'BPO cos must flatter local markets'

M Chhaya

KOLKATA: Lalani group chairman, KL Lalani has sought legislation to make it mandatory for business process outsourcing (BPO) units to purchase at least a portion of their hardware requirement from local markets from which they operate.



"To give a fillip to the hardware business, the government should make legislation so that BPOs have to buy at least a portion of their requirement from the local markets," Lalani said in an interview.

Describing the hardware scene as "not encouraging", he said that BPOs operating in Kolkata were now buying all their requirements either from outside the state, or were getting them from abroad.



"How can the local hardware market and manufacturing business survive if they don’t make some purchases from the local markets they operate out of?" said the chairman of the group, which is one of the largest distributors in India for national and international companies such as HP-Compaq, IBM, among others.

Lalani, who started the group in 1978, demanded that a tax should be levied on inter-state billing even if the consignments are shown as "personal use". "BPOs bring in their hardware showing them as for their own use and so don’t have to pay taxes," he said.

Eastern India’s share in the national hardware market was measly 8.5 percent, while that of West Bengal was only 6 percent. Lalani said that industry platforms like COMPASS were discussing the issue of lobbying with the government for creating a law to make BPOs buy locally. "We are discussing the issue, but the final agenda is yet to be prepared," he added.

He also pointed out that the issue of higher CST was also hampering the local market because traders in the neighboring state of Jharkhand had to pay only two percent, but in West Bengal it was four percent against C-form and 10 percent without C-forms.

Pointing out that hardware manufacturing was becoming unsustainable in West Bengal because of lack of regular availability of materials, Lalani, who made PCs under the brand name Silicon Star, said withdrawal of financial benefits like sales tax exemption was also a stumbling block. "MNCs have elbowed out local brands, but still some competition is possible if we can correct these mistakes and get orders from at least the government," Lalani added.

The local industry’s complaint is that government isn’t buying much and second whatever it is buying, the order is going to multinational brands. The situation was brighter three years ago when the state government sourced most of its hardware requirement from local and regional manufacturers.

Industry representatives met the state IT officials with their complaint, but were told that one of the reasons for choosing the MNCs was that the service support of the local manufacturers was not up to the mark. According to local manufacturers, this is just an excuse and a diplomatic reply.

The local industry has argued with the state government that most other states gave their local/regional manufacturers buying support. Goa, Gujarat and Tamil Nadu greatly encourage local/regional brands.

In the past two years, the West Bengal government has been placing orders for computers with Wipro and IBM.

"We have had to stress on the distribution business because manufacturing had become unsustainable," he said. He said that even the distribution business was turning quirky because of lack of price protection from manufacturers to suffer losses due to lack price protection. "Profit margins have come down to two to -1 percent," said Lalani.

The chairman hinted that he was not entirely convinced that Kolkata had become a major player in IT because the city still lacked in infrastructure. "The state government is dreaming of making Kolkata an IT giant, but for that there has to be proper infrastructure. The city’s name comes after Bangalore, Hyderabad, Gurgaon and some others," he said.

But, Lalani said that it appeared that the government was sincere in its efforts to woo IT investors. "Efforts are being made, but the speed has to pick up."

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