Minutes of the
meeting of the National Task Force on IT & SD
Date: 25 July 1998
Venue: Vidhana Soudha, Bangalore
The National Task Force on Information Technology and Software Development held a meeting in Vidhana Soudha, Bangalore on 25 July 1998 to discuss issues relating to the development of Information Technology in the State of Karnataka as well as to discuss the status of the IT Hardware Industry in the country and measures required to revive the industry. The list of participants is enclosed as Annexure-I.
Shri Sanjoy Dasgupta, Secretary, Department of Information Technology, Government of Karnataka welcomed the Hon'ble Chief Minister of Karnataka, Shri J.H. Patil, Shri B.K. Bhattacharya, Chief Secretary, Government of Karnataka Shri N. Viswanathan, Principal Secretary (Industries), Government of Karnataka, Professor M.G.K. Menon, Co-Chairperson of the National Task Force, Members of the Task Force and other invitees.
The Hon'ble Chief Minister of Karnataka inaugurated the meeting. In his inaugural address, he mentioned that Bangalore has become the focal point for the growth of Information Technology industry and has become well known worldwide as the Silicon Valley of India. The State Government has given sustained support and encouragement to the industry and entrepreneurs from all over the country have been invited to set up Information Technology Industry in the State. The State Government has set up major facilities like the Electronics City, Software Technology Park of India, Electronic Hardware Technology Parks, KEONICS, in addition to the Central Units like Indian Telephone Industries, Bharat Electronics Limited, Electronics & Radar Development Establishment, among others. Karnataka has been training a very large number of Electronics and Information Technology Engineers and Scientists with world renowned institutions like the Indian Institute of Science in the lead. He assured the Task Force that statistics has shown that the growth of the Information Technology Industry in the State has been steady. The Government has promptly taken measures to strengthen infraststructural facilities in Bangalore inspite of the fast industrial growth in the city. The Chief Minister suggested to the Task Force to work out a supportive policy framework for increased application of IT in mass education, decentralised planning, rural development, Health and other such social sectors benefiting the common people.
Shri Bhattacharya, Chief Secretary, Government of Karnataka outlined the history of growth of the IT industry in the State of Karnataka and described in detail the various infrastructural and promotional support given by the State Government to the IT industries.
Shri Viswanathan, Principal Secretary (Industries), Government of Karnataka, promised to give full support of the State Government for new ventures in the IT industry as well as existing industries wishing to expand their production base.
Professor M.G.K. Menon, Co-Chairperson of the Task Force briefly outlined the terms of reference of the Task Force and the decisions taken at the various meetings of the Task Force so far. He assured that the State Government has full support of the Task Force and the Government of India for the efforts of the State Government in promoting IT industry.
Dr. N. Seshagiri, Member Convener of the Task Force, described the broad features of the 108 recommendations made in the Report of the Information Technology Action Plan. He informed that the Union Government has since approved all the 108 recommendations and that these recommendations have now become policy instruments.
Shri Sudheendra Kulkarni, representative of the office of the Prime Minister in the Task Force, outlined the features of 'Operation Knowledge' approved for implementation as part of the IT Action Plan. He highlighted the Recommendation No. 74 in the IT Action Plan which reads as follows: "A pilot project shall be launched in some lead districts which have already attained universal literacy, with the aim of achieving universal computer literacy in all the secondary schools in these Districts. Along side, the network of educational institutions in these districts will be assisted to maximise the induction of IT in order to create world-class talent at the tope-end of the education pyramid. These pilot projects will be joint initiatives of the local educational institutions, respective State Governments and the Centre. In the first instance, such a pilot project will be launched in Dakshin Kannada and Udupi Districts in Karnataka on a substantive self-financing basis. Within a short time, the same will be extended to suitable districts in other States".
The Afternoon Session discussed at length the problems of the IT Hardware Industry and the need for remedial measures to revive the industry.
The President of Manufacturers' Association for Information Technology (MAIT), Shri Manu Parpia, made a presentation on 'IT Manufacture in India - Opportunities and Challenges" to the Members of the National Task. He observed that the Indian industry today is such that it is easier to import than to manufacture with India's share only 0.1 percent of the global industry. He attributed the decline of the IT manufacturing industry in India to the uncertainties resulting from policy changes every year, making the industry to fight for survival than to contribute to growth. The industry is declining with paltry investment and with no major plants. The total Hardware market in India is a paltry US $ 1720 million with exports contributing to only US $ 275 million. He pointed out that the Tax burden of Central Taxes, State Taxes, Personal Taxes, Corporate Taxes, Income Taxes, etc., is very heavy amounting to a total of US $ 350 million on the industry. The number of people employed in the industry is only 74,000. In contrast, Singapore exported US $ 186 billion in 1997 with Electronics and Information Technology industry accounting for more than 52 percent of the total exports. Similarly, China exported over US $ 151 billion in 1997. The export zone of Guangdong alone contributed to US $ 36 billion of exports and over 25 percent of such exports are IT and consumer electronics. Even Thailand exported nearly US $ 60 billion in 1996 and Malaysia exported US $ 87 billion in 1997. The most dramatic growth has been in Philippines with exports of finished IT products growing from $ 10 million per month in 1996 to over $ 150 million per month in 1997. Compared to this, the total Indian exports is only US $ 33.9 billion with a growth rate of 2.6 percent, the IT manufacture and export being less than one percent of the total exports.
