Press Releases: STPI units feel the crunch of slowdown - Business Line, July 1,2002.
During the last fiscal year, 21 units were closed down in the STPI, Chennai, The trend has continued during the first three months of 2002-03 too.

THE IT slowdown is taking its toll on the STPI (Software Technology Park of India) units. A number of units have either cancelled their STPI licences or closed down in the last 18 months.

The trend has continued in the last two months of the current fiscal. Out of 910 registrations in STPI, Mumbai, so far around 170 units have cancelled their registrations. However, some of the units, out of these cancellations, are still in the domestic business, said Mr P Venugopal, Director, STPI, Mumbai.

Similarly, under the STPI, Bangalore, out of the 1,038 units, 37 closed down during the last fiscal year, said Mr B.V. Naidu, Director, STPI, Bangalore.

The situation in STPI, Chennai, which covers Tamil Nadu, Pondicherry and the Andaman and Nicobar Islands, was better than that in Mumbai and Bangalore. During the last fiscal year, 21 units were closed down in the STPI, Chennai, The trend continued during the first three months of 2002-03 too, with five units closing down during April-June, said Ms R Rajalakshmi, Director, STPI, Chennai. ``The situation is seen not only in Tami Nadu but throughout the country,'' she added.

Among various sectors, units engaged in software development and Web-based applications were the two major segments that opted for cancellations, said Mr Venugopal. The reasons included export orders not forthcoming primarily for Web-related business and delay in the revival of the economy in US market, he added.

According to Mr Venugopal, the number of STPI registrations was steady up to January 2000 and was more or less in pace with the CAGR (compounded annual growth rate) of the Indian software export industry. The Ministry of Finance then announced certain Income-Tax benefit period and also specified eligibility to the units registered up to March 31, 2000.

The software export industry was in boom then, and across the country hundreds of units registered with STPI in March 2000. Subsequently, the economic slowdown in the US and elsewhere made the difference to the software export industry.

The small and medium enterprises, registered but with no contracts and orders on hand, waited for a while for things to improve. However, with the slowdown continuing, certain units decided to cancel the registrations, he added.

According to Mr Naidu, under the STPI, the units should provide the monthly, quarterly and annul reports on time. Their (the units) capital goods imports with export performance were monitored and the units should give a minimum performance as per the Exim policy.

Initially, the STPI licence would be provided for three years. If a unit wants to close down, entrepreneurs and promoters made the decision, while STPI would process their request only after completing all the necessary statutory formalities, he added.

An STPI unit enjoys the following benefits: The jurisdictional directors have the powers to approve import of capital goods (net of taxes) not more than $20 million, 100 per cent foreign equity is permitted, all imports of hardware and software are duty-free, import of second hand capital goods is also permitted, re-export of capital goods is permitted.

Further, they have simplified minimum export performance norms $0.25 million or three times the CIF value of imported capital goods whichever is higher and 10 per cent net foreign exchange earnings against export earnings.

Also, domestic purchases by STP unit are eligible for the benefit of deemed exports to the equipment suppliers.