The government has released the Union Budget 2023. Under the budget, the government has allocated Rs 1.23 trillion for telecom and postal projects. The total allocation includes Rs 975.79 billion for the Department of Telecommunications and Rs 258.14 billion for postal projects.
Meanwhile, according to budget documents, the government has raised the non-tax revenue collection estimate from the telecom sector by 30 per cent to Rs 894.69 billion in 2023-24. The government has revised the revenue estimate to Rs 687.84 billion for the current fiscal from an earlier projection of Rs 528.06 billion in the previous budget. The actual revenue of the government in 2021-22 was Rs 858.28 billion.
Key highlights of Budget 2023 for telecom industry
- The government will set up 100 labs to develop applications using the newly-launched 5G services. The labs will cover, among other things, applications such as smart classrooms, precision farming, intelligent transport systems, and healthcare.
- Bharat Sanchar Nigam Limited (BSNL), which is expected to roll out 4G and 5G services this year, will get Rs 529.37 billion capital infusion from the government in 2023-24.
- The government has allocated Rs 21.58 billion for optical fibre cable-based network for defence services and Rs 7.16 billion for telecom projects in the northeastern states.
- Mobile phone production in India has increased from 58 million units valued at about Rs 189 billion in 2014-15, to 310 million units valued at over Rs 2.75 trillion in the FY 2022-23. To further deepen domestic value addition in the manufacture of mobile phones, the government has proposed to provide relief in customs duty on import of certain parts and inputs such as camera lens and continue the concessional duty on lithium-ion cells for batteries for another year. According to the budget document, the 2.5 per cent basic customs duty on camera lens and its inputs/parts for use in manufacture of mobile phone cameras has been done away with.
- Three centres of excellence for artificial intelligence (AI) will be set up to realise the vision of ‘make AI in India and make AI work for India’. This will be set up in top leading educational institutions. Leading industry players will partner in conducting inter-disciplinary research, develop cutting-edge application and scalable problem solutions in the areas of agriculture, health and sustainable cities. As per the budget document, this will galvanise an effective AI ecosystem and nurture quality human resources in the field.
- The government proposed to introduce two new provisions for tax deducted at source (TDS) on online gaming – levy of 30 per cent on payment of net winnings in a financial year and removal of the current Rs 10,000 threshold for the levy of TDS. In case the amount is not withdrawn from user account, tax shall be deducted at source at the end of the financial year. However, for lottery and crossword puzzle games, among others, the threshold limit of Rs 10,000 for TDS will continue.
Commenting on the budget, Lt. Gen. Dr. S.P. Kochhar, director general, Cellular Operators Association of India (COAI), said, “The Union Budget 2023-24 has introduced some provisions which are expected to indirectly have a positive impact on the telecom sector. The budget lays emphasis on innovation, job creation and skilling, with continued push towards Digital India. The capital investment outlay has been increased by 33 per cent to Rs 10 trillion and we hope the same would include development of infrastructure for proliferation of telecom and digital services. We welcome the announcement on setting up of three centres of excellence for artificial intelligence (AI) and 100 labs in engineering colleges for development of 5G applications, which are progressive steps and would help fuel the proliferation of 5G and its ecosystem in the country. The revision of income tax slabs could also help increase disposable income for the people, leading to greater adoption and use of data connectivity services. The industry had requested for some measures to be introduced in the Union Budget 2023-24, to ease the regulatory and financial burden on the sector. We are hopeful that the industry’s suggestions to reduce regulatory levies like license fee, deferring Universal Service Obligation Fund (USOF) contribution till the existing funds are exhausted, exemption of basic customs duty (BCD) on telecom equipment, waiving of goods and services tax (GST) on regulatory payments, refund of input tax credit (ITC), among others, will be considered and addressed by the government during the course of the year. We feel that the government’s support for this industry is crucial, especially when 5G is slated to be an enabler for several other verticals – for increasing efficiencies and output across various applications and use cases – whether for governance, businesses and public utilities, as well as in our pursuit of achieving Industry 4.0. telecommunications is the backbone of India’s digital economy, as established by the success of the JAM trinity – Aadhar, Jan-Dhan Yojana and penetration of mobile telephony, which has propelled financial inclusion in recent years. The 200 per cent increase in rural internet subscriptions between 2015 and 2021 in comparison to 158 per cent in urban areas bears testimony to the efforts being made jointly by the government and the industry for enhancing pan-India digital connectivity. We will continue to collaborate and actively contribute to catalyzing the government’s dedicated digitisation efforts to enhance digital penetration and bridge the digital divide to help India achieve its vision of becoming a $5 trillion economy by 2024-25.”
