Kerala IT industry to bear the brunt- Hindu article

The Group of Technology Companies (GTECH), a strategic grouping of IT firms in Kerala, has urged the Union Government to extend the Software Technology Parks of India (STPI) scheme by a few more years for small and medium enterprises.

Addressing reporters, GTech president V.K.Mathews and Secretary Anoop Ambika said Kerala would have to bear the brunt if the Centre decided to wind up the scheme by March 2011. “Over 200 small and medium enterprises in the state would lose the existing tax benefit that is being reinvested for development of infrastructure and generating fresh employment. Many of these companies will be forced to shut shop”.

Mr.Mathews said the STPI scheme was introduced to promote exports from India. “IT companies made good use of the scheme to improve efficiency, productivity and profits”. He said extending the scheme to Tier 2 and Tier 3 cities alone would help to broadbase development across the country.

Mr.Anoop said the decision to wind up the STPI scheme was driven solely by the compulsion to step up tax revenue. “The Government should realise that 50 per cent of the expenses of a small company are spent on the payroll, a portion of which goes back to the exchequer as taxes”.

Mr.Mathews said winding up the STPI scheme would force companies to move out to Special Economic Zones. This, he observed, would result in poor utilisation of the existing infrastructure.

Smaller companies beginning to make profit will now find themselves having to pay tax. This will affect their capacity for reinvestment.

GTech is seeking the Prime Minister’s intervention to extend the STPI scheme. One of the problems in mobilising industry associations for the cause is that many of the former STPI beneficiaries have grown out of the ambit of the scheme to become major players.

GTech proposes extending the STPI scheme to SMEs so that they continue to benefit from tax incentives.

As STPI tax breaks end, tech SMEs dial SOS- Economic Times article

THIRUVANANTHAPURAM: Those whose ears are close to the multitude of small and medium sector IT companies in the country can already hear a moan, as the date nears for the end to sops under the Software Technology Parks of India (STPI) scheme. That moan is almost becoming a collective sigh as the days are ticking by towards its close in February.

The STPI scheme, launched in 1991, gave a flat 10-year tax exemption on profits to IT/ITES units, and the STPI centers acted as single-window facilitators in providing services to software exporters and incubation infrastructure to SMEs.

IT industry players say that if the finance minister is not convinced about the need to extend the scheme any further, SME tech companies will be in serious trouble. And the biggest noises for an extension of the scheme is coming from Kerala, where more than 80% of tech companies are in the SME sector, and a number of them are new entities who have not got the 10-year benefit. Kerala’s 300-odd tech companies employ roughly 40,000 staff, and over 70% of the companies have less than 100 staff.

“It is going to severely deplete the investible surplus of SMEs. For the bigger IT companies who are out of the STPI scheme, this may not matter, but if the scheme is ended it would be like saying if you are big you are okay, but if you are small, go away”, says VK Mathews, CMD of Technopark-based IBS.

According to Anoop P Ambika, MD of Kreara Solutions based here, “the government need not take it as a black and white issue. Why not let the SMEs continue to benefit from the scheme according to some norms, so that they are not faced with a crippling cash crunch?”, he asks.

The Group of Technology Companies (GTech) in Kerala has suggested that the tax exemption scheme be continued under certain conditions, so that the deserving ones benefit. One suggestion is to extend the STPI scheme for companies operating in tier-2 and tier-3 cities, which will also take India’s IT boom to more locations. Another suggestion is to allow a prescribed time limit for tax exemptions for companies that have established recently, so that they too can avail of the scheme for a longer time like many others have enjoyed.

GTech is planning to take Nasscom’s help in taking up the issue with the PM and finance minister, but officials say that they would be personally pushing the issue before the PM. “Many Nasscom members are too big to be concerned with the ending of the STPI scheme, and it is important that we take an active interest in lobbying for all SMEs in the country”, they said.

A positive decision from the centre, they say, will make a significant contribution to the employment levels and overall economy, considering that the Indian IT sector including BPO, KPO and call centers employ close to 1 million hands. While the top 100 firms may contribute 80% of Indian IT exports, GTech officials point out that the remaining companies account for roughly 65% of the employment.

