Chandy wants STPI scheme restored

Kerala Chief Minister Oommen Chandy has urged Prime Minister Manmohan Singh to restore the Software Technology Parks of India (STPI) scheme to help the small and medium IT companies in the country.

In a letter to the prime minister, Chandy has said the government should consider the revival of the scheme for a period of five years effective from the current financial year, at least to the units in tier-II and tier-III (smaller) cities.

The letter was sent after the chief minister met IT industry representatives last week. GTECH, an industry association in the state, told Chandy that discontinuance of the scheme had aversely affected the small and medium companies.

"In one stroke, the government of India can rejuvenate the sagging fortunes of Indian IT units in the SME sector. IT industry is the largest employer in the private sector with over 30 lakh people employed directly and another 95 lakh gaining indirect employment. Not only will this game changing initiative ensure creation of more jobs, but it will also see IT companies flock to smaller towns and cities, thereby decongesting the metros," said GTECH chairman V.K. Mathews.

GTECH's case is that over 60 per cent of the entire spending of software companies relates to employee salaries which are taxed and hence the contribution to the exchequer remains significant.

It reasons that the additional levy in the form of corporate tax leaves very little for IT units in the SME sector to re-invest, increase headcount and grow, something which is absolutely critical to remain globally competitive.

Apart from a no-tax policy on exports, the STPI scheme empowers IT units to operate without any geographical restrictions, unlike the SEZ scheme.

"STPI scheme was a key contributor to the success of the Indian IT industry in its infancy. While some companies have outgrown the need for this scheme, there remain a large number of IT units for which the discontinuation of the scheme in 2011 has dealt a body blow," GTECH secretary Anoop P. Ambika said.

"The current global economic meltdown has added to the woes and hence a strong case exists for the restoration of STPI scheme," he said.