ITV

Category: Financials

  • Multiplex owners demand uniform entertainment tax

     
    Multiplex owners demand uniform entertainment tax
     

    MUMBAI: The multiplex owners in India are looking forward to uniformity of entertainment tax in the union budget 2008-09. The other things they are insisting on are decrease in service tax on lease rentals.

    “The rates of entertainment tax are amongst the highest in the world. Most states levy an entertainment tax ranging from 30 to 50 per cent of ticket sales. The average rate of entertainment tax across the world is around 10 per cent of ticket sales,” said E City Ventures (Fun Republic) MD Atul Goel.

    Multiplex owners are awaiting abatement of 67 per cent for service tax on rent so that effective tax rate reduces to 4 per cent.

    They feel as the high rate of entertainment tax still exists, the domestic cinema exhibition industry also pays sales tax on food and beverage. Multiplex owners say that they are forced to pay multiple taxes which include property tax on real estate that it occupies, service tax on advertising revenues, show tax on the number of shows held and income tax on net profits.

    Cinemax India CFO Jitendra Mehta says, “We await abatement of 67 per cent for service tax on rent so that effective tax rate reduces to 4 per cent.”

    Echoing Mehta, Goel adds that the service tax introduced on lease rentals for cinema exhibitions will virtually kill this industry, and, in turn, the entire film industry. He thinks that the entertainment tax structure needs to be re-looked to benefit the overall cinema infrastructure.

    Multiplex owners are demanding a one indirect tax regime. They insist that indirect taxation of goods and services should be integrated into the Goods and Service Tax (GST). Besides entertainment tax on cinema tickets should be integrated into GST.

  • FM operators demand lower import duty, 8-year tax holiday

     

     

    MUMBAI: Given that the radio industry is still at its infancy and has great employment and media opportunities in the semi-urban and rural markets, the FM operators are expecting a reduction in service tax in the forthcoming Budget 2008.

     

     

    Since fringe benefit tax is a non-deductible expense, FM industry is looking for a concession in the qualifying rates to radio operators. They feel that would provide a competitive advantage and a boost to the radio Industry. Besides, they are looking for an eight-year tax holiday to FM radio operators.

    Big FM COO Tarun Katial said, “Radio broadcasting should be removed from the ambit of service tax, just like print media. Print media is kept outside the ambit of service tax and the same benefit should be extended to radio as well, if we want to establish a level-playing field. If not, the local advantage extended by radio as a medium will diminish. Additionally, radio operators are required to pay licence fees on 4 per cent of gross revenues wherein, gross revenues include service tax, resulting in double taxation.”

    The FM industry is stressing reduction of customs duty for import of equipment. This would particularly help FM stations lower their infrastructure costs and positively impact their margins especially in Tier II and III cities as the third phase of FM bidding is coming up.

     

    Radio City CEO and AROI president Apurva Purohit said, “Last year in the budget, the government had reduced the customs duty for import of equipment for the radio industry from 40 to 20 per cent. Given the further expansion of FM stations post phase III later this year, one expects this to be further reduced.”

     

    Likewise, the industry wants the government to look at reducing the excise duties on the items made domestically.

     

    Radio broadcasters feel the current customs duty, countervailing duty (CVD), additional duties and educational cess are too high as the total import duties reach nearly 35 per cent. Nearly all of the capex of setting up studios and transmission infrastructure is incurred on imported items.

     

    Radio Mirchi CEO Prashant Panday said, “Considering that radio projects in the future will come up in small towns (with population between 100000 and 500000), the government should look at totally removing additional duties and educational cess and significantly reducing the CVD on these items.”

     

    Panday feels that the government must allow the loans given by banks to the radio sector (in B, C and D category towns as classified by the Ministry of I&B) to be classified as “priority sector lending.” This will make it easier for potential broadcasters to access funds when setting up radio stations in these small towns.

     

    The government must extend the backward areas benefits to radio stations launched in B, C and D category towns – giving all advantages to radio broadcasters, similar to what other industries enjoy.

    Highlights of FM radio‘s Budget 2008 wishlist

     

    • 8-year tax holiday to FM Radio operators. Radio Broadcasting should be removed from the ambit of service tax, just like print media.
       
    • Fringe benefit tax is a non-deductible expense. If a concession in the qualifying rates is provided to radio operators, it would really provide a competitive advantage and a boost to the radio industry.
       
