Gaming industry has high potential, but a number of challenges lie ahead

The industry was expected to grow at 45% in 2009, but managed growth of only 22%

With the increasing number of casual and active gamers, the gaming industry has been engaging more and more players with every passing day. But the challenges faced by the gaming industry are quite different from any other segment in the media and entertainment space. According to the 'KPMG-FICCI Frames 2010' report, the gaming industry was expected to grow at 45% in 2009 but couldn't capitalise on its true potential and managed a growth of only 22%. The size of the gaming industry was estimated at approximately Rs790 crore in 2009, compared to Rs650 crore in 2008.

There are a number of factors which are hampering the growth of the Indian gaming industry. Youngsters, who form a major proportion of those who like to play games, are often not aware about various gaming products that are available in the market.
Lack of adequate gaming infrastructure and the high cost of gaming software are also deterrents to the growth of the industry.

Piracy is also rampant in India-coupled with that, high duties and taxes have also pushed up the cost of gaming consoles.

Rajesh Jain, executive director and head of media & entertainment, KPMG told Moneylife, "The key challenges for mobile gaming are that all mobile sets do not support adequate mobile technology; for consoles, the duty structure is extremely high. For PCs, high-end graphics are required which are not cheap. Piracy has (also) been very rampant."

According to a die-hard gamer from Bengaluru, Ojas Sharma, "Even though the prices of games have come down, taxes make them expensive. A console game can cost between Rs1,000-Rs2,000. PC gamers usually prefer to download games from peer-to-peer websites or they buy pirated Chinese versions. Some even prefer to rent these games."

Gaming companies like Trine Entertainment Limited feel that the industry has to focus on marketing products. "The growth of the industry-mainly over consoles and PCs-would increase over a period of time. Broadband penetration will act as a catalyst as games at present are limited to only major cities and not Tier II and Tier III cities. Companies need to provide local game content like Sony does," Somil Gupta, managing director of Trine Entertainment Limited told Moneylife. He added that costs have to come down, as games can cost as much as Rs4,800.

However, there are a few factors which might help the growth of the industry. "Gaming growth is expected to come from mobiles, consoles, PCs and (other) online platforms. The advent of 3G will surely boost growth for this sector," said Mr Jain.


Govt notifies hike in price of natural gas

Natural gas to power and fertiliser units is being sold at revised rates from today, but the same for city gas projects will come into effect from 8th June

The government has, from today, raised the prices of natural gas by more than double to $4.20 per million metric British thermal unit (mmBtu), leading to a hike in power and fertiliser production costs, reports PTI.

However, a hike in compressed natural gas (CNG) rates will come into effect only from next week.

The cabinet had-last month-approved the raising of gas price from Rs3,200 per thousand cubic metres ($1.79 per mmBtu) to Rs6,818 per thousand cubic metres ($3.818 per mmBtu). After adding royalty, the price for user industries would be Rs7,500 per thousand cubic metres (Rs7.5 per cubic metre) or $4.2 per mmBtu.

"The decision has been notified with effect from 1st June," an official said, adding, "Natural gas to power and fertiliser units is being sold at revised rates from today, but the same for city gas projects will come into effect from 8th June."

The increase in input cost would result in the price of compressed natural gas (CNG) going up by Rs5.60 to Rs27.50 per kg in the national capital. But this would come into effect only from 8th June.

The price of piped natural gas (PNG) would be raised from Rs15.92 per cubic metre to Rs16.85 per cubic metre.

"Gas producers Oil and Natural Gas Corporation (ONGC), Oil India (OIL) and gas marketer GAIL India have been informed of the decision. They have started billing customers according to the new rates," he said.

The hike in gas price would also lead to a rise in the cost of fertiliser production and power generation. However, fertiliser prices will not increase as the government subsidises the sector.

The increase in power tariff would be marginal as only 11% of the total electricity generated in the country comes from gas-based power projects. And, of these, only one-third use the gas with the increased price tag.

ONGC and OIL would gain about Rs5,000 crore and Rs700 crore in revenue respectively due to the gas price increase.

GAIL India, which has been allowed to charge Rs200 per thousand cubic metres or 11.2 cents per mmBtu as marketing margin, would gain Rs150-Rs200 crore in revenue annually.

State-run ONGC and OIL produce 54.32 million cubic metres of gas per day-about 40% of the total amount originating from the country-through fields given to them on a nomination basis. The gas, APM, is sold at government-controlled rates of $1.79 per mmBtu.

"ONGC and OIL have been making substantial losses in their gas business. The (current) low prices of gas have discouraged national oil companies from making investments (in raising dwindling output). Therefore, it became essential to increase the price of gas," the official said.


“Stimulus withdrawal to work well for economy in 2010-11”

The government withdrew the stimulus partially in this fiscal's Budget by raising excise duty by 2%. The impact of this measure could be there for just the last month of 2009-10, that is March

With the Indian economy growing at better than the estimated rate of 7.4% in the last fiscal, chief statistician Pronab Sen on Monday said partial withdrawal of the stimulus is going to work well for the economy.

"Private consumption would increase and government consumption would come down in the first quarter of this fiscal. Stimulus withdrawal is going to work well," Mr Sen told reporters after the release of GDP data.

In the last fiscal, private final consumption expenditure declined by 57.3% from 57.7% a year ago, while expenses by the government rose by 12.3% from 11.7%, indicating that the stimulus was still needed in the economy.

The government withdrew the stimulus partially in this fiscal's budget by raising excise duty by 2%. The impact of this measure could be there for just the last month of 2009-10, that is March.

In the 2009-10 fiscal, mining and quarrying grew by 10.6% compared to just 1.6% a year ago.

The sector saw a robust jump of 14% in the fourth quarter.

Mr Sen attributed this to gas and oil output from Reliance Industries' (RIL) D6 block in the Krishna Godavari (KG) basin and Cairn Energy's Barmer fields in Rajasthan.

He said in the first and second quarters of this fiscal, output from these fields would result in a 40 basis points rise in mining and quarrying.

To a query on reduction of fiscal deficit because of spectrum money, he said a policy decision has not been made so far as to whether money generated through the auction of third generation (3G) spectrum would be used for reducing fiscal deficit or not.

Mr Sen said both growth and inflation should be watched for any policy action.

He said the global situation is much more uncertain now than a couple of months back.

As such, the chief statistician said the growth figure of 7.4% during 2009-10 would not be a deciding factor for economic expansion this fiscal.

"Global situation is such that I think that much greater sense of uncertainty in the global economy is there than we had in couple of months back. So far as the gross domestic product (GDP) in 2010-11 is concerned, I don't think these figures would make any material difference. European situation is a new phenomena, how it is going to impact on macro-basis on our economy, that we don't know," he said.

The Indian economy grew by better than 7.2%, as calculated by Central Statistical Organisation in its advance estimates.


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