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The
Ministry of Communications and IT has just drafted the IT
plan under the tenth Five Year Plan, starting next year. While
the ministry has dreamt big and plans to take India’s IT infrastructure
to developed nation status, the bill is a gigantic $200 billion.
Will industry, users and overseas investors pick up a huge
part of the tab, and how much does the government need to
shell out? Vineet Joshi finds out
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PRAMOD
MAHAjan says the government will play the role of
a facilitator and initiator |
Even
as research firms and think-tanks split hairs about how much
the PC or the printer segment will grow this year, and as
frontline organisations like Nasscom go about building up
the global equity of Indian Software Inc, the bright future
everyone talks about will depend hugely on the IT aspects
of the tenth Five Year Plan (2002-03 to 2006-07). The IT plan
is the first such plan prepared by the newly created Ministry
of Communications and Information Technology (MCIT), earlier
known as the Ministry of IT.
If things do go according to the plan, India will have software
exports worth $33 billion, a domestic software market worth
$18 billion, a hardware industry worth $17 billion (both export
and domestic), 40 million PCs, $52 billion worth of e-commerce,
a telephone density of 35 million, Internet user base of 40
million, 400 Gbps of bandwidth, two-million strong high-end
trained manpower, 60,000 schools and institutes connected
through ERNET, 6,000 community information centres, and over
600,000 cyber cafes—all by end of fiscal year 2006-07.
The cost of doing all this and the required infrastructure
is an eye-popping $200 billion—an amount which will almost
overhaul the entire Indian IT system and put India at par
with developed nations. The investment from various government
and state run companies like BSNL, MTNL, etc, in the five
year plan (till the time they are fully privatised) is estimated
to be to the tune of $30 billion. These organisations will
invest in activities like installing fixed telephone lines,
cellular lines, ISDN, OFC and microwave links. $57 billion
is estimated to come from consumers of services, which will
go into further infrastructure development. As per the financial
outlay submitted by the MCIT to the Planning Commission, the
ministry has proposed a financial requirement of just Rs 25,000
crore for the tenth five year plan, which when compared to
the $200 billion cost, is hardly a drop in the ocean. So,
where does the rest of money come from if we have to achieve
all that the tenth plan proposes to do?
The ministry believes there’s only one solution—private
investments. The plan is to garner as much as 55 percent ($110
billion) from companies of Indian origin, NRIs and overseas
investors. The next big question that crosses your mind is
just how this will be pulled off, considering the government’s
past record.
“The
IT industry is guided by a spirit of entrepreneurship. Probably
it was the inherent talent of our IT professionals that made
India so big in IT, which subsequently prompted us to form
a ministry. I strongly feel it is not the government, but
young Indians and overseas investors who will propel growth
in this sector. We propose to take the role of a mere facilitator
and initiator,” says Pramod Mahajan, minister for communication
and information technology.
Perhaps Prime Minister A B Vajpayee’s comments at ASOCIO
2001 in December 2001 aptly reflected what the government
had in mind for the IT industry—fewer fiscal incentives,
but a basket full of policy measures. “As a part of a
broader agenda we propose to take up several important policy
and legislative measures for the IT industry in the tenth
five year plan,” he said.
And now that the proposals from the ministry are out, the
intentions of the government are clear: reduce government
participation and increase private involvement, and secondly,
initiate confidence building exercises like undertaking proactive
policy initiatives, kick starting e-governance, tackling issues
like IT for the masses and building infrastructure.
As a first step, the plan proposes to do away with all IT
related fragmented policy regimes, subsidies in telecom services,
lack of co-ordination among bodies possessing infrastructure,
restrictive approach towards licensing, artificial barriers
towards opening up of various sectors, high licensing fees
and performance guarantees. The government also plans to allow
interconnection of private networks, promote technology neutrality,
i.e. a service can be offered using any or multiple technologies
of choice, promote/support R&D from private sectors, lay
quality norms for Quality of Services, and further open up
the telecom sector.