    • The government must look at reducing the total burden of imported equipment. It is well known that nearly all of the capex of setting up studios and transmission infrastructure is incurred on imported items. The current customs duty, CVD, additional duties and educational cess are too high – total import duties reach nearly 35 per cent.
       
    • Likewise, the government must look at reducing the excise duties on the items made domestically.
       
    • The government must allow the loans given by banks to the radio sector (in B, C and D category towns as classified by the I&B ministry) to be classified as “priority sector lending.” This will make it easier for potential broadcasters to access funds when setting up radio stations in these small towns.
       
    • The government must extend the backward areas benefits to radio stations launched in B, C and D category towns – giving all advantages to radio broadcasters that are given to other industries.

  • Music industry seeks protection of IPR, enforcement of laws

     
    Music industry seeks protection of IPR, enforcement of laws
     

    MUMBAI: Riding high on technological changes, the music industry and its affiliates in India are not seeking much intervention from the finance minister this time round, except for better enforcement of laws.

    The Indian Music Industry (IMI), the body that looks after the interests of most of the music companies in the country, says that there is not much it expects from the Union Budget. But the Phonographic Performances Limited (PPL), the licencing arm of the IMI, is looking at some concrete intervention.

    PPL CEO Vipul Pradhan believes there should be a provision in the budget to reduce the VAT on cassettes. He says, “We are hoping the government reduces the VAT on cassettes, which is 12 per cent currently. The VAT applicable on CDs is four per cent which makes it more feasible for the people to opt for CDs instead of the audio cassettes. Reducing the VAT on cassettes also at four per cent will help in their sales.”

    “Also, the government has to undertake some kind of initiative for protection of intellectual property and rights. The growth of a country is determined by and large by the sale of computer and entertainment software and piracy is killing the industry. So, it is necessary to form a separate body to protect the intellectual property and also funding is required to educate the common masses about the ill effects of piracy,” adds Pradhan.

    The governing body for the music industry down south, Simca, too is not looking for drastic changes, but a stricter adherence to prevailing laws. Simca general secretary SL Saha says, “There are no budgetary or fiscal requirements that I expect in the budget but proper enforcement of the prevailing acts to promote the industry.”

    PDM Entertainment COO Aman Anand, who recently organised the Sunburn Music Festival in Goa, wants a lowering of entertainment tax in the budget.

    Mobile content company DNS Networks is looking at tax benefits for producers and film making companies, to enable good production values in films, which in turn help mobile content get marketed profitably throughout the world. “Mobile content based on movies, including music, will get an indirect but big boost if filmmaking corporate houses can avail of these tax benefits,” says DNA Networks’ MD Devashish Mishra.

    The Internet and Mobile Association of India’s wishlist for the Union Budget recommends that the nascent e-commerce industry in the country be encouraged by the removal of service tax on online internet transactions done through credit cards, debit cards and net banking transactions, a move that might help the online music stores that have been started by some music companies and content aggregators in the country.

    The IAMAI has also recommended that the state governments be directed not to impose entertainment tax on internet and broadband services.

    People Infocom CEO Manoj Dawane says, “The Indian Mobile VAS Industry is on a growth path, and the times ahead promise opportunities that will need to be capitalized on and avenues that will have to be chartered. Given the existing scenario, we hope for a Budget that provides our space the support to make the most of the opportunities presented.

    “Telecom and media are two of the most important interrelated industries for the MVAS space. Considering both these sectors, we would look forward to the implementation of a single levy system for the telecom sector making telecom services more affordable. We would also look forward to some relief in the Fringe Benefit Tax (FBT).”

    “It would be favorable for service tax regulations to be kept simple, which will result in increased compliance and greater tax collections, along with making Tax filings and administration simpler and taxpayer friendly,” adds Dawane.

  • FICCI submits its wishlist to Fin Min for M&E sector

    NEW DELHI: National industry body Ficci has demanded that the government must give several tax exemptions and holidays to let the animation, gaming and VFX industries, which is growing faster than the overall entertainment industry, realise its full potential.

     

    Ficci has demanded in the budget for 2008, the government must give a 10-year tax holiday, removal of service and sales taxes on the software used for production for 10 years, exemption of import duty on hardware for 10 years, and other facilitating measures.

