UNION BUDGET 2012

INDUSTRY, INFRASTRUCTURE ,AGRICULTURE GROUP No. 3

The share of industry in GDP remained generally stable at around 28 per cent in the post-reform period. The long-term average annual growth of industries during the post-reform period between 1991-92 and 2011-12, averaged 6.7 per cent as against average GDP growth of 6.9 per cent.

INDUSTRY

PROPOSALS :
Hike

in excise duty from 10% to 12% (General) Hike in excise duty on upper end of the car segment from 22% to 24% for cars with engines of between 1.2 -1.5 ltr; for cars powered by engines of 1.5 ltr< the duty is now 27%. Reduction in excise duty from 10 per cent to 6 per cent on specific parts supplied to manufacture of electrical and hybrid vehicles

IMPACT :

Tractor companies seek rollack of excise duty hike With no tax on diesel vehicles, auto makers mull expansion Mercedes, Audi, BMW to get more expensive by up to Rs 3 lakh Small car prices to increase by Rs 4000 to Rs 20,000 Auto industry welcomes incentives to promote hybrid vehicles

Auto : Proposals & Impact

PROPOSALS :
New

entity for public sector banks (Like Holding company) Private equity firms and capital venture funds to pay income tax on the premium they have charged over their fair market value while selling shares to unregistered investors The finance ministry will now monitor the end use of funds given to state-run banks for capitalization to ensure its efficient utilization towards increasing financial inclusion Infusion of Rs 15,888 crores in public sector banks, regional rural banks and NABARD in 2012-13. 10000 crores allocated to NABARD to fund RRBs

IMPACT :

Proposal may make private equity, venture funds investment

difficult Check on end use of capitalization support to PSU bank

Banking : Proposals & Impact

PROPOSALS :

Hike in excise duty from 10% to 12% (General) Exemption of basic custom duty for LCD and LED TV panels Reduction in basic customs duty from 7.5% to 5% on specified

plantation and processing machinery in coffee industry Reduction in duty to 30% of MRP against 45 % of MRP on branded apparels Increase in excise duty on ice cream and flavored milk from 1% to 2% , reduction in basic customs duty on probiotics from 10% to 5% Increase in basic customs duty on standard gold bars; gold coins of purity exceeding 99.5% and platinum from 2% to 4% and Levy a 1% excise duty on unbranded jewellery Customs duty exemption of shuttle less looms from 5% to zero, which would benefit spinning mill companies

IMPACT :

Televisions, cars, colas & eating out to cost more, home-brewing coffee to get cheaper, TV, AC, refrigerator prices to go up by Gold and platinum jewellery prices set to go up; gold smuggling likely to increase Branded apparels to get cheaper

Consumer goods : Proposals & Impact

PROPOSALS :

Crude oil cess increased from 2500 PT to 4500 PT Retrospective amendment effective from 1 April 1962

transfers under the tax net Customs duty scrapped on imported coal 80 IA exemption, extending Tax Holiday period for the power projects Additional depreciation of 20% for new power projects Tax free bonds, external commercial borrowings (ECB) for part financing Rupee debt of existing power projects Sun set norms provision for power companies Full exemption on coating chemical used for compact fluorescent lamps from basic customs duty. Excise duty on LED lamps was also being reduced to 6 per cent.

to bring indirect

IMPACT :

Net payment of $7-7.5 per barrel of crude oil extracted now that outgo will shoot up to $15 per barrel proposal to scrap customs duty on imported coal would bring down electricity generation costs by about 12 p. per unit around USD 6/MT equivalent Environment for expansion and establishment of new power projects Little to cheer for renewable energy sector

Energy : Proposals & Impact

PROPOSALS :
Hike

in excise duty from 10% to 12% (General) Customs duty on imported plant and machinery used in the mining industry has been cut from 7.5% to 2.5%. Exemption limit has been enhanced to 150 percent for capex in urea plants Increase in basic customs duty on non-alloy, flat- rolled steel from five per cent to 7.5 per cent

IMPACT :

Steel costs will go up by Rs 500 to Rs 1,000 per tonne Mining cost to become cheaper Cement prices likely to increase Rs 3-4 per bag Urea production may increase (May help in filling 5MT supply gap)

Industrial Goods : Proposals & Impact

PROPOSALS :
Hike

in excise duty from 10% to 12% (General) Preventive health checkup deduction up to 5000 Rs. allowed 5 year extension to the 200 percent R&D tax deduction up to 2017 Concessional basic customs duty of 2.5% along with reduced excise duty of 6% on iodine Basic customs duty on probiotics will be reduced from 10% to 5%. Fund allocation for the health sector recorded a paltry 14% increase in 2012-13 to Rs 30,477 from Rs 26,760 crore Proposal of NUHM

