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India budget-2013-14


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India budget-2013-14

  1. 1. Infrastructure Thrust Fiscal Deficit underUncertainty over GAAR control GST roadmap in question Service tax reforms CAD a serious concern Check on expenditure Hostage to foreign inflows Balancing fiscal consolidation with growth Thursday, 28th Feb, 2013
  2. 2. Budget in brief Balancing fiscal consolidation with growthThe Union Budget 2013-14 promises to return the economy back to a high growth trajectory while at the sametime keeping a strict check on fiscal profligacy that the country can ill afford. The fact that the FM was able to contain fiscal deficit to 5.2% of GDP in the current year is a remarkable achievement given the overall slow down and the runaway subsidy bill. Going into the new fiscal FY13-14 the fiscal deficit has been pegged at 4.8% of GDP and this in our opinion is not an unachievable task. P Chidambaram as Finance Minister exudes confidence and he has an admirable track record of delivering on his promises. The Finance Minister has done a great balancing act in a rather difficult year. He has promoted manufacturing industry by proposing an Investment Allowance. Further to prevent revenue leakages and augment revenue resources he has come out with a number of innovative measures which while being ingenious evoke confidence. He has sought to promote investment in infrastructure by issue of tax free bonds, freeing up NELP blocks, referring stalled infra projects to the CCI and increasing tax holiday period for power sector. In addition several measures to boost investments, savings and capital markets should yield handsome dividends as the year rolls by. However the resurfacing of the GAAR issue can be a big negative for the markets. Especially given the fact that the FM has gone on record to state that the CAD (Current Account Deficit) can only be bridged through foreign flows constituting of FDI, FII and ECBs. With the TRC (Tax Residency Certificate) declared insufficient, uncertainty over the implementation of the law could lead to foreign investors turning cautious and the momentum of the flow of funds could slow down. I have been at pains to state over and over again that India, at the present juncture, does not have the choice between welcoming and spurning foreign investment. 2 Thursday, 28th Feb, 2013
  3. 3. Real GDP growth rate Seems to have bottomed out 9.0% 8.5% 8.4% 8.5% 8.0% 7.5% 7.0% 6.7% 6.5% 6.2% 6.20% 6.0% 5.5% 5.2% 5.0% 2008-09 2009-10 2010-11 2011-12 2012-13E 2013-14E Whatever may be the final estimate (of the GDP), it will be below India’s potential growth rate of 8% 3 Thursday, 28th Feb, 2013
  4. 4. Fiscal Deficit Reigned in to manageable levels As % of GDP7.0%6.0% 5.7% 5.1% 5.2%5.0% 4.8% 4.8%4.0%3.0%2.0%1.0%0.0% 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE Fiscal consolidation cannot be effected only by cutting expenditure. Wherever possible, revenues must also be augmented 4 Thursday, 28th Feb, 2013
  5. 5. Subsidies Should be of lesser concern going forward Rs. in Crore300000 3.0%250000 2.5%200000 2.0%150000 1.5%100000 1.0%50000 0.5% 0 0.0% 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE Food Fertilizers Petroleum Interest and Others Subsidies as a %of GDP (RHS) We must redeem our promise by 2016-17 and bring down the fiscal deficit to 3%, the revenue deficit to 1.5% and effective revenue deficit to 0% 5 Thursday, 28th Feb, 2013
  6. 6. Market Borrowings Not extraordinarily worrying Rs. in Crore 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE (Apart from borrowing) There are only three ways before us: FDI, FII or External Commercial Borrowing (ECB). 6 Thursday, 28th Feb, 2013
  7. 7. Budgetary Measures Initiatives to kick start growth; control spending In his budgetary speech, the Finance Minister has outlined several initiatives to kick start growth, boost revenues and target spending. Rs. in Crore 1400000 1200000 1000000 800000 600000 400000 200000 0 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE Corporation tax Income tax Wealth Tax Customs Union Excise Duties Service Tax Taxes of the Union Direct Indirect The economic space that we have gained has given me the confidence to be more ambitious in 2013-14. 7 Thursday, 28th Feb, 2013
