FM`s not extending tax holiday disappoints BPO

According to MyIris.com : In response to the Union Budget 2008-09 presented by the finance minister, P Chidambaram, at the parliament today, Susir Kumar, Chief Executive Officer, Intelenet Global Services said, `` We are happy that the government has decided to increase spending on education by 20% and with the focus on knowledge and skill development. The measures being introduced by the finance minister on skill development of the working class will help build people with the right caliber and this definitely will have a positive effect on the BPO industry which is people intensive.`

He said, ``However from an industry perspective, we are extremely disappointed as the industry was expecting the FM to extend the 10 year tax holiday under Sec 10A and 10B which is set to expire in March 2009. The BPO industry in India is still a young industry as compared to the IT industry and needs the support of the government till it reaches a phase of growth and maturity. BPO is a capex intensive industry and has just started making cash profits. To achieve growth we need to have extra cash flow for additional investment in capital expenditure. This is the only way to achieve scale as BPO business model is sustainable only on a scale basis. This scale leads to more employment in the labor pool that is not as highly as skilled as the labor pool consisting of engineers, which are employed by the IT sector.``