A Million PCs Now

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.

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
  • A plethora of tax exemptions under the Income Tax act
  • A special corpus fund to tackle Y2K within the Government
  • Venture capital funds
  • 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.

  • 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

    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.

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.
  • 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.
  • 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

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

Income Tax Exemptions For IT

  • Definition of 80 HHE to be expanded to include service
  • 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

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
  • Shikshak Computer Scheme: To enable teachers to buy
  • 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

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

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