    Interestingly, it says also that as there is no Indian channel with 24 X 7 indigenous animation content, 10 per cent of the time on entertainment channels must be reserved for such content. This will give local content and talent a major boost.

    The memorandum from Ficci says that though the animation, gaming and VFX industry is growing in leaps and bounds, the full potential is yet to be tapped, despite the projection that the industry would grow hugely by next year.

    Ficci estimates show that the animation industry today stands at Rs 13 billion and is expected to grow to Rs 43 billion by year 2009, with a CAGR of 35 per cent.

    Similarly, the gaming industry is expected to grow from Rs 360 million to Rs 13.50 billion by 2009, with a CAGR of 78 per cent.

    “The growth rate in these sectors are much higher than overall media & entertainment sector, which is expected to grow at a rate of 19 per cent,” says Ficci. The industry could be a major export revenue earner as well as provide massive employment.

    Ficci says that after Information Technology, the biggest export earners for India are Animation, Gaming and VFX, but the overall business model existing at present, which is a low-end BPO approach, is stunting its growth.

    The Ficci document stresses: “Exports in this vertical can be looked in two ways: one, a purely outsourcing model in which production houses provide services to overseas studios. This is low-end work in the value chain with more of a BPO approach.

    “The other is revenues earned from exporting the finished product (the intellectual property developed in India for domestic / foreign markets) to global audiences.

    “Both the models have tremendous potential for foreign exchange earning for India. But it is better in the long term if we move up the value chain and have indigenous content with both domestic and foreign appeal.”

    Ficci estimates that in the next five years, India would require more than 30,000 trained animators and gaming professionals.

    “If this industry is nurtured properly, it can meet the government‘s objective of employment generation, and the latter should aid in the setting up of centres of excellence on the lines of IITs and IIMs for the animation and gaming industry,” says Ficci.

    Ficci feels that the other direct impact of aiding these industries would be building Brand India better, by engaging the country‘s massive talent pool in creating content for Indian as well as global audiences by transferring India‘s 5,000-year-old time- tested legends into the new media.

    “Animation could be another way of creating “Brand India” among NRIs / PIOs and other global audiences. Currently when India is increasingly garnering attention in the world arena, it is the right time to reach outwards through this medium,” Ficci says.

    Ficci points out to models of Korea, China, Singapore, etc., which enjoyed their respective government support, so much so that 40 per cent of the animated content in the US is Japanese.

    “The reason for such a pattern is that countries like Japan and Canada have developed very strong domestic markets, and once a domestic market gets enough consumable content, the same can be routed for exports,” says the memorandum.

    Ficci reminds that the Korean government sees animation as the most competitive industry for the 21st century, and has provided massive tax reliefs.

    “(Korean) application guidelines specify that companies whose projects have been accepted by a Korean broadcaster can apply for up to 40 per cent of their production budget,” Ficci says, demonstrating the massive support system there.

    So far as the animation industry is concerned, Ficci says that it is now covered under Software Technology Parks of India.

    The problem, says Ficci, is that this holds good for a BPO nature of work where outsourcing is the main module and most of the studios which are getting benefited from STPI have to make sure of an export commitment of more than 85 per cent.

    “As a result many Indian studios wanting to produce original content based intellectual property and use art and talent from India to produce animation stories do not get any such benefits,” explains the memorandum.

    Creating original content in India attracts custom duty and also the freshly levied sales tax (VAT) on off the shelf software (12.2 per cent, which might increase further) and further also the income tax component.

    “This is leading to more and more studios working on foreign content and a severe lack of animated Indian stories in our domestic television schedules,” laments Ficci.

    Hence Ficci‘s key proposals for the animation, gaming and VFX industries are

    • Tax holiday for 10 (ten) years, so that cost of creating intellectual property (original content) comes down drastically and the industry becomes viable
       
    • Removal of Service Tax
       
    • Removal of Sales Tax on the Software used for Animation, Gaming & VFX production for a period of 10 years
       
    • Exemption of Import duty on hardware for a period of 10 years
       
    • Market Development Assistance for overseas business promotion
       
    • 10 per cent mandatory local content on the networks to began with

    “Finally, we feel there is negligible revenue accruing to the exchequer currently as no new Indian IP is getting created. If a tax holiday is given, revenue will flow into the exchequer funds in a couple of years as the industry will gain impetus and encouragement to grow. In this regard the IT sector can be looked at as a role model,” says the Ficci memorandum.