IMPACT :

Drug prices may rise due to excise duty hike Undergoing a preventive health check-up will help a consumer
save tax up to Rs 5,000 Boost for probiotics product industry

Healthcare: Proposals & Impact

Infrastructure in Budget 2012-13

During

Twelfth Plan period, investment in infrastructure to go up to Rs. 50 lakh crore with half of this, expected from Private sector. Tax free bonds of Rs. 60,000 crore to be allowed for financing infrastructure projects in 2012-13. More sectors added as eligible sectors for Viability Gap Funding under the scheme Support to PPP in infrastructure Government has approved guidelines for establishing joint venture companies by defence PSUs in PPP mode

Highlights

First

Infrastructure Debt Fund with an initial size of Rs. 8,000 crore launched earlier this month. A harmonised master list of infrastructure sector approved by the Government IIFCL has put in place a structure for credit enhancement and take-out finance for easing access of credit to infrastructure projects.

Highlights (Contd.)

National Manufacturing Policy announced with the

National Manufacturing Policy

objective of raising, within a decade, the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs.
Coal

India Limited advised to sign fuel supply agreements with power plants, having long-term PPAs with DISCOMs and getting commissioned on or before March 31, 2015. External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects.

Power and Coal

Highlights (Contd.)

Target

of covering a length of 8,800 kilometer under NHDP next year. Allocation of the Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore. ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project. Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users.

Transport: Roads and Civil Aviation

ECB

to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion. Proposal to allow foreign airlines to participate upto 49 per cent in the equity of an air transport undertaking under active consideration of the government. Full exemption from import duty on specified equipment needed for road construction, tunnel boring machines etc

Transport: Roads and Civil Aviation (Contd.)

Delhi Mumbai Industrial Corridor In September 2011 central assistance of 18,500 crore spread over 5 years approved. US $ 4.5 billion as Japanese participation in the project.

Measures

will ease financing constraints faced by certain infrastructure segments and spur growth. The access to viability gap funding for irrigation projects will improve private sector participation in the sector. Construction companies, power companies and port development companies will be benefited by the lowering of withholding tax on ECB to 5 percent from 20 percent. Power sector will further get a boost through the availability of tax-free bonds.

Impact Analysis

Y-o-Y

growth of allocation to infrastructure including power, road transport ,shipping ,urban infrastructure, and railways together has increased by a mere 7.4 percent as compared to 36.0 percent in 2011-12. For sectors such as port, allocation of tax free infrastructure bonds remain unchanged at Rs.50 billion. While this will facilitate development of Port infrastructure, the impact on these sectors will be neutral ,if not negative.

Is it enough?

Healthy

infrastructure spending holds the key to facilitating economic growth in India. Inadequate infrastructure has time and again exposed the Indian economy to supply side constraints. Although the Y-0-Y growth in infrastructure has been less than expected the mechanisms for funding has been enhanced and it augurs well for the overall development of infrastructure sector.

Conclusion

ANALYSIS OF AGRICULTURE SECTOR

Agriculture

including allied activities, accounted for 14.5 per cent of gross domestic product (GDP) at 2004-05 prices, in 2010-11. Foodgrains production raised 244.78 million tonnes in 2010-11 During the current Five Year plan, agriculture growth is estimated at 3.28 per cent against a target of 4 per cent.

Agriculture : an overview

The

total plan outlay for agriculture and cooperation has been increased by 18 per cent The allocation for scheme "Bringing Green Revolution in Eastern India is also increased The allocation for Rashtriya Krishi Vikas Yojna (RKVY) is also increased by 17 per cent Raised the target for agricultural credit Allocated Rs 10,000 crore to the National Bank for Agriculture and Rural Development (NABARD)

Budgetary allocation for agriculture

Farmers

who repay loan on time will be rewarded Farmers would also be eligible to get post-harvest loans up to six months at 4 per cent interest rate KCC scheme will be modified to make the KCC smart card to be used at ATMs. Set aside a sum of Rs 200 crore for incentivising scientific research Structural changes are being made to the Accelerated Irrigation Benefit Programme (AIBP) to boost investment in irrigation projects.

Budgetary allocation for agriculture

Irrigation

and Water Resource Finance Company to be operationalised. National Mission on Food Processing would be started. Creation of 2 million tonnes of storage capacity in form of modern silos.

New initiative