President, MAIT informed the Task Force that Members of MAIT held a series of discussion meetings to introspect, identify the problems being faced by the industry and find out how countries like Philippines, Singapore, Taiwan and China have solved these problems. MAIT has diagnosed the following to be the major problems:
Import/export processes and procedures are archaic, time consuming and designed to slow down.
The Government policies are inconsistent and erratic and based on suspicion and therefore has brought about a high level of uncertainty.
In the Zero Duty regime in the offing, duty on several inputs are likely to be greater than that of finished products.
Drives towards economies of scale are not reflected in the present policies. For example, Export production is separated from domestic production. All the existing schemes are subject to interpretation and hence corruption.
Even in SEEPZ, for each transaction there are 7 signing authorities, 27 document/copies required and 6 record documents on an average. Physical checks and inspection and window-to-window movement for payment of duties create enormous delays in each transaction.
MAIT sincerely tried to suggest to the Government various approaches to stem the crisis. MAIT had even spent nearly Rs. 1 crore for a study by Arthur D Little Inc. for suggesting a viable frame work for the Indian IT Hardware industry. Study teams went to Singapore, Philippines, Taiwan, Malaysia and China to understand how they have solved such problems. It was generally agreed that the hassle-free 'at your service' logistics followed in the 'Subic Bay' of Philippines, the stable duty regime of input at NIL duty followed in the Shenzen Bonded Zone, the completely self-assessment and post-audit/spot-audit based clearances, including that for Customs along with TRADENET based Databases and EDI support followed in Singapore as well as the integrated domestic and export production successfully followed in China should be emulated in India in an appropriate manner. MAIT members also felt that a simple, but effective value addition criteria should be followed in determining who is a real manufacturer and who is a pure trader. All Members of MAIT were unanimous in their demand for sweeping procedural reforms on matters concerning Customs, Excise, Tax Collection, Cargo handling, EXIM procedures, etc.
Shri Ajai Chowdhry, Member, MAIT, made a presentation on domestic hardware manufacturing with particular reference to the shortcomings of the EHTP scheme, infrastructural and procedural bottlenecks, duty regime like SAD, etc. He gave a prescription for ESOP not linked to GDR for hardware industry.
Shri Ashok Soota, Past President of MAIT and Member of the Task Force, advocated that the speed of business should not be hampered by any of the procedures of the Government and therefore all such constraints should be removed. He advocated that all manufacturing, both for exports and for local consumption, should be made in bonded zones independent of locational constraints.
He further stated that being manpower intensive and knowledge intensive, return on capital is one of the highest. He advocated the concept of 'Virtual Factory' where different manufacturers can manufacture different parts in different places with a 'Just in Time' (JIT) coordination without any procedural hassle.
Shri N.R. Narayanamurthy, Member of the Task Force recommended the concept of 'brand equity for India' for moving up the value chain. The country is now operating at the bottom of the spectrum with only $ 40,000 per person productivity and it is necessary to move up the value chain to reach US $ 200,000 per person or higher.
Shri Nautiyal of ITI suggested that the Public sector units should also function as sub-contractors for manufacture wherever it turns out to be profitable for the country.
Shri R.K. Gupta, Managing Director of NDS Systems, Mumbai, stated that the country should aspire to become a high value added manufacturer of peripherals. Also, it is possible to work out a Just in Time large scale manufacture of mother boards in the country.
Shri N. Vittal, Member of the Task Force, advocated that in the long run, the whole country should become a free trade zone. Towards this end, all interim policies for hardware manufacture should keep such a vision in purview.
Shri Inderdeep Singh, President of ELCINA pointed out that for component manufacture on an international scale of economy, infrastructure support has to be given or facilitated on par with more successful countries like Taiwan. Almost a new mini town with self-administration has to be set up for providing such congenial infrastructure to large scale manufacture of components. At present, education on electronic components and materials does not exist in an organised manner. This has to be remedied immediately. Spares for capital goods used in the production of components should be made readily available. There should be no control or constraints in making raw materials quickly available. All policies should be oriented towards removing constraints which tend to reduce the velocity of business. Labour policies in India should be retuned to come in line with what is followed in competing countries like Taiwan, Singapore, Malaysia and China. There should be flexibility to retrench 5 percent of the total labour force without the Management having to assign any reason. Courier exports and Courier imports (other than for dual use items) should be made available in several cities apart from Mumbai and Delhi as at present.
Shri R. Venkataraman, Past President of ELCINA, pointed out that there is a large variety of input materials for component production numbering more than 10,000 which require an unambiguous classification. He advocated a Trust-based import policy.
Dr. M.K. Padmanabhan, CEO, DSQ Software Limited, made a detailed presentation on the scope of export of CAD/CAM/CIM products from the country. He pointed out that this effort is intellectual manpower intensive and hence gives scope for high value addition in the country. This export item does not have high component of body shopping/on-site activity as compared to offshore activity. He stated that the country has great potential for such exports because of the large number of high quality engineers the country is producing in various fields of specialisations. The overseas demand for such items is increasing. However, the number of companies in the country engaged in this kind of exports is very small. This is required to be remedied immediately.