Meanwhile, T.R Dua, director general, Digital Infrastructure Providers Association (DIPA) praised the government’s plan to establish 100 labs for 5G application development in engineering institutions with a focus on business models and job opportunities. He said, “These labs will support the growth of 5G enterprise use cases, including smart classrooms, precision farming, intelligent transport systems, and healthcare. The budget for 2023 aims to promote job creation through initiatives like Pradhan Mantri Kaushal Vikas Yojana 4.0 and the establishment of 30 Skill India international centres. These centres will help expand businesses and industries, leading to more job opportunities. The Skill Certification Scheme aims to provide industry-relevant skill training to a large number of Indian youth and to assess and certify individuals with a prior learning experience. DIPA supports the government’s efforts toward green energy and the allocation of funds for the National Green Hydrogen Mission. A huge number of telecom sites have already adopted energy-efficient solutions and is a significant contributor to the growth of Li-ion energy-storage solutions. However, DIPA expressed disappointment that the demand for a Rs 180 billion input tax credit refund by telecom infrastructure firms was not addressed in the Budget 2023. This denial is causing a significant financial burden on the infrastructure industry. Additionally, the 20 per cent basic customs duty on imports of telecom equipment is affecting the cost-effectiveness for telecom companies and DIPA suggests granting exemption from this duty to support investment in the industry.”
Further, Arvind Bali, chief executive officer, Telecom Sector Skill Council, said, “The government’s focus on the skill development of India’s potential youth talent through initiatives like National Education Policy (NEP), Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 4.0 for skilling in niche new-age technologies like 5G, AI, 3D printing, drones, coding, mechatronics, robotics, and IoT draws further impetus to the ongoing efforts. Blue and grey-collar job demand in India grew by up to four-fold in 2022. Annual demand in telecommunications and 5G have increased by 33.7 per cent in September 2022. There was a demand for 1.3 million workers in FY 2022-23 which is growing each year. New use-cases including cloud computing, robots, and IoT are also seeing a sharp rise in hiring. We believe the initiatives will be beneficial to close country’s growing demand-supply gap of technical talent workforce. With the government’s push to establish 30 Skill India international centres, 100 premier labs for developing applications to use 5G services, and centres of excellence for AI, India has the potential to deliver talent not only across domestic markets but also to the international market. The initiative like the Eklavya Model Residential Schools (EMRS) is also a progressive move by the government to uplift the tribal population and empower the students to take up new job opportunities.”
Additionally, Sudhir Kunder, country director, DE-CIX India, said, “Successes in the previous budget and our transformation into the ‘AmrutKal’ were highlighted today by the Financial Minister. It is encouraging to see continued support for digital payment systems, digital document integration, and the creation of a digital public infrastructure for agritech and fintech. Introduction of digital lockers, digital Library, e-courts, and the promise of one hundred research labs to create applications for 5G were the landmark announcements. Empowering youth with 30 Skill India Centers imparting skills like coding, AI, robotics, mechatronics, IoT, 3D printing, and drones with other next-gen cutting-edge technologies will make them economically independent. Establishing three institutes of excellence for AI development is a major step forward for our country and will help to create AI in India and make AI work for India. Summarising, the budget makes it abundantly clear that 2023 will be the year of digitalisation, with demands for digitalisation rising throughout the year. As an interconnection platform, DE-CIX India is pleased to shoulder the duty of ensuring the long-term viability of India’s digital infrastructure as we make interconnection easy. Anywhere.”
Also, Hitesh Garg, India country manager, NXP Semiconductors, said, “The government has brought a progressive budget that will support green mobility and innovation in the automobile sector. Major steps like National Green Hydrogen Mission and extending the subsidy on electric vehicle (EV) batteries will help the country to have a seamless transition towards a low carbon intensive and fossil fuel dependent economy, empowering the country to achieve its net zero goals. The three centers of excellence for AI to enable ‘Make AI for India’ and ‘Make AI work for India’ will stimulate an effective AI ecosystem and nurture quality human resources in the field of technology. It will also boost the public-private partnership in conducting research and developing cutting-edge applications and scalable solutions across industries. In line with the government’s vision of digital India, all these initiatives will help us transform into a digitally empowered society and knowledge economy.”
In addition, Manoj Paul, managing director, Equinix India, said, “With focused initiatives to promote the usage of AI and 5G, the Indian government is geared up to leverage the advanced technologies for building futureproof businesses and strengthening the digital ecosystem in the country. The emphasis on digitisation results in a high demand for tech talent that’s technologically adept and skilled in digital know-how. With the three proposed centres of excellence for AI and 30 new international Skill India centres, our government is all set to empower the youth with advanced tech skills. Additionally, the usage of 5G services by the proposed labs in engineering institutions will create a new range of opportunities, business models, and employment potential, lending a widespread purpose to 5G and increasing the need for a robust digital infrastructure. We welcome these government measures as we believe our digital infrastructure will play a pivotal role in boosting India’s digital growth. With our global climate neutral goal and 100 per cent renewable energy coverage target, along with our green data center design innovations, Equinix can build and operate resilient, efficient and sustainable data centers to support the government’s green growth focus and the National Green Hydrogen Mission that can help transition to low carbon intensity and reduce dependency on fossil fuel inputs.”