  8. 8. Revenue measures Pragmatic and achievableIn a bid to curtail revenue losses he has introduced several measures like the 1% TDS on immovableproperty, withholding tax on royalty payments, voluntary disclosure scheme for Service Tax evaders since2007 and final witholding tax on share buybacks by unlisted companiesFurther there has been no revision of the income slabs and the rates which is pragmatic given thepressures on revenue. Further a tax on the super rich introduced has gone down well with the markets.A 15% Investment allowance on plant and machinery over Rs 100 crores should definitely provide a fillip toasset creation and spur investment in the manufacturing sector. This is over and above the depreciationrates prevailing.Surcharge introduced on companies earning a taxable income of Rs 10 crore or more should also helpswell the kitty.Pruning of the negative list to only two sectors should help increase the gamut of services liable to servicetaxBut the biggest clincher is the Voluntary Compliance Encouragement Scheme on Service tax whichproposes to tax the 10,00,000 non service tax payers out of the 17,00,000 lacs registered assessees. Thisitself should lead to a healthy collection; although the estimated amount has not been quantified.Further reduction in STT and introduction of CTT (Commodities transaction Tax) should help lower cost oftransactions for traders in the equity markets.Non Tax revenue estimates (in the form of divestment, sale of other market securities and enhanceddividends from PSEs) are also pragmatic and achievable Wherever possible, revenues must also be augmented 8 Thursday, 28th Feb, 2013
  9. 9. Indirect Taxes Contributing to growthStatus quo on the normal rate of excise duty (12%), service tax rates (12%) and peak customs duty (for nonagricultura imports) maintained. Relief is from the fact that customs duty on crude oil imports was nothiked (as feared earlier).Customs duty proposals – on leather & leather goods lowered to 5% from 7.5% while concessionary period on environmental friendly vehicles extended to FY2015. – On pre forms of precious and semi precious stones duty lowered to 2% from 10% – Export duty on de-oiled rice bran oil cake withdrawn – 10% Duty imposed on export of raw ilmenite & 5% on upgraded ilmenite – Significant concessions provided to the aircraft MRO (maintenance, repair and overhaul) industry – Raw silk duty increased from 5% to 15% – Duty on steam coal and bituminous coal equalized to 2% and CVD of 2% – Duty free limit on gold jewellery raised to Rs 50,000 for males and Rs 1,00,000 for female passengers. – Duty on imported high end vehicles raised to 100% (75%), +800 cc motorcycles to 75% (60%) and yatchs 25% (10%)Excise duty proposals – Hand made carpets and textile floor coverings of coir / jute and ships and vessels totally exempted. Consequently no CVD on imported ships There will also be no change in the normal rate of excise duty of 12% and normal rate of service tax of 12% 9 Thursday, 28th Feb, 2013
  10. 10. Indirect Taxes (contd) VDIS on service tax to provide a windfall – Excise duty on Cigarettes and cigars to be increased by 18% – Excise on SUVs increased to 30% (27%). Not applicable to taxis – Duty on marble increased from Rs 30 / sq mt to Rs 60 / sq mt – Silver manufactured from smelting zinc / lead taxed at 4% – Duty on mobile phones above Rs 2000 raised to 6% (1%) – Branded alternate medicines to be taxed on MRP. Abatement of 35% to exist Service Tax further stream lined to have only two sectors on the negative list – Vocational Training to institutes affiliated to the State Council of Vocational training – testing activities in relation to agricultural produce – VDIS scheme for service tax to provide a windfall to the exchequer; although not quantified in the budget document I hope to entice a large number of assesses to return to the tax fold. I also hope to collect a reasonable sum of money 10 Thursday, 28th Feb, 2013