Shri T.V. Mohandas Pai of Infosys Technologies Limited, Bangalore recounted their experience with the Software Technology Parks and Electronic Hardware Technology Parks in the Electronic City in Bangalore. Wherever power problems are faced, one should think in terms of installing captive power plants or cooperative power plants. He
pointed out that at present there is considerable physical intervention of the Customs which impedes the velocity of business. He suggested to the Task Force to work out alternative systems which will minimise delay.
Presentations were made by representatives of new entrepreneurs in the Electronics City. They pointed out that the Task Force should recommend policies in Sunrise industries like Content Industry, Embedded computers, security hardware and software, Smart Cards, etc. A special promotional policy framework should be suggested for manufacture of software embedded devices.
Shri Sanjay Kalra of HCL Corporation, Chennai, pointed out that to realise a software export of $ 50 billion targeted by the Task Force for 2008. One million quality software professionals have to be trained as compared to the 500,000 at present. He pointed out that to recruit 200 quality software professionals, they have to interview as many as 3500 people of whom 10 percent were from IITs, 60 percent from Regional institutions and 30 percent from small towns. The Task Force has to spell out clearly how this one million quality software professionals will be trained.
Shri Mohan Tambe, Managing Director of Innomedia Technologies, Bangalore, conducted the Members of the Task Force and other participants of the meeting for a demonstration of Info Kiosks developed by them utilising a Cable Television based Interactive technology which will be installed by STD operators.
Co-Chairperson of the Task Force, Prof.M.G.K.Menon reviewed the proceedings of the meeting and conveyed as a decision of the Task Force meeting that a Panel on Development, Manufacture and Export of IT Hardware will be set up with Dr.N.Seshagiri as Member-Coordinator. The Members shall include the concerned Secretaries or their representatives, of the Government, representatives of the industry including the present and past Presidents of MAIT,ELCINA, Computer Peripheral Manufacturers Association, Representatives of Telecom Industry and Services Association of India, Electronics & Software Export Promotion Council, Public Sector Undertakings and special invitees including Shri N.Vittal and Prof.B.Nag.
LIST OF PARTICIPANTS
Government of Karnataka
1. Shri J.H.Patel, Hon'ble Chief Minister - Patron
2. Shri B.K.Bhattacharya, Chief Secretary
3. Shri N. Viswanathan, Pr.Secretary(Industries & Commerce)
4. Shri Sanjoy Dasgupta, Secretary (Information Technology)
National Task Force
1. Prof.M.G.K.Menon, Co-Chairperson
2. Dr.N.Seshagiri, Member-Convener
3. Shri M.S.Ahluwalia
4. Shri N.Vittal
5. Shri Ravindra Gupta
6. Shri P.G.Mankad
7. Shri Sudheendra Kulkarni
8. Lt. Gen. S.S. Mehta
9. Commodore Prem Chand
10. Shri T.H.Chowdhry
11. Shri N.R.Narayana Murthy
12. Shri Ashok Soota
13. Shri Dewang Mehta
14. Professor P.V. Indiresan
15. Shri Anil Bakht
Industry & Institutional Representatives
1. Shri Manu Parpia
2. Shri Inderdeep Singh
3. Shri R.K.Gupta
NDS Computer (P) Ltd.
4. Shri Piyush Singhal
CMD, Lipi Data Systems Ltd.
5. Shri Atul Vijayakar
6. Shri Sanjay Kalra
Executive Vice President
HCL Corporation, Chennai
7. Shri R.Venkataraman
Past President, ELCINA
8. Dr.M.K. Padmanabhan
CEO, DSQ Software Ltd.
9. Shri T.V. Mohandas Pai
Infosys Technologies Ltd.
10. Shri Mohan Tambe
Innomedia Technologies Pvt.Ltd.
Rep. of ITI, Bangalore
13. Dr. M. Vidyasagar,
Centre for Artificial Intelligence & Robotics,
Representatives of the following organisations were invited:
1. Telecom Equipment Manufacturers Assopciation
2. TVS Electronics
3. Tata IBM Limited
4. Apple Computers International Ltd.
5. EPSON (Singapore) Pvt. Ltd.
6. BPL (India) Ltd.
7. Digital Equipment Ltd.
8. Honewell India Software Operation Pvt. Ltd.
9. Novell Software Deve;p[,emt
10. Nashoft Systems Pvt. Ltd.
11. Texas Instruments India Pvt. Ltd.
12. Lucent Technologies India Ltd.
13. Autodesk Inc.
14. Sun Microsystems Pvt. Ltd.
15. Robert Bosch India Ltd.
16. Sonata Software
17. Silicon Automation Systems
18. Motorola India Electronics
19. AL Information Technology Limited
20. Advanced Synergic Microsystems Ltd.
21. BAEBAL Software Limited
22. BFL Software Limited
23. IG Soft India Pvt. Ltd.