Small and medium enterprises in the IT industry want extension of STPI sops and exemption from fringe benefit tax and service tax on office space rentals.

Mr Sankaran P. Raghunathan, President, IT-SME Association, said the government needs to set up IT parks for SMEs with nominal occupation charges and permit co-ownership of space at special economic zones (SEZs). Currently, only those companies buying at least 25 acres of land are allowed to set up operations in SEZs.

This came up in a discussion organised by the Federation of Indian Chambers of Commerce to talk out pre-budget issues of the industry.

Mr Raghunathan also suggested that a certain portion of government contracts be set aside for SMEs. Due to our small size we are currently being discriminated against in government contracts and PSU tenders, he said.

Mr D. Balakrishnan, Chief Operating Officer, SPEL Semiconductor Ltd, suggested that Customs processing for electronic goods be carried out online to save time.

He said that Korean companies such as LG and Samsung availed themselves of speedy Customs clearances in their countries and that India should also give similar preference to home-grown companies.

Mr Adi Saravanan, Founder and President of BPO company Allsec Technologies, said the government could look at providing bandwidth interoperability facilities.

This will ensure that companies spread their assets and offer same process capabilities to domestic and international projects. Currently, companies needs to get separate bandwidth to work on domestic and international projects.

SMEs currently contribute about $9 billion (about Rs 36,000 crore) to Indias total software and services revenues of $40 billion (about Rs 1.6 lakh crore). They are expected to contribute 40-50 per cent to total software and services revenues by 2010.