  • Budget 2008: IBF wants no customs duty on STBs

     

    NEW DELHI: The Indian Broadcasting Foundation, the largest body of television channels in the country, has urged the Finance Ministry to exempt CVD, cess charges and additional duty on set-top boxes (STBs) for the next 10 years.

     

    Digital cable TV would get a boost if STB prices fell, IBF said.

    In a pre-budget memorandum presented to the Revenue Secretary and other senior officials in the Ministry recently, the IBF has also demanded that the concessions given to the IT industry should be extended to broadcasting, particularly in view of the convergence of technologies.

    For example, as of now, customs duty, CVD, and cess for broadcast equipment put together is 36.64 per cent whereas it is only 21.32 per cent for computers and 4 per cent for cell phones.

    The Foundation says that it is the most heavily and unfairly taxed Industry.

    Apart from service tax, states impose very high, even up to 35 to 40 per cent entertainment tax as also sales tax, stamp duty etc.

    The base of the fringe benefit tax for the broadcasting industry has been kept at 20 per cent whereas the base for six industries including computer software industry is only 5 per cent.

    The IBF says that the total service tax at 12.36 per cent on the total television media advertising revenue of Rs 74 billion works out to Rs 9.15 billion. Of this, the service tax liability of Doordarshan is Rs 1.01 billion and that of other channels is Rs 8.14 billion.

    Of the total ad revenue, the share of Doordarshan is Rs 8.18 billion and private channels is Rs 65.82 billion.

    The customs duty should be zero to make STBs affordable to consumers and no excise duty to encourage indigenous production of STBs.

    The government should exempt the broadcasting industry from service tax as in the case of print media, the IBF says.

    The government had in March 2005 granted exemption to the service providers (small cable operators) whose aggregate value of taxable service for a financial year does not exceed Rs 400,000. There was need for a clarification that the exemption granted is only in respect of service tax payable on services provided and does not extend to service tax charged on services procured by cable operators. Cable operators, thus, are liable to pay service tax charged by broadcasters and multi-system operators (MSOs).

    In this regard, the service tax authorities may be asked to launch periodic campaigns to ensure that all last mile cable operators are registered and display their registration certificates prominently.

    In view of the fact that broadcasting is included in Entry No. 31 and is being treated as a “Service” under Entry No. 92 C of List I of Seventh Schedule of the Constitution, the state and union territory governments may be directed not to levy entertainment tax, sales tax, etc. on the broadcasting industry inclusive of distribution services.

    There was need to expand the definition of Industrial Undertaking under Section 72A of the Income Tax Act, 1961 to include Electronic Media, that is, TV Broadcasting.

    In order to enable cable operators invest in infrastructure for achieving time bound digitalisation, a “National Fund” may be created to provide soft loans etc.

    Television industry is the electronic version of the print media providing information, entertainment and education to the citizens of India. Though service tax is levied on Broadcasting media, print media is not attracting service tax even though it enjoys a larger share of advertising revenue.

    According to the IBF, The total estimated advertisement revenue for 2006-07 was Rs 164 billion of which 55 per cent was generated by the print media (Rs 90 billion) and 45 per cent by TV channels (Rs 74 billion).

    The Ad spend to GDP ratio for India is one of the lowest at 0.34 per cent. It is 1.3 per cent for USA, 1.0 per cent for Australia and even neighbouring countries in South East Asia like Malaysia, South Korea, Singapore etc enjoy a high ratio of 0.8 per cent to 1 per cent.

    Without government’s support like service tax holiday on advertisement revenue, the potential cannot be exploited to the desired extent. Service tax pulls down consumption and hence economic growth. Lower consumption means lower overall tax revenues.

    As a result of the service tax, even the public service broadcaster Prasar Bharati will have to increasingly depend on Government grants while private TV channels (particularly news channels) will have a hard fight to survive, the IBF points out.

    At the outset, the IBF points out that there are 122 million Television homes in India and more than 71 million homes are connected to Cable & Satellite TV and these are increasing rapidly.

    The industry produces approximately 6,00,000 hours of original programming annually for more than 300 TV Channels making it one of the biggest in the world.

