The Union Budget 2023 has assured the telecom sector of a reasonable level of policy and financial support. The government has allocated Rs 1.23 trillion for telecom and postal projects, including Rs 975.79 billion for the Department of Tele­communications.

The budget estimates that non-tax revenue collections from telecom will amount to Rs 894.69 billion in 2023-24. It presents a revised revenue estimate of Rs 687.84 billion for the current fiscal year 2022-23, against an earlier projection of Rs 528.06 billion. The actual revenue collected in 2021-22 was Rs 858.28 billion.

There are multiple telecom-related an­­n­ouncements in Union Budget 2023, in­cluding the following:

  • The government will set up 100 labs to develop applications using the 5G platform. These labs will cover applications such as smart classrooms, precision far­m­­ing, intelligent transport systems and healthcare.
  • PSU Bharat Sanchar Nigam Limited, wh­i­ch is expected to roll out 4G and 5G services in this calendar year, will get a ca­pital infusion of Rs 529.37 billion in 2023-24.
  • The government has also allocated Rs 21.58 billion for an optical fibre cable-based network for defence services and Rs 7.16 billion for telecom projects in the Northeast.
  • Handset 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 2022-23. To enable better value addition, the budget proposes to provide relief in customs duty on the import of certain parts and inputs such as camera lens, and it continues the concessional duty on li­thi­um-ion (Li-ion) cells for batteries. The 2.5 per cent basic customs duty (BCD) on camera lens and its inputs/ parts for use in the manufacture of mobi­le phone cameras has been removed.
  • 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”. These are to be set up in leading educational institutions. Le­a­ding industry players will be asked to partner in conducting interdisciplinary research and develop cutting-edge applications and solutions in sectors such as agriculture, health and sustainable cities.
  • The budget proposes two new provisions for tax deducted at source (TDS) on online gaming. One is a levy of 30 per cent on payment of net winnings in a financial year, and the other is the re­mo­val of the current Rs 10,000 threshold for the levy of TDS. In case the amount is not withdrawn from the user account, tax will be deducted at source at the end of the financial year. However, for lotteries, crossword puzzles, etc., the threshold limit of Rs 10,000 for TDS will continue.

The general reaction from the industry and stakeholders has been positive, but there is disappointment too in terms of demands that have not been met. Lt Gen. Dr S.P. Kochhar, director general, Cell­u­lar Operators Association of India, says, “Union Budget 2023-24 is expected to indirectly have a positive impact on the telecom sector due to the emphasis on innovation, job creation and skilling, with a 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 will include the development of infrastructure for the proliferation of telecom and digital services. The revision of income tax slabs could also help increase disposable income, leading to greater adoption and use of data connectivity services.”

Kochhar also pointed out that the industry had requested for some measures to ease the regulatory and financial burden. These included reductions in levies such as licence fee, deferring of the Universal Ser­vice Obligation Fund contribution till the existing funds are exhausted, exemption from BCD on telecom equipment, waiving of the goods and services tax on regulatory payments, and refund of input tax credit (ITC). He remained hopeful that these wo­uld be considered.

Meanwhile, T.R. Dua, director general, Digital Infrastructure Providers Asso­ciation (DIPA), praised the plan to establi­sh 100 labs for 5G application developme­nt and the likelihood of job creation th­ro­ugh initiatives such as the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 4.0 and the establishment of 30 Skill India international centres. He noted that a lar­ge number of telecom sites have already adop­ted energy efficient solutions and th­us telecom is a significant contributor to the gro­wth of Li-ion energy storage solutions.

However, DIPA expressed disappointment that the demand for the Rs 180 billion ITC refund by telecom infrastructure firms had not been addressed in the budget. This is creating a significant financial burden. Also, the 20 per cent BCD on te­le­com equipment imports impacts cost effectiveness, whereas duty exemption would support investment.

Arvind Bali, chief executive officer, Telecom Sector Skill Council, says, “The government’s focus on skill development through initiatives such as the National Ed­ucation Policy and PMKVY 4.0 for ski­lling in technologies such as 5G, AI, 3D printing, drones, coding, mechatronics, robotics and IoT gives further impetus to the ongoing efforts. The demand for blue- and grey-collar jobs in India grew up to fourfold in 2022. The annual demand for 5G and telecommunications increased by 33.7 per cent in September 2022. There was a demand for 1.3 million workers in 2022-23, and this is growing each year. Areas such as cloud computing, robotics and IoT are also seeing a sharp rise in hiring. We believe these initiatives will be beneficial in closing the gap in the technical workforce. The Eklavya Model Resi­dential Schools are also a progressive initiative to uplift the tribal population and empower students to take up new opportunities.”

Meanwhile, Ankit Agarwal, managing director, STL, says, “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 to­wards digital transformation for the agricultural sector. The pandemic has intensified the need for a tech-enabled skilled work­force. The 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 youth skilling and training for the future. 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, will help the domestic industry in streng­thening its position in the global arena and transforming the country into a global manufacturing hub.”

The Internet And Mobile Association of India (IAMAI) issued a statement that read, “The union government has meticulously built up the Indian digital ecosystem, with a great investment of effort and resources to develop unique digital assets such as Aadhaar, UPI and Digi Locker. The good work continues in the form of si­mplification of the know-your-customer and unified filing processes by strengthening facilities under Digi Locker and the announcement of Digi Locker itself, whi­ch takes public digital goods to the next level. As a result, India has emerged as a ma­jor digital centre. This has also been driven by the fast rising internet user base and the emergence of a vibrant digital services market.”

For the digital industry, there have been two critical concerns: the slowdown in the growth rate of digital penetration and the digital divide in the country with some sections getting marginalised. These concerns may now be addressed. As the IAMAI notes, “Announcements of progra­mmes such as Digital Public Infrastructure for Agriculture, the National Digital Li­brary for Children and Adolescents, the Bharat Shared Repository of Inscriptions, the online training platform iGOTKar­ma­yogi to provide continuous learning op­portunities for lakhs of government em­ployees to upgrade their skills and facilitate a people-centric appro­ach, and the establishment of e-courts will take digitalisation to the marginalised.”

The 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. The association notes, “The IAMAI appreciates the various futuristic initiatives such as the promotion of EVs and agritech that promise a digital transformation of two of the largest sectors and also helps future-proof these sectors by building a launchpad for future entrepreneurial initiatives.”

In other moves that could have a positive impact, the finance minister has allo­w­ed start-ups to extend the date of incorporation for income tax benefits from March 2023 to March 2024 and carry forward losses on a change in the shareholding of start-ups from seven years of incorporation to 10 years.

Overall, the budget initiatives will certainly benefit the telecom sector and help develop use cases based on 5G platforms that, in turn, would create employment. As such, we can expect positive externalities to flow from activity in the sector. How­ever, more direct attempts to address the ca­sh crunch in the industry could have been of great help in enabling a faster roll-out of new networks and creating a more competitive landscape.

 

Devangshu Datta