Centre could triple IT spend

The government plans to spend a whopping Rs 10,000 crore, or 3% of its annual Plan budget, on e-governance projects in 2010-11. This would be more than three times the outlay for such projects in the current financial year. Stepping up expenditure on e-governance-a major focus area for the government-would prove a bonanza for IT companies that vie for large government contracts.

Speaking on the sidelines of a Nasscom summit here, IT secretary R Chandrashekhar said e-governance projects under social sector programmes would be much bigger in the coming year, and this would take total expenditure on them to 2-3% of the Plan budget. The National Rural Employment Guarantee Scheme and various education and health projects have major e-governance components.

Chandrashekhar said the government would focus on ensuring that budgetary allocations actually translate into services received by intended beneficiaries. "Now that some headway has been made in the services and the delivery platform, the focus is on actually getting the services online in the states and the Centre," he said.

Under the Rs 23,000-crore National e-Governance Plan (NeGP), the ministry has laid out 27 mission-mode projects, which include complex ones like automating land records, tax, driving licences and passports, among others. It has also mandated setting up 1 lakh common service centres, the number of which has been recently escalated to 2.5 lakh. Out of the 27 projects, 9 are central, 11 state and 7 integrated.

For the $50-billion Indian software export industry, the various e-governance projects are a huge opportunity. Industry body Nasscom has projected that government IT spend in India was around Rs 15,000 crore in 2009, and that the business opportunity in e-governance over the next three years is worth $9 billion.

Top-league IT vendors like TCS, Infosys (INFOSYS.BO : 2497.7 +26) and Wipro (WIPRO.NS : 655.7 +8) have already set up dedicated India units to tap into the huge opportunity. "There is much action in India and we want to participate in every bit of it," said P Raghuraman, executive director for Asia Pacific at Amercian technology & consulting giant Accenture.

The government has awarded contracts for five mission-mode projects so far, which include the income tax department's centralised processing centre project and an e-biz portal project, which were bagged by Infosys. TCS has the corporate affairs ministry's MCA 21 and the defence ministry's Passport Seva projects. Wipro is working on Central Board of Excise & Customs projects.

The biggest mission-mode project so far is the Unique Identification project, which is spearheaded by former Infosys chairman Nandan Nilekani. Though the NeGP was announced in the first tenure of the UPA government, most of the projects have met with delays.

Chandrashekhar also said the IT ministry has recommended to the finance ministry that benefits of the Software Technology Parks of India be aligned with those under special economic zones in the forthcoming Budget. Section 10A of the Income-Tax Act provides for 100% deduction for ten years of export profits made by units set up in any STPI. This tax benefit is due to expire on March 31, 2011.

SEZs, on the other hand, have 100% tax-holiday for the first five years and 50% for the next five years, and up to 50% for a further five years, subject to creating reserves, apart from soft loans and other advantages. Chandrasekhar said IT players have been asking for "greater stability in the taxation regime".