the country from the 1998 level of one per 500 people to one per 50

      people alongwith a universal access to Internet by the year 2008, with a flood of IT

      applications encompassing every walk of economic and social life of the country.

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      Information For All And By All
      • Internet access at the district levels by January 26, 2000.
      • Access to nearest Internet node on local call rates from

        August 15, 1998.
      • Railways, Defense, State Electricity Boards, and National

        Power Grid Corporation as well as ONGC, GAIL, and SAIL to provide Internet backbone.
      • Cable TV operators be allowed to provide Internet

        connections without licensing.

      To increase penetration of the info-infrastructure in

      the country, the document calls for a 30 percent annual growth rate from the 1998 level of

      fiber-optic backbone of 75,000 km. It also calls for aggressive growth rate in VSATs,

      satellite transponders, and wireless communication-based value-added services. For all

      this, the document lays down certain immediate steps, the prime among them being:

      • Internet access nodes to be opened by the DoT and authorized

        ISPs at all district headquarters and local charging areas by January 26, 2000.
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      • No license fee for setting up of ISP operations by companies

        for the first five years, after five years a nominal fee of Rs 1 will be charged.
      • The monopoly of VSNL on International Gateway for the

        Internet shall be withdrawn and authorized public/government organizations will be allowed

        to provide Internet Gateway access directly without going through VSNL gateways. Private

        ISPs have been allowed to provide such Gateways after obtaining defense clearance.
      • The last mile linkages shall be freely permitted either by

        fibre-optic or radio communication for IT application enterprises, IT promotional

        organizations, and ISPs. In case of radio linkages, coordination by the Wireless Adviser

        will be observed to avoid frequency interference.
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      • Datacom requirements for ecommerce/Electronic Data

        Interchange (EDI) shall be met by the DoT in a liberal framework by assigning highest

        priority under its priority classification.
      • Public TeleInfo Centers (PTIC) having multimedia capability

        especially ISDN services, Remote Database Access, Government and Community Information

        systems, Market Information, Desktop Video Conferencing, TeleInfo, and Internet access

        services will be permitted and encouraged by the Government.
      • DoT shall take suitable action to delicense multimedia

        services, including fax provided by PCOs.
      • Zero Duty by January 1, 1999
        • Parts and components excluding populated PCBs
        • Storage Devices
        • Integrated circuits above Rs 1,000
        • Stepper Motors
        • Color Graphic Display Tube
        • Deflective components for color monitors

        Interestingly, the report talks about creating newer

        Hi-tech cities as existing software centers may not be able to fulfill the targets set for

        the IT industry by the year 2008. The report encourages the promotion of Hi-tech habitats

        in the rural hinterland adjacent to suitable cities. For this purpose suitable autonomous

        structures will be designed and progressive regulations framed to facilitate

        infrastructurally self-contained, self-financed Hi-tech habitats of high quality.

        Initially, five such Hi-tech habitats shall be planned and implemented in the rural

        hinterland of Bangalore, Hyderabad, Pune, Delhi, and Bhubaneshwar. It is estimated that

        progressively 50 such Hi-tech habitats can be viably set up by empowering the state

        governments to autonomously nucleate them within a technologically progressive and

        administratively liberal set of guidelines to be prepared by a special working group on

        Hi-tech habitats to be set up by the Task Force.

        To boost software exports, the action plan suggest that all

        IT software be entitled for zero customs and excise duty. This apart, the move toward zero

        duty under the WTO-ITO Ministerial declaration should be speeded up, and duty on capital

        goods for manufacture, become zero by January 1, 2000. The report also states that zero

        excise duty is concomitant with zero customs duty with in-phase reduction.

        The action plan also calls for amendment of 80 HHE Income

        Tax Act to provide for the inclusion of IT services exports under the software and export

        turnover. The benefits of this section for income-tax exemption to profits from exports to

        be extended to supporting IT software and IT service developers.

        The action plan takes care of a long-standing requirement

        of the software industry for working capital funding by stating that a differential and

        flexible approach is to be adopted by giving special dispensation toward working capital

        requirements of the software sector in view of the unique nature of the industry.