    There are over 56 million viewers of Indian television programming in neighbouring countries and overseas, creating a positive international image of India unlike any other media.

  • Budget, latest notifications push up STB production, broadcasting costs

     

    NEW DELHI: The measures suggested in the budget proposals for 2007 and the latest government notifications issued on 1 March, will not only make manufacturing of STBs dearer, they will also escalate manifold the price of broadcasting programmes.

    These are the conclusions, an exclusive analysis for indiantelevision.com by a senior tax expert on the matter have thrown up.

    The exemption from CVD has been withdrawn on specified parts of STBs, like tuners, RF Modulators and remote controls, according to Essel Group vice president and MSO Alliance leader Arvind Mohan.

    Mohan handles all the tax issues for the Esssel group.
     

    “Earlier, the exemption on CVD was granted by Notification No.21/2002-Customs. However, this has now been withdrawn vide Notification No.20/2007 March 1, 2007,” Mohan tells indiantelevision.com.

    Accordingly, he argued, now 16 per cent of CVD would be levied on the import of these parts. To that extent, the domestic production of STBs would become costlier.

    “It is quite surprising that though the CVD exemption benefit has been withdrawn from the specified part of STB, the exemption from levy of 4 per cent of Additional Duty of Customs in respect of cell phone parts, components and accessories, as was available only till April 30 2007, has been extended through the present budget proposals till June 30, 2009.

    “It is a clear-cut discrimination between the Telecom Industry and Broadcasting & Cable Industry,” Mohan says.
     

    Mohan shows also that the notification regarding the broadcasting sector would also shoot up their costs dramatically.

    Concessional rate of custom duty at the rate of 5 per cent was levied on the following items used in broadcasting sector vide Notification No.21/2002, on 14 major items. These are

    • Television cameras (with portable field video recorders (professional grade);
    • Audio recording equipment;
    • Tabletop post production video editing machines;
    • Four-source editing controllers to control editing machines;
    • Eight-channel video mixer/switches;
    • Special effect generators for fading and superimposing of text and graphics;
    • Time-base correctors/frame synchronisers;
    • Broadcast standard 3-D computer graphic systems;
    • Professional grade colour video monitors;
    • Portable lighting equipment with lamps for shooting in low light situation;
    • Professional-grade photographic cameras of all formats;
    • Darkroom equipment including enlargers;
    • Computer control editing machines;
    • And spares and accessories of above mentioned equipment as permitted by the Deputy Principal Information Bureau in the Ministry of Information and Broadcasting.

    However, these concession have now been withdrawn vide Notification No.20/2007-Customs. Accordingly, now the basic custom duty at the rate of 10 per cent shall be applicable on all these items,” Mohan says.

    “Consequently all the related duties and taxes would also go up. What you must remember is that professional TV cameras, audio recording equipment, video editing machines, etc. are being regularly used by various channels, specially news channels in their day to day working. This move is likely to adversely affect all channels, including news channels.”

    He points out also that exemption from Customs Duty has been withdrawn on recorded magnetic films used for producing TV serials.

    These items will now attract peak rate of custom duty at the rate of 10 per cent.

    Similarly, the Excise Duty exemption on recorded video cassettes, U-matic tapes, Betacam, any similar format, etc. intended for TV broadcasting, has also been withdrawn and excise duty at the rate of 8 per cent has been imposed.

    “This move is also going to adversely affect the broadcasting sector,” Mohan argues.

    Despite announcements by the government and reiteration by the Telecom Regulatory Authority of India, on the initiative to introduce digitisation in all the major cities of India by 2010 (Commonwealth Games), no fiscal concession has been extended in order to catalyse the process, he asserts.

    “This is clearly contrary to the approach adopted by the government for expanding telecommunication services, which were duly-supported by a lot of fiscal incentives and some of these incentives are still continuing.

    “In order to create a level playing field between IT, newspaper and TV sectors, it is imperative that similar fiscal concessions are extended to broadcasting and cable sector also, to realise the objective of digitisation,” Mohan argued.

    He stresses that while no fiscal concession has been extended for digitization initiative despite the representations and recommendations of Trai and the information & broadcasting ministry, a lot of concessions have been accorded to the delivery of content to cinema in digital form namely, which he felt was also discriminatory action.