  11. 11. Direct Taxes Additional tax on the super richStatus quo maintained on income slabs and rates as per last year.However a Rs 2,000 tax credit is provided to every assessee with an income upto Rs 5,00,00010% surcharge imposed on assessees with income of Rs 1 crore and aboveSurcharge raised to 10% (5%) on domestic companies with taxable income above Rs 10 crore. For foreigncompanies surcharge increased to 5% (2%)1st home buyers who take a loan not exceeding Rs 25 lacs to be provided an additional deduction ofinterest of Rs 1 lac . This limit is over and above the current Rs 1.5 lacs. This is to be claimed in AY FY14-15. If limit not exhausted, can be carried over to the next assessment year.For persons with disability or suffering from certain ailments permissible premium rates of insurance havebeen increased to 15% from 10% on the sum assuredDonations to the National Children’s Fund eligible for 100% deduction.Investment allowance of 15% on investment in Plant & Machinery of over Rs 100 crore provided.Section 80-IA benefits to power sector eligible date extended to March 2014.Timeline on concession rate of tax of 15% on repatriation of dividends from a foreign subsidiary to adomestic parent company extend to FY2013. Further Dividend Distribution Tax set to 0% on that portion ofthe dividend distributed by the Indian parent. When I need to raise resources, who can I go to except those who are relatively well placed in society? 11 Thursday, 28th Feb, 2013
  12. 12. Direct Taxes (contd) Revenue leakage loop holes plugged effectively Withholding tax on Interest paid on investments made through Rupee denominated long term infrastructure bonds to NRIs reduced to 5% from 20% Securitization Trusts to be exempt from Income Tax. Tax on income distributed by the Securitization trusts to be at the rate of 30% for companies and 25% for individuals / HUF. Investor Protection Fund set up by a depository exempt from Income Tax Pass through status provided to Category I Alternate Investment Funds (AIF) and Angel Investors recognized as Category I AIFs. This is on par with Venture Funds RGESS timeline extended 3 consecutive years and income limit augmented to Rs 12 lacs from Rs 10 lacs. MF also made an eligible investment. 1% TDS to be imposed on immovable property transactions above value of Rs 50 lacs. Agricultural land is however exempt To plug loop holes a withholding tax of 20% is top be imposed on unlisted companies who distribute profits through buy back of shares. Tax rates on payment of royalties and fees for technical services to non resident Indians hiked to 25% from 10%. However applicable rates to be as stipulated in the DTAA. With a view to improve the reporting of such (immovanle properties) transactions and the taxation of capital gains, I propose to apply TDS at the rate of 1% …. 12 Thursday, 28th Feb, 2013
  13. 13. Direct Taxes (contd) Lowering of STT to benefit equity traders STT (Securities Transaction Tax) reductions are as follows – Equities 0.01% (0.017%) – MF / ETF redemptions at fund counters 0.001% (0.25%) – MF / ETF purchase / sale on exchanges 0.001% (0.01%) CTT (Commodities Transaction Tax) on non agricultural commodities of 0.01% to be introduced. However it will be allowed as a deduction. It is time to introduce Commodities Transaction Tax (CTT) in a limited way 13 Thursday, 28th Feb, 2013
  14. 14. GAAR still unresolved FII and FDI flows likely to be affected The FM has again raked up the controversy of GAAR by suggesting that the TRC (Tax Residency Certificate) merely itself would not be sufficient for foreign investors & non-resident Indians to avail tax treaty benefits. Further tax authorities have been provided with additional powers to decide on tax issues at their discretion. This change has impact on all non-resident investors and FIIs using these routes for channeling investments into India and seeking to claim tax treaty benefits. Moreover the change is proposed with retrospective effect from FY12-13 which will bring any investor, availing treaty benefits under scrutiny. “More conditions would need to be fulfilled” and ambiguity on these additional conditions has spooked foreign investors We expect markets to sell off and FII buying to be restrained until further clarifications are not provided to investors Impermissible tax avoidance arrangements will be subjected to tax after a determination is made through a well laid out procedure involving an assessing officer…. 14 Thursday, 28th Feb, 2013
  15. 15. ExpenditureGovernment expenditure boosts aggregate demand and it has both good and badconsequences. 15 Thursday, 28th Feb, 2013
