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Journalism of Courage
New Delhi, May 14: The Ministry of Finance (MoF) has withdrawn all custom duty concessions to the telecom industry as announced in the Union Budget for 1999-2000.
The department of revenue issued a notification on Thursday withdrawing the duty exemption on "apparatus for carrier current line systems or digital line systems-HDSL system" which was announced in this year’s Budget. The concessional duty regime was initially introduced in 1998, with finance minister Yashwant Sinha deciding to continue with the scheme for the second year running. The equipment is crucial for network implementation, as it based on wireless-in-local loop (WLL) technology and allows quicker setting up of a network by bypassing the need to lay underground copper or optical fibre cables.
“The action on the part of the department of telecommunications (DoT) and insistence of communications minister Jagmohan will make the projects of basic operators further unviable,” said Association of Basic Telecom Operators (ABTO) secretarygeneral S C Khanna, adding, “it is a death blow in many ways to the entire basic telecom industry. The finance ministry and the DoT have jointly driven the last nail into the basic telecom coffin.”
However, domestic telecom equipment manufacturers have received a major shot in the arm with the finance ministry rolling back all duty concessions on the import of HI-density subscriber line (HDSL) apparatus, a critical input for basic telecom projects.
Under the scheme, a concessional duty of 20.32 per cent duty was levied on import of such equipment. This included a basic duty of 5 per cent, a surcharge of 0.5 per cent and a countervailing duty (CVD) of 16 per cent. With the withdrawal, importers will now have to pay a basic duty of 25 per cent, surcharge of 2.5 per cent, CVD of 16 per cent and a special additional duty (SAD) of 4 per cent. The SAD is applicable in cases where the concessional duty is not applicable.
Khanna of ABTO said the entire approach of the DoT over the past few years towardsprivate basic telecom operators is plainly aimed at ensuring that there is no competition. It is nearly a decade since the process of inviting private sector involvement in telecom sector started. The national telecom policy of 1994 was primarily aimed at improving the teledensity across the country and providing the people with cost-effective and efficient access to communications.
The objective remains unfulfilled, khanna said. Basic telecom companies have been fighting a never-ending battle on several fronts: with the DoT, the finance ministry, customs authorities, the ministry of surface transport, local bodies and even misleading propaganda by local manufacturers.
Khanna said withdrawal of concessional duties, which were part of the Union Budget for 1999-2000 and passed by all political parties violates the basic tenets of parliamentary democracy.
Finance minister Yashwant Sinha had, in his Budget speech, accorded project import status to the telecom sector and stated that a basic customs duty offive per cent would be applicable to the sector under project imports. While doing so, the finance minister also met demands of the indigenous industry by imposing countervailing duty on such project imports. With the new circular now, indigenous manufacturers as well as MTNL will be hurt, the association said.
The duty roll-back has major telecom manufacturers overjoyed. "Not only does it provide a fillip to indigenous manufacturers, it will provide an incentive to basic service providers to get quality products at only 25 per cent of the price of imported equipment," said chairman Himachal Futuristic Communications Ltd (HFCL) Mahendra Nahata.
