The Hindu Business Line : Extend IT sector `benefits' to manufacturing too

The Government also needs to ensure correction of certain inverted duty structure anomalies where duty on raw materials is higher than on finished products. MR RAVI UPPAL, VICE-CHAIRMAN & MANAGING DIRECTOR, ABB INDIA, HEAD - SOUTH ASIA-PACIFIC REGION.

Corporate India is in good shape. Confidence is high and ambitions are going beyond borders. In fact, the corporate sector is not really looking for sops and handouts as such. What the Government needs to do is to adopt the role of an enabler or facilitator.

It should concentrate on larger issues like infrastructure, bureaucratic hurdles and simplification of procedures. The Government also needs to address strategic matters like facilitating technology development and addressing the human resource challenge for skilled manpower.

Speedy implementation of administrative and fiscal reforms and doing away with unnecessary non-value added and antiquated practices will go a long way in allowing industry to grow. For example:

Deemed exports excise duty is now being collected and subsequently refunded - this is a non-value added administrative exercise that should be discontinued;

As we reduce Central Sales Tax and move towards its eventual displacement in the new VAT regime, C-form submissions should be done away with; and

All VAT States should be connected to the LTU (large taxpayer unit) for sales tax purposes in order to leverage the benefits of this concept taxes like fringe benefit tax and other levies, which are an administrative nightmare don't add any significant value to the exchequer and should be abolished.

On the whole the Government should simplify the tax structure and take a single corporate tax, through a single window, even if it means revising the rate marginally to compensate for any specific merging areas.

The Government must significantly increase infrastructure investment from the current level of merely 4 per cent to double digits. At the same time, it needs to cut down on its own expenditure by dismantling industry oriented ministries that have lost relevance in a free market economy. All that is really required is an effective regulator as we have seen in sectors like telecom. This would also help address our mounting fiscal deficit.

Power sector

Coming to the power sector, to give the Government its due, several key policy initiatives have been put in place at a federal level. We need to step up the pace of execution by de-politicising the sector, ensuring viable private participation and instilling a sense of implementation urgency, at the Central and more importantly the State level.

We must remember that power is an extremely investment intensive sector which offers moderate returns. So, in order to attract investment from the private sector, it should not be burdened with taxes that add to the cost of capacity creation and eventually get reflected in the price per unit paid by consumers. Special treatment could also be considered - for instance on Cenvat, across power generation, transmission and distribution projects, regardless of size.

Manufacturing sector

Our future lies in a strong manufacturing sector and the Government must do all that is necessary to facilitate its growth. We need to implement a National Manufacturing Policy in a time-bound manner, to stimulate industrial growth.

The Government also needs to ensure correction of certain inverted duty structure anomalies where duty on raw materials is higher than on finished products.

The real objective of setting up special economic zones should not be lost and focus should be more on the provision of world-class infrastructure to facilitate industrial development, rather than on mere tax incentives.

Further, if India's exports have to grow, the manufacturing sector will be a key driver, so the Government must incentivise this effort. Benefits available to the IT sector (investment allowance, accelerated depreciation, export incentives) should also be extended to manufacturing.

New industrial undertakings

Income-tax incentives for profits from new industrial undertakings should be exempt for a minimum of five years to encourage new business initiatives.

R&D efforts should be incentivised to ensure that we stay at the forefront of technology and innovation.

Finally, I would like to say that given the maturity of our economy, the Union Budget exercise should not be treated as a `great annual event' with wish lists and expectations of major policy initiatives. What needs to be done should happen during the course of the year!

The author is Vice-Chairman & Managing Director, ABB India, Head - South Asia-Pacific region.

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