FinMin’s blow for digitization as duty on set top boxes doubles

01 Mar,2013

By Nandini Raghavendra

 

The Union Budget 2013 does not have good news for the Cable and DTH operators. The import duty on set top boxes, which are mandatory post the government’s digitization plan, has been increased from the present 5% to 10%.

 

With almost, 100% of the set top boxes being imported, this directly affects not only the operators but also the consumers as the cost rise will be passed onto them, eventually.

 

Digitization was a government mandate which the cable industry has supported. However, this increase, which will definitely work out to at least 6-7% eventually, will force us to pass down the rise in price to the consumer.

 

If you calculate merely Phase II of the digitization roll out, we need 20 million set top boxes, and this rise will make an approximate difference of Rs 100 per box, which means a minimum of Rs 200 crore burden on the operators.

 

Meanwhile, there is Kolkata and Chennai still to be completed in Phase I. For the consumer, there is also the power consumption a single set top box consumes since it needs to be left on, which is 18-20 watts per box per month.

 

All of this means adds a huge burden on the consumer,” says a dejected President of the Cable Operators Federation of India, Roop Sharma who counts 60,000 cable operators as members.

 

An important point she adds is that while we have a section of the country, which cannot afford even the one single set top box, we also have houses with two-three TV sets each of which will need a set top box to function.

 

The affect of this on the digitization process will affect the whole television industry. A fact, CEO, Colors, Raj Nayak too points out.

 

“For the broadcasting industry, given the initiative of the government towards digitization, a process which was in acceleration mode with Phase II and III still to be implemented, a hike on the import duty of set top boxes may just act as a speed breaker.”

 

For the DTH operators, who are taxed heavily in any case, this comes as possibly the worst news. Already paying 32% of their top line as taxes before they even see the money, as Harit Nagpal, CEO Tata Sky and also President of the DTH Association says, this doubling of import duty on set top boxes, comes as a shocker. “On the one hand the government is serious about digitization.

 

On the other, there is no known reliable source of boxes, so where are we going to source them from. This is a retrograde step from the government which will affect us by at least $20 million approximately.”

 

The DTH industry, has been crying hoarse about the dual levy of tax, which is service tax as well as VAT on activation charges.

 

In fact, even bodies like FICCI’s entertainment and media sector had appealed to the ministry and other relevant stakeholders for the need for reduction of customs duty on import of Set top boxes as well as more infrastructure status to the cable, broadcasting and DTH verticals.

 

How this will affect the roll out of digitization is the most important impact to be seen from here.

 

Source:The Economic Times

Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

 

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