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Budget: FM radio sector seeks tax holiday
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NEW DELHI: While the number of FM Channels in the country has grown from ten to over 200 and the government claims a compounded annual growth rate of 24 per cent, they are far from breaking even and have sought various concessions including a tax holiday and reduced licence fees.

The Ficci Radio Forum has also urged the government to fix reasonable fee for music royalty in line with international norms.

On a broader level, the Forum has urged the government to also consider some other benefits which are critical to maintain a high and sustainable growth of the radio industry. These include the need to release additional frequencies in all markets; allow broadcasters to operate multiple frequencies in the same city, permit tradability of licences, raise the foreign investment ceiling for radio broadcasting, and ensure a level-playing field for satellite and FM radio since there is no FDI limit for the former, but a ceiling of 20 per cent for the latter.

There should be automatic renewal of licences at the end of the initial term and an early resolution of the issue of music royalties.

The Forum says any broadcaster should be allowed to own multiple licences in a city. This is the definitive way to ensure diversity of content for listeners.

"Given the technology and distribution modes, it is unlikely that any company or media can influence public opinion of listeners/readers/viewers as they have unlimited access to multiple sources for obtaining information, education and entertainment. Furthermore, a blanket restriction on the number of channels of a broadcaster will discourage diversity of viewpoints. India being a multi-linguistic country, there is adequate room in every city/town to have multiple FM channels catering to different sections of the population," the Forum opines.

The Forum says there should be no national limits for FM radio ownership and the local (city-specific) limits should be increased from 3 or 33 per cent of the total licences available in the centre, whichever is less. This was in line with the recommendations of the Dr. Amit Mitra Committee – which had been endorsed by the Telecom Regulatory Authority of India (Trai).

The government must allow the FM industry the freedom and flexibility that a business needs. Acquisitions and sale of businesses is an integral part of the normal growth pattern of any industry. Even in telecom where the telcos use government spectrum, they are allowed to buy and sell companies. In the case of radio, the Government must allow transferability and tradability of licences. The Forum has called for allowing automatic renewal of licenses at the end of the initial term of the licences, as was done earlier and is the international norm.

There is need of either a single collection agency for Music rights fee or developing a mechanism where one rate is applicable to all agencies or royalty collection bodies. The industry also wants differential royalty rates by city categorisation based on the lines of population of the city, differential royalty rates by genre of music, and elimination of advance payments and security deposits for music royalty.

While there are no FDI limits for satellite radio, there is a ceiling of 20 per cent for terrestrial radio, compared to larger FDI for newspapers (26 per cent), TV news (26 per cent), cable TV (49 per cent), and DTH (49 per cent).

Noting that the Government is introducing Goods and Service Tax (GST) regime from April 2010, stakeholders have suggested that the service tax, entertainment tax and VAT should be subsumed in GST and only a single/unified GST rate be notified for FM Radio operators.

Soni recently said she had sought reduction in the fringe benefit tax (FBT) from 20 per cent to 5 per cent for media personnel working for both print and electronic media companies.

"Keeping in mind the fact that the broadcasting sector is expected to grow at the rate of 12 per cent in the next four years, I requested the Finance Minister to provide parity and rationalisation in the service tax paid by broadcasters on revenues accrued by them from advertisements,'' Soni said after a meeting with Mukherjee.

The sector wants tax holiday for five years under Section 80 – 1A of the Income Tax Act for those sub-sectors who are undertaking digitalisation and tax at not more than 30 per cent for a further five assessment years in a block of 15 years.

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