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Help Budget 2011: Media companies seek higher FDI, lower taxes to aid growth
MUMBAI: Indian media firms are expecting the federal government, in its budget for 2011-12 on Feb. 28, to provide them with some tax relief and is hopeful of getting a growth boost by way of an increase in foreign direct investment limit.

In June 2010, India's Telecom Regulatory Authority of India , which also regulates broadcasters, had recommended higher foreign direct investment in the broadcasting sector, particularly in direct-to-home (DTH) and cable network operators and FM radio.

"The sectors are really capital intensive. The radio companies are bleeding right now. So FDI is badly needed in the sector and same goes for DTH," Angel Broking analyst Chintrangda Kapur said. "The government is actually considering that plan."

A report by industry lobby FICCI recommends the government to push up the foreign direct investment limit in all distribution sectors to 74 percent, as per the telecoms regulator's report.

This policy change is a pre-requisite for the all-round roll-out of digital service regime, FICCI said. This will allow serious players and existing operators in dire need to fund their upgradation and expansion.

Currently, foreign direct investment in cable networks and loss-making DTH operators is capped at 49 percent, while investment in FM radio is at 20 percent.

A study by Media Partners Asia expects India to become the largest DTH market in the world in terms of subscribers by 2012, overtaking the U.S.

Although the regulator had suggested maintaining status quo on foreign direct investment limit of 26 percent in news and current affairs television channels, FICCI recommends the boundary to be pushed up to 49 percent.

The $12 billion Indian media and entertainment industry is forecast to grow 13 percent for the next five years, according to a FICCI-KPMG report.


Direct-to-home providers and digital cable operators want the government to remove the 5 percent basic customs duty on imported set-top boxes.

"The consumers' burden is reduced and we can be a little more aggressive in terms of trying to gain customers," said M.G. Azhar, president of strategy and business development at Den Networks .

Direct-to-home players are also likely to see a cut in licence fees from the current 10 percent to 6 percent, Goldman Sachs analyst Ishan Sethi said in a report.

Print publications are looking for a waiver of service tax charged on transportation of publications by rail or road.

Broadcasters are seeking some rationalisation in the service tax charged on advertising revenue. This, if implemented, will be a big positive for radio and television companies.

However, analysts think it is unlikely to be implemented, as the demand has been pending for many years.

Multiplexes hope for abolishment of all import duty on cinema exhibition equipment and service tax on property rentals, through implementation of the much-awaited Goods and Services Tax (GST). They also want entertainment tax to be included in the GST.

Media firms also expect the government to provide some relief on taxation of payments made to film distributors for intellectual property.

Currently, while there is a service tax on such payment, some states also collect value added tax on it, thus resulting in double taxation.

"The entire industry is waiting for the GST," said Kapur of Angel Broking. "In this session, we are at least expecting a roadmap for GST. The implementation will not happen before 2012."

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