    As examples, he shows that digital cinema development projects have been notified as project imports under heading 9801 and will thus attract the project rate of 7.5 per cent customs duty.

    The services provided in relation to delivery of content of cinema in digital form after encrypting electronically have also been exempted from the payment of service tax.

    “Similar concessions are required to be extended for promotion digitisation of broadcasting and the cable sector.

    “World over, there has been a migration from analogue to digital regime as analogue is increasingly becoming obsolete. In all countries, various concessions in the form of subsidies, fiscal incentives, tax holidays for establishment of digital infrastructure are being extended by the respective governments, Mohan says.

    He clearly asserts that creditable role of the government in the process of digitisation, but says that if the targets are to be achieved in the stipulated timeframe at the national level, the necessary support to boost digitisation efforts is required to be extended by the government, as have been done in case of telecom sector.

  • MSOs, industry chambers firm up lobbying for entertainment industry on budget

     

     

    NEW DELHI: Amidst an overwhelming sense of dismay, all three industry bodies are lining up their lobbies to get the demands of the entertainment and broadcasting industry sewn into the budget, somehow.

    However, the position of sector regulator Trai is not clear so far on this issue and also, the Indian Broadcasting Foundation feels that there is no point in lobbying.

     

    The major MSO body, MSO Alliance is also gearing up to impress upon the government the need for concessions favouring digitalisation and removing meaningless double-taxation.

    So far, senior executives-industrialists have already met the Finance Minister once but the response to their pleas is not immediately known.

    “There seems to be nothing on the horizon at the moment,” Bobby Bedi, head of the Confederation of Indian Industry‘s entertainment industry committee, told indiantelevision.com.

    “We have already met the I&B minister and he is solidly with us. The problem is the finance minister,” argued another senior executive, saying that “perhaps people do not realise that the industry is poised for a quantum jump.

    “There are immense possibilities in the areas of digital exhibition, outsourcing, post-production, etc., which needs a boost,” Bedi said.

    He revealed that the Federation has already taken up lobbying with members of Parliament on getting some of their crucial demands met.

    Bedi suggested: “We should see some of the concessions coming up, though maybe not necessarily as the final budget provisions, but maybe sometime later in the year.”

    A senior official in the entertainment industry cell of the Federation of Indian Chambers of Commerce and Industry also revealed to indiantelevision.com that they have already started lobbying with members of Parliament, but would not reveal their names, saying: “We have a centralises system,” she said.

    The Associated Chambers of Commerce and Industry in India‘s representative Ajay Sharma said that the three chambers had met the finance minister yesterday already, but would not discuss what the response of the minister was.

    The Telecom Regulatory Authority of India has not decided what course it will take. Responding to a question, RN Choubey, Trai advisor (Broadcasting and Cable Services) told indiantelevision.com: “The MSOs had certain suggestions, so we had sent them the finance ministry, but they had come in late, so the proposals reached late. By then the major formulations in the budget must have been sealed.”

    So is Trai still going to press further and lobby for the demands being taken up by finance ministry? “Nothing is ruled out nor ruled in. What Trai is going to do is for them to decide, and I cannot assume that role.”

    Roop Sharma, Cable Operators Federation of India president said: “We have already held a meeting with Assocham, and we are going to take this issue up seriously, especially digitalisation and bringing down duties and taxes.

    IBF director-finance, Naresh Chahal said: “What do we do with more lobbying? We had sent so many crucial suggestions and are dismayed. This has been the position of the government for the past three years, so I do not think anything will change by lobbying.”

    Chahal said, however, some may have a feeling that broadcasters are all very rich and need no concessions, but that was not true. There are many small broadcasters who suffer immensely and there are so many newer ones coming up who need initial start-up concessions, he reasoned.

    Meanwhile, the MSO Alliance is also firming up its plans and will go with the chambers of commerce and industry.

    Ashok Mansukhani, senior official at Incable and a senior member of the MSOA said: “The government has simply blackballed the issue of digitalisation, completely ignoring even the recommendations of the Planning Commission.”

    He said that MSO and cable TV, as well as broadcasting are a telecom service issue now, with all of the players regulated by Trai. “So we cannot be a service and pay service tax, and then also pay entertainment tax, which the cinema halls do. Where is the level playing field?” Mansukhani demanded to know.