  16. 16. Non Plan Expenditure Subsidies to be a lesser worry going forward(Rs. in Crore) 2011-12 2012-13BE 2012-13RE 2013-14BE Chg BE FY14/FY13Non-Discretionary ExpenditureInterest Payments and Debt Servicing 273149.9 319759.0 316674.0 370684.0 16%Defence 170913.3 193407.3 178503.5 203672.1 5%Pension 61166.05 63183.41 63836.41 70726.00 12%Police 33106.46 35611.28 37130.97 40895.49 15%Subsidies 217941.1 190015.1 257654.4 231083.5 22%Discretionary ExpenditureAssistance to States from NCCF/NDRF 2458.9 4620.0 4375.0 4800.0 4%General Elections 79.1 91.5 72.5 230.2 152%Payment against Debt Waiver and DebtRelief Scheme for Farmers 1176.4 0.0 0.0 0.0 -100%Postal Deficit 5716.3 5727.1 5838.1 6717.1 17%Reimbursement of losses to Railways 652.0 600.0 637.0 660.0 10%Subsidy to Railways towards dividendreliefs and concessions 2034.4 3003.9 2384.2 2746.0 -9%General Services 19145.6 21291.4 21022.5 22673.0 6%Social Services 19444.2 20784.1 21303.7 23114.0 11%Economic Services 19043.3 20479.2 18643.6 20905.2 2%Other Non-Plan Exp 69598.1 95946.5 77937.2 115868.4 21%Amt met from Famers Debt relief fund andNCCF/NDRF -3635.3 -4620.0 -4375.0 -4800.0 4%Total 891989.8 969899.9 1001638.0 1109975.0 14% Faced with a huge fiscal deficit, I had no choice but to rationalise expenditure. 16 Thursday, 28th Feb, 2013
  17. 17. Non Plan Expenditure Defense expenditure kept at last year’s level (contd) Rs. in Crore 1200000 1000000 800000 600000 400000 200000 0 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE RE - Int Payment & Debt Servicing RE- Defence RE- Subsidies RE Others CE- Loan and Advances to State, UT CE- Defence CE- Others Capital Expenditure (CE) Revenue Expenditure (RE) ...I assure him (Defense Minister) and the house that constraints will not come in the way of providing any additional requirement for the security of the nation 17 Thursday, 28th Feb, 2013
  18. 18. Interest Payments Creeping up beyond 3% of GDP; worrisome Rs. in Crore 400,000 3.3% 3.3% 350,000 3.2% 300,000 3.2% 250,000 3.1% 200,000 3.1% 3.0% 150,000 3.0% 100,000 2.9% 50,000 2.9% 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE Int. Payment and Debt Servicing (LHS) Interest Payment as a %of GDP (RHS) In the budget for 2012-13, the estimate of Plan Expenditure was too ambitious and the estimate of non-Plan Expenditure was too conservative. 18 Thursday, 28th Feb, 2013
  19. 19. Plan Expenditure Positively growth oriented Rs. in Crore 600000 500000 400000 300000 200000 100000 0 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE RE- State Plan RE- Central Plan CE- State Plan CE- Central Plan Capital Expenditure (CE) Revenue Expenditure (RE) As a proportion of total expenditure, it (Plan Expenditure) will be 33.3 percent 19 Thursday, 28th Feb, 2013
  20. 20. Savings, Investments Conducive to put India on 7% growth path & Capital Markets Without savings and investments it would be difficult to kick start growth. Recognizing this urgent need the FM has undertaken several initiatives The time limit on the RGESS (Rajiv Gandhi Equity Savings Scheme) has been increased to three years from one year and the income limit has been expanded to Rs 12, lacs from Rs 10 lacs. Further investment in mutual funds along with equity shares is also allowed to improve the attractiveness of the scheme. Inflation indexed bonds and certificates are expected to be introduced after consultation with The RBI Additional deduction of Rs 1 lac on interest is allowed over and above the existing Rs 1.5 lacs where the loan amount does not exceed Rs 25 lacs. Further if the amount of loan is not exhausted in year 1, the limit can be extended to the next year also. In order to widen the insurance sector reach Insurance companies are permitted to open offices in Tier II cities and lower without prior permission of the RBI. Further Banks are also permitted to operate as insurance brokers For capital markets, – SEBI has been directed to simplify procedures for FIIs. – Ambiguity between FII and FDI is to be resolved by classifying any stake in a company more than 10% as FDI – FIIs allowed to hedge their Re exposure in the currency segment of the Indian derivative markets. – Permitting FIIs to use their bond investments as collateral for margin requirements – Angel investor funds to be recognised as Category I AIF venture capital funds Increasing savings and their optimal allocation for productive uses lead to higher economic growth 20 Thursday, 28th Feb, 2013