        According to the plan, IT software and services industry will be 'treated as a priority

        sector by banks for the next five years'. Against the present estimate of Rs 400 crore of

        working capital for the industry, the amount shall be increased to around Rs 1,200 crore

        by the year 2000, subject to the broad criteria of pro-rata increase for the prospective

        requirements 24 months ahead, as compared to the actuals of the current needs at any given

        time. Banks/FIs like ICICI, IDBI, UTI, and SBI to set up joint ventures with Indian or

        foreign companies for setting up of at least four different venture capital-dedicated

        funds of a corpus of not less than Rs 50 crore each to cater to the credit needs of the

        industry.

        The plan also calls for the amendment of the Companies Act

        to facilitate issuance of Sweat Equity to employees. The RBI is to issue revised Exchange

        Earnings Foreign Currency (EEFC) guidelines to eliminate restrictions on staggered

        remittance.

        Income Tax Exemptions For IT
        • Definition of 80 HHE to be expanded to include service

          exports.
        • IT products purchase to be deductible under Section 88.
        • No gift tax for PCs up to Rs 30,000.

        It also calls for quick introduction of 100 percent

        depreciation on computers, given the high obsolescence rate in the PC industry. This has

        been a long-standing demand of the IT industry and according to sources is likely to be

        met in the current finance bill.

        As an opportunity area, the report lays special thrust on

        Y2K problem. It calls for an investment of around Rs 700 crore as a corpus fund to be

        mobilized to control the crisis that could be created by this issue. Efforts to sensitize

        such organizations in the country facing the crisis shall be taken by the Government

        immediately, including issuance of government orders for strict compliance in a time-bound

        manner.

        In the third part of its report 'on enabling IT for all',

        the Action Plan calls for Operation Knowledge. The aim of this national campaign will be

        to universalize computer literacy and also to spread the use of computers and IT in

        education. Operation Knowledge is to be developed into a comprehensive policy within the

        next three months. The schemes under this are:

        • Vidyarthi Computer Scheme: To enable students to buy

          computers.
        • Shikshak Computer Scheme: To enable teachers to buy

          computers.
        • School Computer Scheme: To enable schools to buy computers.
        • Funding patterns
          • Banks to create specialized IT financing cells.
          • RBI to issue new guidelines with regard to working capital

            requirement for IT.
          • Working capital corpus of Rs 1,200 crore to be set up by the

            year 2000.
          • Banks and FIs to set up Joint ventures for venture capital

            funding.

          The report also states that computers are to be made

          available in every school, polytechnic, college, university, and public hospital in the

          country by the year 2003. All Universities, engineering colleges, and medical colleges to

          be networked for a supplementary program of distance education for improving the quality

          of education before the year 2000. The report also calls for the setting up of a National

          Council of IT education, comprising experts from both the industry and the academia, to

          define courses and their content. It also says that an IT course module should be made

          compulsory for all degree courses on the short term.

          Stressing on the importance of higher education in the

          field, the plan calls for the setting up of Indian Institutes of Information Technology

          (IIIT). These institutes are to be granted the deemed university status without waiting

          for the mandatory three-year period. The report lays stress on the need to develop SMART

          schools, where the emphasis is not only on IT but also on the use of skills and values

          that will be important in the next millennium.

          The report also lays down the importance of having proper

          data security and cyber laws in place. It proposes the setting up of an Information

          Security Agency at the national level which will play the role of a cyber cop. A National

          Policy on Information Security, a Privacy and Data Protection Act for handling of

          computerized data shall be framed by the Government within six months. It also lists down

          several other essentials to tackle the need for greater cyber security.

          The Action Plan has met the objectives laid before it by

          the Prime Minister, however, it is still a document. The real implementation and change of

          rules will come after this. It is only when the Government gets down to acting on this

          report, the dream of India as an IT superpower will really take off. Question is:

          Does this government have the political will and the

          necessary finances to carry out what must be seen as one of the most ambitious projects

          launched by an Indian government, since Nehru embarked on his dream of building a modern

          India?

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