  • Media stocks under fire as Sensex crashes

    MUMBAI: Finance minister P Chidambaram‘s `no nothing‘ offer to the media sector came as no surprise except in the area of set-top boxes (STBs) where one thought a push would be given in terms of sops to boost the local manufacturing industry. There is very little that the Budget can offer in realistic terms and the past trend continued this time too.

     

    If the Union Budget 2007-08 hurt the media stocks today, it was more to do with the announcements that were made as part of an overall corporate sector tax policy. There were, in fact, three tax proposals that could pinch the industry but in varying degrees.

    First, and this will particularly hit the news channels, is the employee stock options (ESOPs) which are being brought under the fringe benefit tax (FBT) net. Listed companies like TV18 Group, NDTV and TV Today Network have been planning to use this as a management tool to retain talent in a media business that has recently seen a high attrition rate.

    Already NDTV‘s net profits have been eroded (for a few quarters) by a rise in personnel costs and ESOPs. TV18‘s policy has been to reserve a chunk of holding for the employees while TV Today has taken permission to offer up tp five per cent as stock options.

    The news channels took a beating today with TV18 dropping 4.47 per cent to Rs 578.70 on the BSE while Global Broadcast News slipped 6.08 per cent to Rs 572.80. NDTV, on the other hand, fell 2.26 per cent to Rs 318.50 but TV Today gained 1.7 per cent to Rs 134.85.

    Unlike IT companies which has built stock options into it, the media sector shouldn‘t be unduly alarmed. “There may be some cause for concern but it wouldn‘t have any major impact. Though it is becoming a trend, the media sector doesn‘t integrally have a big component reserved as stock options,” says an analyst at a broking firm.

    The dividend distribution tax, up from 12.5 per cent to 15 per cent, will also impact the sector. But this could only be a minor shock as media companies are not well known for doling out huge dividends.

    The third, and probably most pinching of the lot, is the commercial property rentals that will now fall under the service tax bracket. If this does not exclude the entertainment sector (we are still awaiting clarity on this), multiplexes may find themselves in a spot of trouble. Most of them have ambitious expansion plans to spread across the country and do not see ownership of property as the only route to setting up screens in different locations.

    The multiplex companies went into a free-fall today as the scrip value dipped in the stock exchanges. Adlabs and Shringar ended four per cent down at Rs 423.65 and Rs 52.65 respectively while Cinemax fell 7.29 per cent to Rs 141.25.

    “If the multiplexes fall under the service tax net, it will have a more lasting impact on their bottomlines,” says an analyst.

    Meanwhile, UTV dropped 8.61 per cent to Rs 258.95 while Balaji Telefilms fell 7.58 per cent to Rs 114.05.

    Zee Group‘s Wire & Wireless India Ltd (WWIL) also shed 6.5 per cent to close the day at Rs 102. While Cas (conditional access system) is slow to take off, the industry is still not clear whether there are incentives provided in the Budget for domestic manufacturing of set-top boxes.

    “Media stocks fell today along with the tumbling of scrips in other sectors like cement and IT. Besides, there was a global meltdown which cast its imfluence in India. It remains to be seen how long the Budget will cast its negative impact on the media stocks, but there is nothing that is deeply damaging,” the analyst adds.

     

  • Prasar Bharati grant down, fourfold increase in loans

    NEW DELHI: Even as the grant-in-aid to Prasar Bharati in the budgetary allocations for the Information and Broadcasting Ministry for 2007-2008 has come down, there has been a more than fourfold increase in the loans to the public broadcaster over the current financial year.

    The loan to Prasar Bharati has been fixed at Rs 2,174.4 million as compared to Rs 411.1 million as sanctioned in the Revised Estimates for 2006-07. The grant-in-aid has come down further, from Rs 11,748.2 million in the Revised Estimates for 2006-7 (as compared to the Budgetary allocation of Rs 12,340.7 million) to Rs 10,639.3 million. All this is apart from the investment of Rs 2,174.4 million.
    In keeping with a decision taken with the budget for 2000-01, Prasar Bharati is being funded as a full-fledged autonomous body with effect from April 2000. The grant-in-aid is to cover the gap in resources of Prasar Bharati in meeting its revenue expenditure, while the loans are to finance the capital expenditure.

