NASSCOM EMERGE Community Catalyst for Growth of Emerging & Start-Up companies

  I would like to highlight the problem of SMEs in getting suitable accommodation at reasonable rent in some proper area for functioning. In the past, with Nasscom's efforts, it was decided that such units could be run from residential areas. But supreme court did not accept this and we know how they were forced to get out of residential areas. Office accomodation in commercial areas is always very costly and hence out of reach of SME IT units. Accomodation in industrial areas is good and affordable but it has to be in areas having neat units only. The govts had sometimes ago started the scheme of establishment of Software Technology Parks for providing flatted hall accommodation to SME units. Examples are the STPI in Okhla Delhi and in Sector 29, Noida. The objective of STPI was not only to provide tax relief (which is not available any more) to STPI units but also to provide needed accommodation on reasonable rent or cost to IT units. It is shocking to know that Noida Authority did not only not provide any more such accommodation to IT units but has also now closed down the little accommodation they provided as STPI in sector 29 in 1996 and are now selling it as commercial property. It brings in more money to them. I was shocked to know that Export Processing Zone in Noida, run by Govt Of India, provides accommodation only to big new units and not to existing SME units. The minimum size of their hall is 500 sqm  whereas the normal requirement of a small IT unit would be only 200 sqm. The other organizations like the Delhi Metro or the State Industrial Development organizations etc are also providing accommodation (usually only plots) for bigger units only. Noida Authority also mainly provides bigger plots (more than 2000 sqm size) only in industrial areas. The builders are of course now developing office space in industrial areas but their rental are very high - of the order of Rs 50/- psft. SEZ's would help only the major units and not SME units. It would be desirable if this point could also be taken up for discussions under SEZ vs STPI and let members write their experiences in this matter along with the rental rate for such accommodation going in their area for each others information.

With best wishes,

Sincerely,

mksinghal

Dear All,

We had the 5th Noida CEO Breakfast meeting today at Sopra India. We had the pleasure to host Bargavi Natesan from Infosys who spoke on "SEZ's its Success and Challenges".

I have uploaded the ppt and some other files in the Files & Media Section >> Govt. Policies

Regards,

Avinash

Thanks Avinash for arranging the session, it was very informative and useful for us. It made us clear that SEZ is not something which we can look for SME sector. There is need for a proposal from NASSCOM side for STPI extension with all the benefits, the proposal can be sent to respective gov departments. let us know if we can contribute in any manner.

Regards

Damnish

Thanks Avinash for arranging this very informative session. I am still not clear on the follwing points. Could somebody clarify:

1  As I stated in my earlier note, NEPZ in Noida has the status of SEZ. They have constructed a no of sheds for allotment to export units at very small rental. We wanted to shift our IT unit, which is 100% export oriented, to this NEPZ about two yrs ago and applied for allotment of one shed (Area 500 sqm) on rental basis to us. The allotment was however not made and we were informed that accomodation in NEPZ is provided only to new units who bring in fresh investment and not to old units for transferring themselves in this zone. How does the SEZ policy thus help old SME units in getting accomodation, let aside the tax benefits.

2  How are old units like Infosys able to make use of SEZ scheme in view of the restrictions on old units experianced by us and how can the existing SME units thus make use of SEZ scheme.

sincerely,

mksinghal

My Dear Avinash,

You informed through another message that you uploaded the ppt and some ther files concerning this session on Files & Media Section>>Govt Policies. Could you kindly advise how do I get there. Would it not be better if you could also provide a link to this section in your such announcements for ready use. Thanks & best wishes,

sincerely,

mksinghal

Mr. Singhal,

I have hyperlinked the section. You can also directly access the same at

http://nasscom-emerge.groupsite.com/file_cabinet/show_files#

regards,

Avinash

Hi Damnish,
Needless to say, If STPI is extended for another 5 years, that would be a great booster for the SMEs, but honestly I have reasons to doubt.

In case STPI is not extended (beyond March 2010), units will have 2 options (a) continue at non-SEZ and pay full rate tax, i.e., 34% (30% + 10% surcharge + Cess) (b) move to SEZ and pay zero tax. Obviously units earning low profit may find the first option more preferable, more so because they may find the re-location cost a bit steep. However, units who earn a couple of crores per annum and can afford relocation cost may need to do some back-on-the envelope calculation to find what suits them on 5 years projection.

