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June 16, 1997


Special incentives for IT industries announced

The Karnataka government has announced a comprehensive policy on information technology industry to ensure the growth of the sector and enable the southern state to retain its pre-eminent position in the field.

Announcing the features of the policy, Minister of Large and Medium Scale Industries R V Deshpande, said in Bangalore that the Karnataka State Industrial Investment Development Corporation and the Karnataka State Finance Corporation would soon be evolving a special package of incentives, assistance and concessions for the promotion of the information technology industry.

Key components of the package would include equity contribution in both the small and medium-sized enterprises, reduction of promoter's margin money and seed capital or venture capital assistance in deserving cases.

There would be no locational restrictions for setting up of software industries requiring up to 5 kVa. The power tariff would be the same as that applicable for domestic consumers. They would be given priority in sanctioning and servicing of power connections and also exemption from power cuts.

The financial incentives would include exemption from payment of entry tax and purchase tax on the computer hardware, its peripherals and other capital goods including captive power generation sets. This would be applicable during the implementation stage and could be extended up to five years.

Irrespective of the investment in these industries and their location in the state, they would be granted sales tax exemption for 10 years or deferment for 12 years, subject to a ceiling of 200 per cent of the value of the fixed assets.

Such exemption or deferment would cover the turnover tax payable by the unit. The captive power generation units installed by IT units would be exempted from payment of electricity tax without time-limit and also sales tax on fuel consumed. These concessions and incentives would be available to the IT units having investment in fixed assets up to Rs 1 billion.

Deshpande announced that an autonomous Indian Institute of Information Technology funded by the Union and state governments, foreign foundations and non-resident Indians would be located in Bangalore. It would conduct research in software engineering and would be the nodal agency for the growth of IT education.

The second electronics city would come up adjacent to the one near Bangalore. It was planned to set up electronics cities at Mysore, Dharwad, Hassan and Mangalore. The software technology park would be upgraded.

A special taskforce comprising experts would be constituted by the government soon, said Deshpande. It would be asked to give detailed recommendations within three months for the formulation of a development model for the promotion of the IT industry.

It would also identify potential locations for the establishment of electronic cities and software technology parks. The task force would also evaluate manpower requirement during the Ninth Plan period and make suggestions for the introduction of courses in academic and training institutions.

The minister announced that the value of software exports from Karnataka is likely to touch Rs 5 billion. Hardware production might be worth Rs 20 billion by 2000. As many as 32 per cent of software exporting units are located in the state, Deshpande pointed out.

He said direct foreign investment in Karnataka, from 1991 to 1996, was Rs 50 billion. The export promotion park in 300 acres near Bangalore was almost ready and it would be declared open soon.

Units exporting 33 per cent of their products would be permitted to set up units in the park. The Union government had sanctioned fuel linkages for power generation plants up to 1,160 MW and a separate fuel linkages for 600 MW and a separate fuel linkage for 600 MW barrage-mounted power plants, Deshpande said.

The Centre would give clearance for the proposed international airport complex near Devanahalli in July.

- Compiled from the Indian media

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