Meanwhile, Ankit Agarwal, managing director, STL, said, “Today’s budget was a much awaited one as we were looking forward to growth-inducing changes. It is heartening to see that the government is well aligned with the needs of the country. I have three key takeaways from the budget 2023 which are: Capital investment in infrastructure, empowering rural India and an impetus on skilling. All three hinge on a robust digital economy as it is at the heart of all infrastructure and people related interventions in the country and the world over. The increase in the capital expenditure outlay by 33 per cent to Rs 10 trillion, which is 3.3 per cent of the GDP is expected to give a major push to infrastructure and job creation. It will help the government’s CAPEX get aligned to the Organisation for Economic Co-operation and Development (OECD) average of 3.5 per cent of nominal GDP. Additionally, the government’s announcement to put Rs 100 billion per year for urban infra development will further stimulate overall economic development. For both of these, there would be an additional push towards digital infrastructure to create smart cities, imparting education and so on and so forth. One of the most meaningful features of this budget is the finance minister Nirmala Sitharaman and the government’s impetus on growing the agri tech industry. Almost 85 per cent of farmers operate less than 5 acres of land. Around 36 million hectares of agri-land has been affected by natural calamities over 6 years (size of one Himachal Pradesh each year). Imagine a world where companies are able to integrate IoT sensors and analytics to improve the lives of farmers! It is an indication of a truly inclusive country in the making. Fibre technology will be one of the key steps toward digital transformation for the agriculture sector in India. Last but not least, the pandemic has intensified the need for a tech-enabled skilled workforce. Government, training institutes and corporates must ensure that they have a good grasp of the changing dynamics. Budget 2023 has put an important focus on skilling and training youth for the future for India and for the world. Announcement of setting up 100 labs for 5G services-based application development will tap employment potential and business opportunities in the country. We also whole heartedly welcome the government’s decision to move in favour of the telecom optic fibre industry by maintaining the customs duty rate on its raw material which we believe it will help the domestic industry to strengthen its position in the global arena and transform the country into a global manufacturing hub. Post pandemic, the approach to welfare and growth has naturally been influenced by technology and the power of digital and it is this power that we will harness to become one of the top three economies in the coming years.”
According to the Internet and Mobile Association of India (IAMAI), “For the past few years, the Union Government has meticulously built up the Indian digital ecosystem, with a great investment of effort and resources to develop some unique digital assets such as Aadhar, UPI and Digi Locker. The good work continues in form of simplification of the know-your-customer (KYC) and unified filing process by strengthening facilities under Digi Locker and the announcement for the entity Digi Locker, which takes public digital goods to the next level. As a result, India has emerged as a major digital centre and a global example. This has also been driven by the fast-rising internet user base and the emergence of a vibrant digital service market. However, in recent times there have been two critical concerns for the digital industry: first, the growth rate of digital penetration has slowed down; and secondly, there is a clearly identifiable digital divide in India with some sections getting marginalised as they are not onboarded digitally. Some of the announcements such as Digital Public Infrastructure for Agriculture, National Digital Library for Children and Adolescents, Bharat Shared Repository of Inscriptions (Bharat SHRI), online training platform iGOT Karmayogi to provide continuous learning opportunities for lakhs of government employees to upgrade their skills and facilitate people-centric approach, the establishment of e-Courts, are programmes that will take the digital to the marginalised. Similarly, creating one hundred labs for developing applications using 5G services is another visionary initiative that will help build the use cases for the future upon which digital service businesses can be built. IAMAI concurs with the government’s vision of equipping India’s new generation with digital skills so they can utilise new technologies such as AI, IoT, VR and robotics to compete in global markets, thus enhancing India’s economy. IAMAI also welcomes the Government’s decision to set up three centres of excellence for AI that will facilitate inter-disciplinary research and develop cutting-edge applications. The association appreciates the various futuristic initiatives such as promotion of EVs and agritech, that not only promise a digital transformation of two of the largest sectors in India, but also help future-proof these sectors by building the launchpad for future entrepreneurial initiatives in these sectors. While the budget seeks to build and leverage digital platforms, it is also cognizant of the needs of the indigenous digital industry. The association would like to congratulate the finance minister for allowing start-ups to extend the date of incorporation for income tax benefits from March 2023 to March 2024 and provide the benefit of carrying forward losses on change of shareholding of start-ups from seven years of incorporation to ten years. Mobile handset manufacturing has been in public discourse in recent times, and the budgetary relief in customs duty on the import of certain parts and inputs such as camera lenses and continuation of the concessional duty on lithium-ion cells for batteries for another year is welcome developments in that regard. However, IAMAI believes that there are certain persisting systemic challenges which impede the growth potentials of start-ups or even the electronics system design and manufacturing (ESDM) sector in India. While the budget announcement marks the correct intention and fiscal incentives, other ministries need to complement the finance minister’s grand vision to help realise the vision shared by her.”