    The total budgetary allocation for the I&B Ministry for 2007-08 is Rs 16,818.4 million as compared to Rs 16,600 million in the Revised Estimates for 2006-07 (as against a Budgetary allocation of Rs 17,160 million in the Budget).

    While there is no announcement of any new programmes, the Budget document says the allocation of Rs 220.8 million for buildings and machinery includes funds for the multi-storey building of the Films Division in Mumbai, the Phase II building of the National Film Archives of India in Pune, and a mini Media Centre of the Press Information Bureau in Delhi.

  • Industry vents ire on ‘nothing budget’

    NEW DELHI: In the initial reactions to the 2007-08 budget proposals by Union Finance Minister, the media industry seemed distraught that none of the reliefs it has sought have been considered.

    “There is nothing we had hoped for,” a source in the Indian Broadcasting Foundation told indiantelevision.com. The source pointed out that the Sensex crash pointed to the sentiments of the corporate sector and the media industry could not feel otherwise.
    Both the major commerce and industry chambers, Federation of Indian Chambers of Commerce and Industry, as well as the Confederation of Indian Industry have, meanwhile, said they were disappointed with the budget.

    There were, however, indications, that the industry, especially MSOs would perhaps try and activate the government to meet with their demands in the ensuing period of debate on the budget proposals

    One major news channels told this correspondent that the major thing they had proposed was reduction of customs duty on STBs and components for producing them indigenously, but hopes had been dashed.

    Said India TV CEO Chinatamani Rao, “What could one react to? The IBF had on behalf of the broadcasting industry given several suggestions and nothing has been done on those issues. There is nothing in the budget for the entartainment or broadcasting industry. At best, you can say it is a neutral budget.”

    However, Big 92.7 FM COO Tarun Katial, struck a less strident note when he said, “Reduction in the customs duty works in the favor of business houses. The service tax however needs to reduce… especially since the radio industry is at its infancy and has great employment and media opportunities in the semi-urban and rural markets.

    “Local retail advertisers are at the bottom of the pyramid and they should not be subject to service tax, especially if they have to be enabled to compete with other established / larger players. The benefits that the budget brings to the agricultural sector is very good and with our network spreading across the country and reaching out to 50,000 villages, it is sure to be good for business.

    “Extending FBT on ESOPs requires some analysis and the additional 1 per cent cess on all taxes is sure to burn a hole in some pockets.”

    Radio Mirchi CEO Prashant Pandey said, “There has been nothing specific for the radio industry in this budget. So while it is a growth budget and that is good news for advertising, that is the only thing which brings cheer. I dont think radio was looking at anything specific either. We had asked for a waiver of customs duty in our pre budget memorandum, so that was expected.”

    Arvind Mohan, senior executive vice president of WWIL told indiantelevision.com: “This is a dismal budget. There is nothing in it for us.”

    He opined that at best, the marginal reduction of tax burden on import of digital equipment could be seen as a s sort of a silver line.

    There has been no change in the customs duty for import of STBs, and the service tax, which had been sought to be done away with in this budget, has been slightly augmented, from 12.24 to 12.36 per cent, which is detrimental to the growth of the industry, Mohan felt.

    Stressing that he felt that the dividends distribution tax and the tax on share options for employees would also dampen industry spirit as a whole, Mohan said, “We shall take it up with Trai and also with the Indian Media Group, and lobby with the finance ministry and we hope the government will heed our demands.

    Roop Sharma, president, Indian Cable Operator‘s Federation, said: “Chidambaram wants complete digitalisation of cable TV before the 2010 Commonwealth Games, but what has he done for that? Nothing. I think they want the small industries like cable operators to die out, because they have given no tax holiday for us at all.”

    Senior Trai officials said that they had sent their proposals to the finance ministry some 25 days ago, and “by then the budget procedure might have got a long way through,” indicating therefore, that they were not happy with what has been proposed for the sector.

    The official said that due to certain reasons, he had not been able to look at the exact budget proposals, and would be ready to comment later only.

    Most observers, however, felt that there was nothing in this budget for the media and entertainment industry, but sought more time for giving more considered opinion.

    Trai had strongly proposed that customs duty on import of STBs and their components be reduced to Zero, and service tax be waived. It had called for rationalisation of tax structure to provide for a level playing field for the newspaper and electronic media, but that has not been reflected in the proposals by the finance minister.