Budget Wishlist: OOH industry wants lowering of total duties to 16 pc from 34 pc

The out-of-home industry would like to see some of those rules regarding billboards to be eased in the Union Budget 2008-09. The industry would also like the total duties to be lowered to a maximum of 16 per cent. OOH players like Stroer OOH Media, Jagran Engage, Future Media and OOH Media reveal their wishlist for the Finance Minister.

Indrajit Sen, Country Head & CEO, Stroer OOH Media India, said, “Regarding expectations from the Union Budget 2008-09 for the OOH industry, honestly we aren’t expecting any special favours for the outdoor advertising industry. The specific issues that we should address are that the entire industry needs a major facelift through widespread modernisation. This is because an outdoor media is highly visible and forms a visual identity for most of our cities. With India taking on a leadership role in the world economy, we shall attract increasing numbers of foreign visitors to our cities, which then can’t afford to look shabby and ancient anymore.”

“We need to import large numbers of outdoor display media. Custom duties that are applicable for any such import at approximately 34.5 per cent make the whole pricing very unattractive and unviable. Therefore, we would like a lowering of total duties to a maximum of 16 per cent. Similarly, the duties for import of LED lightning technology and LED should be done away with to encourage a rapid switchover to the efficient technology,” he added.

M Kumar, General Manager-Brand Development, Jagran Engage, observed, “OOH is still considered a sector within the larger media and entertainment (M&E) industry. It is largely disorganised and fragmented, and an industry status hasn’t been conferred on it. Even though the size of the sector is bigger than that of radio or the Internet, it seldom finds a mention, and whenever it does, it seems more like an afterthought. In recent times, key OOH players have taken steps to make sure that it gets the importance it deserves and there is all-round buy-in from thought leaders as well as advertisers. While issues concerning OOH is at the state level (local municipal corporations), those debated in the television or the print are at the Ministry (Information and Broadcasting) level.”

Kumar further explained, “We believe that once the sector is able to offer the scale comparable to, let’s say, manufacturing or services, it will be significant enough to be featured in the Union Budget. For that to happen it is imperative that consolidation takes place sooner than later in this space, we get into an organised mode and partake in the India growth story. A welcome initiative has been the formation of a body by the IOAA in 2007 by like-minded players, which will offer a much larger platform to the OOH players to take up important issues. Perhaps in the coming years, a charter of demands specific to the OOH sector will get highlighted.”

So, has the industry taken any steps to inform the Finance Ministry its expectations from the Budget? Kumar said, “Not really. As of now, the OOH players are doing their own thing. We are aware of our role in the country’s rise to becoming an economic powerhouse. Like any other sector, OOH, too, has its shares of deliverables – directly proportional to affecting consumption and contributing to the India’s economy. Once that starts showing, the desired results combined with specific issues championed by the IOAA, there will be a case for flagging off expectations from the Budget post deliberations with the Finance Ministry.”

“The nature of issues that the OOH sector is grappling with currently is largely local (state government level) and is being debated as such,” added Kumar.

Partho Dasgupta, MD & CEO, Future Media Ltd, said, “At present, the media and advertising industry represents a very small portion of the country’s GDP. As an industry, we need to first grow this share collectively before making demands from the Union Budget. However, from an individual as well as overall industry perspective, I welcome all policies that will help increase consumer confidence and thereby, enhance consumption. Revision of personal taxation norms will encourage consumption, which will in turn benefit the advertising and media industry. I also recommend a review of the fringe benefit tax and reduction in customs duty on import of technologically advanced and innovative media solutions.”

Ishan Raina, CEO, OOH Media, said, “Reduction of duty on import of screen/plasma from emerging markets like China, Taiwan etc., would result in positive impact on reduction of investments in equipment costs and higher capital expenditure. Due to other competitive players in the market, it is important to retain the key employees through employee stock option plans (ESOPs). Since this has now been brought under the fringe benefit tax (FBT) purview, the cost of manpower retention has highly increased. This should be slashed. Further, service tax hike may hit the industry.”

Raina explained that reduction in keeping constant the service tax on ad revenue brought more growth to industry in the long term. “Service tax on lease rentals is affecting our advertising business as many ad agencies are paying huge rentals.

On the whole, it appears to be negative and needs to be reworked. In the media industry, the major cost comes from capital expenditure, rent and employee cost. Tax holiday for 10 years needs proposed for this new medium to grow,” he further said.

Raina added, “Outdoor advertisement through LCD/plasma screens was a new and upcoming segment for the Indian media industry. Due to this, the companies are bound to accumulate huge losses during the initial phase of business due to more competitive player in the market and higher outflow of rent and capital expenditure. Corporate taxes in other Asian countries are lower than in India. For example, the corporate tax rate in Hong Kong is 17.50 per cent, in Singapore it is 20 per cent, and in Malaysia it is 27 per cent. These countries directly compete with India and attract foreign direct investment. Our Finance Minister needs to take positive steps to design the corporate taxes policy in a manner which enables us to compete with other Asian countries.”

Has the Union Budget generally ignored the interest of the media and entertainment (M&E) industry? According to Raina, the M&E industry was expected to be one of the prime beneficiaries of the continued growth in India’s GDP. He, however, added, “Despite being one of the fastest growing sectors, it is impacted by its cyclical ties. The economic growth and rising income levels have supported the sector’s growth. With an estimated size of $8 billion, the turnover of the sector is expected to reach $18 billion by 2010 at a CAGR of 19 per cent. All segments in the industry are projected to grow. Maximum growth is expected from television, OOH and film segments. The Finance Minister needs to give special packages to boost this industry.”

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