“Our
FDI policy provides the lowest FDI limit for the most lucrative
areas i.e. NLD, basic and cellular telephone services, and
100 percent FDI in probably the least attractive area—Internet
services without international gateway, NLDO infrastructure
providers and e-mail services. When the entire development
of India’s IT industry hinges on private investment we
need to replace lopsided policies with proactive ones,”
says P S Narotra, director and member convenor of the study
team on infrastructure for the plan, MCIT.
“We
see the government role’s primarily in policy. It should
make private investment viable, attractive and easy. When
I emphasise policy that doesn’t mean that investment
from government is not required. It is required in areas where
private investment would not immediately come in, like IT
for the masses, advanced studies, research activities, education
programmes, etc,” says Kiran Karnik, president, Nasscom.
Apart from positive policy measures, industry experts believe
that the government should kick start the initial infrastructure
building process. “Proactive policies will certainly
give a boost to investors, but what is also required is that
the government should showcase the positive approach by implementing
some big projects which helps in strengthening infrastructure,”
says Amitabh Singhal, secretary, ISPAI.
In the plan four areas has been identified: e-infrastructure,
e-governance, bioinformatics and bridging the digital divide,
which will require the estimated investments of $1.75 billion,
$250 million, $40 million and $600 million respectively. Under
e-infrastructure, the plan also includes a move to build a
highly secure and robust captive IT infrastructure for the
defence services. Infrastructure development activities will
be limited to this alone and will not extend to building any
further national and international telecom infrastructure,
which directly compete with private players.
On e-governance, the plan proposes to introduce e-governance
in all government departments. “The government can act
as a catalyst for growing the domestic market in a big way.
If it adopts e-commerce and says that all tendering and procurement
will be done over the Net for all government purchases, this
will give tremendous boost to the entire e-commerce activity
in India,” explains Karnik.
Bridging the digital divide will include a large focus on
using ICT for poverty alleviation, larger business generation
for small and medium enterprises and information spread. In
bioinformatics, the government proposes to take urgent measures
to implement a focused national programme. This will include
bringing advanced techniques of scientific computing to address
some computationally demanding biological problems such as
comparative genomics, protein folding and drugs design with
far reaching ramifications for Indian society.
Will IT get it?
Indications from the Planning Commission suggest that the
budgetary support of Rs 25,000 crore sought by the MoIT will
go through a tough scan. “IT does not require too much
money and fiscal support but certainly some very strong policy
measures to rotate money and bring in international currency,
as compared to other sectors where the role of the government
is pretty demanding and private payers are not too keen to
invest. The effort should be to generate money from the market,”
feels N K Singh, member Planning Commission.
The MoIT itself exudes confidence. “We don’t see
much of problem in getting this sum as this is minuscule compared
to the $200 billion required in the next five years. There
is appreciation all around for IT and everyone wants to give
it a fair chance,” says a source from MoIT.
The industry, however feels that though policy measures are
quite adequate, it is high time for government to carry out
its obligation to the IT industry. “IT will be the single
biggest export sector and wealth earner for Indian and I feel
the IT industry will be a main catalyst to the tune of 50
percent for the growth of entire Indian economy in a few years.
The government should give all necessary support both in terms
of policy and budgetary allocations for the next five years,”
says R Ramaraj, MD and CEO, Satyam Infoway.
So while the government is firm on its stand to ‘part
with power’ and give industry and businesses an increasingly
active role to play, it has to ensure that there is adequate
synergy amongst policy makers, implementers, and hardliners
within the government, or every effort will come to naught.
Merely loosening up policy measures and controls will not
help in getting investment—what is required is proactive
involvement in right earnest.
BOX:
India’s
government will:
* Open up telecom sector for 100 percent FDI.
* Providing free environment to service providers without
any restrictions on types and categories of services.
* Allow VoIP for ISPs and other players.
* Revamp the National Long Distance Operators (NLDO) policy
to remove entry barriers so as to ensure early investment
in this sector.
* Prevail upon DoT to make the network interconnect regime
free, without any permissions required.
* Relax/modify EXIM policy issues—customs duty will be
made technology neutral, variation on custom duty on equipment
for service providers will be tackled.
* Co-ordinate with TRAI to make it mandatory for MTNL and
BSNL to unbundle the local loop and allow other service providers
to co-locate their equipment like DSL.
* Provide infrastructure status to the entire IT sector.
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