The Hindu Business Line : Uncertainty continues to haunt SMEs

Bangalore, July 6 The expansion plans of small and mid-sized IT and BPO companies could be impacted by the uncertainty posed by the second successive one-year extension of tax holiday. While a section of the industry has welcomed the move that would provide some respite to the crisis-hit industry for an additional year, others have said it is too short a period to plan for future expansions.

“It has left us in a limbo,” said Mr Partha DeSarkar, CEO, Hinduja Global Solutions. “How can we take long-term decisions based on such short-term policies?” From this perspective, the measure is ineffective, he added.

Mr DeSarkar said companies need clarity for future vision.

“Two successive extensions can hardly tell us what we should be doing,” he said. Companies would be unsure whether they want to expand in a Special Economic Zone (SEZ) or in Software Technology Parks of India (STPI) units.

The measure would give some boost to the small and medium companies, said Mr B. Ramaswamy, President and Managing Director, Sonata Software. “On the STPI account we expected that it would be for three years at least for the Small and Medium sized Businesses (SMBs). From that point of view, it is disappointing,” he added.

When a company wants to expand its operations it generally requires between 18 to 24 months to commit to an infrastructure, said Mr Rostow Ravanan, Chief Financial Officer, MindTree Ltd. Mr Ravanan said the extension of the scheme would not be useful unless the 10 year cap on the scheme is also raised, which has not been done. “Therefore for older companies like us there is no benefit,” he added.

Mr Som Mittal, President, Nasscom, said the benefits available for one year would help the industry mitigate the impact of the current economic environment and help India retain its competitiveness.

“A three to five year extension would have been beneficial for Small and Medium Enterprises and also Tier2/3 towns. We will continue our dialogue with the Government on the issue,” he added.