If STPI is not extended, I urge NASSCOM to facilitate allotment of land to SMEs and form SEZ on co-operation basis (similar to Nokia SEZ) to keep the cost & hassles to minimal.

SMEs earning decent profit may find SEZ attractive even right now as they don't need to pay 11.33% MAT which is currently paid by units at STPI.

If SMEs joins hand together, it won't be tough to move to SEZ, after all SEZs are expected to offer good infra.

Dear Mr. Nadhani,

Thank you for your inputs and for your suggestions. I shall also convey this message internally to my colleagues and get back to the community.

Regards,

Avinash

Dont worry, the outlook is not that gloomy - NASSCOM will certainly do its best to get the STPI extended in either its current form or in a version that enables Product SMEs to stay competitive

Ganesh

I think there is some confused thinking about STPIs and SEZ's in the minds of SME units. I think STPIs were not only for tax concessaions. Tax concessions can always be given by adding a small clause in the Income Tax Act eg in sec 10. Customs & Excise were never important for SMEs. The basic objective of STPIs was to provide flatted factory dedicated complexes for SME software units with all infratructure facilities from where such units could work properly at reasonable costs. The examples were the STPI complex at Okhla and in Sector 29, Noida. What is important is not only to ensure that more such STPIs come up but the existing STPIs continue to function. As I wrote earlier, Noida Authority has already closed most of STPI in Sector 29 Noida by allotting the cabins to govt offices or selling them as commercial property. Only one or two very small units are now unctioning from there.

Our own SME unit functioning from STPI, Sec 29, Noida was sealed by Noida Authority in Nov 2006 to force us to shift as they wanted to sell it as commercial property. Unfortunately, no IT professional body then came to our support to register protest in this connection. I then realized that IT professional bodies have really no interest with protecting SME interests. I find that other type of professional bodies do suport their members in such circumstanes. We are now fighting this case in the court.

SMEs cannot think of moving from STPI to SEZ as SEZs are only for new unit. As I wrote earlier, we were not allotted space even in NEPZ, Noida after our exit from STPI, Noida because the DC, NEPZ ruled that space in NEPZ was only for new units and not for transferring existing units to NEPZ. The bigger companies can open new units in SEZs but SME units may not be competent enough to open new units in SEZ. Transferring of an existing STPI unit to SEZ is thus not permissible and is also illegal.

mksinghal

Mr Singhal has touched upon a very salient issue relevant to NASSCOM. Will somebody in NASSCOM please respond to his statement, "I then realized that IT professional bodies have really no interest with protecting SME interests. I find that other type of professional bodies do suport their members in such circumstances."

Does NASSCOM have a REAL interest in protecting SME interests ? (Lets bear in mind how appointments are made in NASSCOM).

Any experiences of anyone ?

Regards,

Nalin Khanna

Dear Mr. Singhal,

Thank you for your suggestion and for highlighting the issue of cost effective accommodation for SME companies. With the Supreme Court rulings and the sealing's in Delhi, the issue of residential accommodation being used by software companies and many others has become a larger issue. It has been represented by multiple stakeholders and NASSCOM will continue to also push this with the appropriate authorities. At the same time, NASSCOM is facilitating meetings with the Government of Haryana and UP and will take forward your suggestion to them for creating cost-effective real-estate for SMEs within existing STPs and upcoming SEZs.

Regards,
Avinash

My Dear Avinash,

Thanks for your comments. If Nasscom is really doing something towards helping provision of cost effective accomdation for SMEs, why do you not write to Noida Authority with copy to UP Govt asking them as to why have they allotted accomodation in STPI, Ganga Shopping Complex, Sector 29, Noida to other govt offices instead of to software units for whom they were resrved as far back as in 1994, when STPI movement started, and why are they now planning to sell the remaining space for comercial use instead of allotting them to sofware units. You would recall that I had brought the case of sealing of our unit in STPI in Nov 2006 to the notice of Nasscom soon thereafer but with no support whatsoever. On the other hand, CII, of which also we are members, did write at least one letter supporting our cause.

sincerely,

mksinghal

Dear Mr. Singhal,

Thank you. I shall reach out to you today to discuss this. We would be happy to take your inputs and reach out to the Noida Authority and the UP Government.