HCL Infosystems signs agreement for R & D Centre in Technopark

Tvm: HCL Infosystems, India’s premier hardware, services and ICT system integration company today acquired the formal possession of 2 acres of land for setting up a state-of-the-art facility in Technopark, Thiruvananthapuram. The Research and Development Centre will be set up at Technopark Phase III which is coming up near the Technopark campus.
An agreement to lease out the land was signed today by V K Bhal, Corporate General Manager, HCL Infosystems with Mervin Alexander, CEO, Technopark in Trivandrum. The new facility has been planned as per the company’s expansion strategy. The centre will be creating job opportunities for around 1,600 professionals over the course of next 9 years. The facility will involve setting up of regional skill development centre, state-of-the-art data centre facility, networking lab, product development lab, software development centre and remote support centre.
Speaking on this occasion, George Paul, Executive VP, HCL Infosystems said, “We commend the vision of the Government of Kerala to fuel investments in igniting the growth of IT sector in the state and are honoured to have got this opportunity to partner in the state’s growth story. This is yet another chapter in the transformation journey of HCL Infosystems as we add more capacity to build a stronger ICT solutions ecosystem.”
Spread over an area of 2 acres, the proposed facility of over 160,000 Sq ft will be built over three phases. The company already has more than 14 centres in India and would be starting the construction process of the new facility soon.
Dr. Ajay Kumar, Principal Secretary IAS (IT); Sheela Thomas IAS, Principal Secretary to CM; Korath Mathew, Director, Akshaya and Binu Sanker, CEO, GTech were among those present on the occasion.
Anil PhilipKerala IT News

STPI scheme closure will hit State hard: Gtech

Our Bureau
Thiruvananthapuram, Dec.7
The predominant presence of small and medium IT companies in the State will make Kerala the hardest hit if the Software Technology Parks of India (STPI) scheme is allowed to expire in March 2011.
The Group of Technology Companies (Gtech), a strategic grouping of IT companies in the State, is seeking the Prime Minister's urgent intervention in the matter, and save hundreds of small and medium businesses from folding up.
Not convinced
Speaking to newspersons here, Mr V. K. Mathews, President, and Mr Anoop Ambika, Secretary, Gtech, said the closure of the STPI scheme would cause an estimated 85 per cent of the 200-odd small and medium companies in the State to close down.
Since most of the erstwhile STPI beneficiaries have since turned big players and overgrown the flagship scheme, Gtech is finding it difficult to mobilise leading industrial bodies to engage the Union Government on their behalf.
While the Union Ministry of Commerce is convinced that there is indeed a case for extending the STPI scheme, the crucial Ministry of Finance has not taken a view perhaps because of the tax implications from the move.
Extension sought
The Gtech suggested that the scheme be extended for another seven years to the SMEs so that they continue to receive tax incentives.
Explaining why SME companies should be allowed to enjoy STPI benefits, Mr Ambika said as much as 50 per cent of the overheads in IT companies are accounted for by payroll expenses. In the traditional sector, this was around 10 per cent only.
For instance, while the steel industry pays 18.9 per cent of total revenue as taxes, IT industry pays 20.1 per cent as taxes even with the STPI incentives that they receive.
This happens because 50 per cent f the expenses of any IT services company is pay roll expenses and 20-30 per cent of the salaries goes back to the Government in the form of income taxes.
While the top 100 firms would be contributing about 80 per cent of total IT industry output in the country, some 4,500 SMEs, despite their 20 per cent contribution, account for almost 65 per cent of total employment.
The National Association for Software and Service Companies (Nasscom) has increasingly been talking about getting Tier 1 and Tier 2 cities under the STPI umbrella, Mr Mathews said. This should be the way to go in Kerala as well.
Asked if pulling the plug off the STPI facility could mean increased focus on Special Economic Zone-led model of development, Mr Mathews said that inconsistencies in policy thinking fail to inspire confidence in the benefits expected to flow from SEZs.
Withdrawal of the STPI scheme would also throw up the larger issue of leaving the built-up infrastructure to rust, Mr Ambika said.

Kochi to host India ICT Summit 2010

Special Correspondent

Thiruvananthapuram: Over 400 delegates, including politicians, government officials, leaders from the private sector, trade associations and the media, are expected to attend the 2010 edition of the India ICT Summit to be held at Hotel Le Meridien, Kochi, on December 14 and 15.

Organised by the Confederation of Indian Industry, the summit is a high profile ICT event with several eminent national and international industry stalwarts slated to speak in six different sessions. The theme of the event is ‘Changing Role of India – Partnering for Transformation.'

“This is an extremely relevant topic, signifying a major challenge faced by the IT Industry in India today. Kerala, with its large pool of educated youth, should be able to play a major role in the next wave of outsourcing by global enterprises,” said V.K. Mathews, convener, CII Kerala ICT Panel & Chairman India ICT Summit 2010.

The summit will have over 25 eminent personalities and thought leaders from India and abroad discussing topics, including international business opportunities for Indian IT companies post recession, the use of technology to transform global businesses and how the industry should prepare for the second wave of outsourcing.

The event will be inaugurated by V. Narayanasamy, Minister of State, Planning & Parliamentary Affairs. Some of the key speakers included Shashi Tharoor, MP, Andrew Simkin Consul General, U.S., Ajith Singh, Consul General, Singapore, Mike Nithavrianakis Deputy High Commissioner, U.K., Hans Burkhard Sauerteig Consul General, Germany, Dr. P Prabakaran Chief Secretary, Government of Kerala and Kris Gopalakrishnan, CEO, Infosys.

The U.K. is the partner country for the event and the government of Kerala is the partner State.

Details of the event are available on www.indiaitsummit.com.