Govt rules can inhibit BPO spirit

NEW DELHI: At a time when India has proved its prowess as a favorable destination to American and European MNCs looking out for outsourcing - the government should not sit back and be part of the feel good factor. Perhaps it should engage itself in removing roadblocks to ensure further growth of the burgeoning industry and not dampen the spirits of the industry.

"The government should make sure that the Indian BPO industry rises up to its full potential. It needs to address issues like - interconnection of domestic and international call center operation, which is not permitted at present. There is another issue of key pair to be deposited with government for encryption beyond 40 bits on Internet. These issues need to be addressed properly," explained deputy GM of Corporate Affairs at Chennai based Sify Ltd, Deepak Maheshwari.

At present, government does not allow a call center to make outgoing calls and even the interconnection of domestic and international call centers is not permitted. "Most of the call centers are vacant during the day-time. Government can play a vital role in the growth of the domestic call center industry if they can allow the use of same bandwidth for domestic operations," he added.

It is ironical to note that the government has not reviewed IPLC tariffs for the past many years, even after it has mellowed down the STD/ISD markets by reducing tariffs to as much as 80 percent. "Today the BPO industry is contributing quite a lot when it comes to the GDP, but it is disheartening to see the same rates of around Rs 12 lakh to Rs 13 lakh being charged for getting 2 MBPS IPLC lines. Government should revise these plans for better," Maheshwari explained.

With huge opportunities lying ahead, the BPO industry needs to be nurtured properly to reap its full benefits. "There is no need for the government to stress on having an IPLC when it comes to starting a call center. Ideally the government should allow agents to start work on broadband access. This way a lot more work can be funneled in the country and it can give a major boost to the overall industry," he added.

BPO AND TAXES

Leaving that aside, the recent Finance Act 2003 has clouted the BPO industry by asking its foreign customers to pay taxes for offloading their work to Indian shores.



"Government has asked for taxes to be paid by captives and third party BPO operations. We need to address this issue as soon as we can as it is not happening internationally and places like Philippines or Ireland can very well catch the eyeballs of an India-interested BPO prospect," informed PriceWaterhouseCoopers partner taxation, Rahul Garg.

According to the finance act, a BPO company will be taxed only if it is outsourcing its 'core' activities to Indian shores, interestingly no hardcore definition has been given for these core activities. Admittedly, the fact that the government has refrained from taxing the BPO service providers till recently reflects its co-operation towards the BPO sector. Further, this is also the most important reason why BPO service providers have so far been able to charge a lower service fee from overseas clients.

"This is surely not going to be well accepted in the multi-national fraternity and they will start to shy away from our competitive advantage," Garg added on.



So in this situation, the government needs to look seriously at this issue and if procuring goods from the country is not taxed, the same formula should ideally be applied to services as well.

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