Regards,

Avinash

Dear Mr. Singhal,

Thanks for pointing out the challenges you and other SMEs are facing due to irregular and ad-hoc usage of STPI units in UP. To me this further cements my belief that SMEs should as far as possible, avoid the dependance on govt for infrastructure support. Most of the software business in India was build without the government and many will argue this as one of the main reasons for its success. Rather than rely on the government to provide low-cost office accommodation to SMEs, I would look to some enterpreneur who can come up with a low-cost incubation/biz centre concept  targeted to SMEs. Maybe there is an opportunity for the next Captain Gopinath to emerge here...

Best,

Dear Mr. Singhal,

I also support Arvind's views. I am not in the NCR region to fully appreciate the local issues hence I will try to comment on the key aspect of this thread as it is valid across all locations. In Chennai, we started a process to consolidate space requirements across SMEs. The idea being, once we have the demand data we will be in a better negotiating position to talk to the SEZ. Parallely we also pitched the idea to few SEZ developers, they were willing to rent out space. Unfortunately, when we sent out the email only FIVE companies in Chennai responded. This meant that we can't pursue what we conceived. Take aways:

1. We need NOT depend on Government - Other solutions are available.
2. The problem is on both sides, the association and also on the member companies side.

On a side note, I am of the opinion that NASSCOM's success is based on the ACTIVE participation of member companies. The office bearers, both full-time and industry representations, are there to really facilitate what we want to achieve as a group. NASSCOM is not shielded from all the challenges of running any large organizations. It is up to us to mature it collaboratively.

Suresh

Note: I am a member of NASSCOM just like many of us here and do not hold any office.

The prompt response from NASSCOM Chairman confirms that they are well aware of the ensuing problem and trying to find possible solution. Let's hope the STPI extn. decision is arrived at ASAP.

We all are talking of slowdown; for product companies this is the best time to plan for new products and scale up existing product line when talent availability is comparatively easy. The gestation period for products are longer as compared to services company, so if product organizations can set a clear roadmap right now and act fast, they will be ready to roar when market will look up!

May I urge NASSCOM officials to impress upon the Govt machinery to arrive at long term decision right now without waiting for the next government to form? The most critical element is time that is running away...

Kisor

Kisor makes a very valid point. A period of relative slowness in the industry is the best time for product companies to attract good talent and build great solutions. User industries will also have the time to discuss their technology and information problems and product CEOs should sieze this opportunity to engage the users and fine tune their value propositions.

Ganesh

I would like to add that we should not talk in terms of SEZ vs STPI. SEZ is a new scheme started by the govt for all export oriented industries whereas STPI was a scheme started by the govt only for IT units sometimes in 1991. It is true that the govt is now withdrawing some tax benefits from STPI units and allowing some to SEZ units. Let those IT units who can avail benefits through SEZ scheme avail them, but we should continue to press that STPI scheme will always be very relevant for IT Software units and ensure that it contines. We may also try for further continuation of tax benefits for STPI units. Our discussions may therefore focus seperately for SEZ units and for STPI units and not on SEZ vs STPI.

Further, I do not agree with Mr Arvind Jha's suggestion that IT units should reduce their dependance on govt support for infastructure. No industy can flourish without govt support. It is not ecessary for me to recapitulate the many efforts made by Nasscom since the begining in the formation of IT Policy which provided that IT units could operate from homes, that STPIs should be formed, that plots be alloted to IT units on priority, that better power and communication facilities be provided to IT units and for all the tax benefits which IT industy was getting. I remember Nasscom had in the past supported Baazi.com publicly against some puntive action initiated by the govt against them. I am sure one of the main duties of any professional body is to ask for ever more facilities from the govt for their interest group and to save their members from victimization from stray govt functionaries. We cannot thus arbitrarily advise for reducing govt dependance on infrastructure at the same time requesting govt for reduction of tax liabilties.

My Dear Avinash,

Could you kindly advise how could I start  a new topic for discussions in this forum. For example, I wish to start the following new topics for discussions in this forum:

Govt Policy & Nasscom - Here we consider the facilities provided by Govt to SME units and any suggstions made for Nasscom follow up by members.

Save STPI, Secor 29, Noida - Here we consider the problems being met with at STPI, Sector 29, Noida in particular and with STPIs in general.

SEZ - Here we consider how SMEs could make use of this scheme.

Clarifications by Nasscom Emerge Adminstrator - Here you reply to members queries to enable them to make better use of this discussion forum.

mksinghal