The Budget has outlined a few proposals that could interest domestic information technology (IT) companies. They include the setting up of an eBiz platform that will make all investment and business clearances available on a single portal, with a payment gateway. All central government ministries and departments are expected to integrate their services with this platform.
Other proposals include continuing spends on e-governance, IT training in rural schools and a rather vague statement about “reviving” special economic zones (SEZ).
While frontline IT companies derive 3-5 per cent of their revenues from the domestic business, CMC derives a third of its revenues from its Indian clientele, comprising several government agencies.Companies stand to gain
Infosys is a significant player in the e-governance space as it now maintains the portal of the Ministry of Corporate Affairs, handling electronic company filings.
The new eBiz portal will see IT companies vying for a slice of the pie, more so as it is expected to go live by December this year.
When e-governance initiatives are given a facelift, companies such as CMC and Wipro Infotech, which are prominent names in this space, and which have won multi-year deals from several state agencies, would look for greater traction.
Given that the unique identity scheme has not been scrapped, as was feared, Mindtree, which is a key player in this space, will look for newer contracts.
The allocation of ₹500 crore for IT training in rural schools and delivering government-to-citizen services, among other things, will also mean business.
So, the likes of NIIT and CMC, which are involved in IT training, will look to make inroads into such deals. CMS Computers, an unlisted firm, and Reliance Communications are companies that are part of e-governance delivery projects in Gujarat. These firms may also be vying for a share of these deals.SEZ revival
The budget mentioned a revival of SEZs, which may be welcomed by IT companies.
Most of them, both large as well as mid-sized ones, now pay full taxes of 26-28 per cent, as tax incentives given to the sector had run their course by 2011. This is well above the MAT rate of 18.5 per cent.
But given the government’s finances, it is unlikely that tax incentives may be offered to the IT sector, more so as it is one of the most profitable (18-27 per cent EBIT margins) industries in the country.
The domestic IT segment, which was hit over the past few years by the slow decision-making of the United Progressive Alliance government in awarding contracts, and which also faced issues with delays in payment, may now get a fresh thrust with a new regime in place.