  21. 21. Savings, Investments & Reduction in STT to benefit tradersCapital Markets (contd) – SME’s along with startups to be permitted to list on the SME exchange without making an IPO. However with certain restrictions – Stock Exchanges allowed to introduce a dedicated debt segment – Mutual Funds distributors allowed to participate in the Mutual Fund segment of stock exchanges – Asset backed securities, ETFS and debt mutual funds to be included in the eligible list of securities in which Pension & Provident Funds can invest. – STT on equity futures and ETF and MF products reduced to improve attractiveness. With the object of developing the debt market, stock exchanges will be allowed to introduce a dedicated debt segment on the exchange 21 Thursday, 28th Feb, 2013
  22. 22. Budget Summary Nominal GDP to grow at 12% Chg FY13 Chg BE (Rs. in Crore) 2010-11 2011-12 2012-13BE 2012-13RE 2013-14BE BE/RE FY14/FY13 Revenue Receipts 788,472 751,436 935,684 871,828 1,056,331 -7% 13% Net Tax Revenue 569,869 629,764 771,070 742,115 884,078 -4% 15% Non tax Revenue 218,603 121,671 164,614 129,713 172,253 -21% 5% Capital Receipts 402,428 568,918 555,240 564,148 608,967 2% 10% Recoveries of receipts 12,420 18,850 11,650 14,073 10,654 21% -9% Other Reciepts (Disinvestments) 22,846 18,088 30,000 24,000 55,814 -20% 86% Debt Reciepts 367,162 531,980 513,590 526,075 542,499 2% 6% Total Receipts 1,190,900 1,320,354 1,490,924 1,435,976 1,665,298 -4% 12% Non Plan Expenditure 818,299 891,991 969,900 1,001,638 1,109,976 3% 14% Non Plan Revenue 726,491 812,049 865,596 919,699 992,909 6% 15% Interest Payments 234,022 273,150 319,759 316,674 370,684 -1% 16% Non Plan Capital 91,808 79,941 104,304 81,939 117,067 -21% 12% Plan Expenditure 379,029 412,375 521,025 429,187 555,322 -18% 7% Plan Revenue 314,232 333,737 420,513 343,373 443,260 -18% 5% Plan Capital 64,797 78,638 100,512 85,814 112,062 -15% 11% Total Expenditure 1,197,328 1,304,366 1,490,925 1,430,825 1,665,298 10% 12% GDP Nominal 7,795,313 8,974,947 10,159,884 10,028,118 11,371,886 -1% 12% Gross Fiscal Deficit 373,590 515,992 513,591 520,925 542,499 1% 6% Fiscal deficit as a % of GDP 4.8% 5.7% 5.1% 5.2% 4.8% 3% -6% Revenue Deficit 252,251 394,351 350,425 391,244 379,838 12% 8% Revenue deficit as a % of GDP 3.2% 4.4% 3.4% 3.9% 3.3% 13% -3% Primary Deficit 139,568 242,842 193,832 204,251 171,815 5% -11% Primary deficit as a % of GDP 1.8% 2.7% 1.9% 2.0% 1.5% 7% -21% We are the 10th largest economy in the world. We can become the 8th or perhaps the 7th, largest by 2017 22 Thursday, 28th Feb, 2013
  23. 23. Sector Summary Favouring infrastructure sector Sector Budget Impact Key HighlightsAuto & Auto Ancillaries Neutral Excise duty on non-taxi SUV’s hikedAviation Neutral Concessions announced only for MRO industry Additional interest deduction beneficial forBanking / Financial Marginally HFC’s; Interest subvention scheme extended toServices Positive private sector banks Investment allowance of 15% on investment ofCapital Goods Positive Rs 100 crore or more during 1/4/2013 to 31/3/2015 in plant and machinery and Infrastructure push No hike in excise duty; Infrastructure push in theCement Positive areas of road, irrigation and low cost housingFMCG / Consumer Increase in the specific excise duty on cigarettes NegativeDurables (not exceeding 65 mm) by 18% While every sector can absorb new investment, it is the infrastructure sector that needs large volumes of investment 23 Thursday, 28th Feb, 2013
  24. 24. Sector Summary Healthcare and education clear cut beneficiaries (contd) Sector Budget Impact Key Highlights Rs 37,330 crore allocated to the Ministry ofHealthcare / Pharma Neutral Health & Family Welfare Clearance of stalled road projects; setting up ofInfrastructure Positive regulatory authority for road sectors 0% customs duty on plant & machinery for semiIT / BPO’s Neutral conductor industryMedia Negative Duty on STB increased from 5% to 10% A PPP policy framework with Coal India Ltd as inMetals & Mining Neutral order to increase the production of coal NELP blocks that were awarded but are stalled toOil & Gas Positive be be cleared 80 IA benefit for power plants extended byPower Positive another year The 12th Plan projects an investment of USD 1 trillion or Rs 55,00,000 crore in infrastructure 24 Thursday, 28th Feb, 2013
  25. 25. Sectoral Measures and ImpactThe key to restart the growth engine is to attract more investment, both fromdomestic investors and foreign investors 25 Thursday, 28th Feb, 2013
  26. 26. Auto & Auto Ancillaries Increase in duties accentuating slowdown Budget Expectations Budget Declaration Impact Excise duty raised to 30% from 27% for non-taxi N.A Negative SUV’s Duty on luxury motor vehicles hiked from 75% to N.A 100%; on motorcycles (engine capacity > 800 cc) Negative to 75% from 60% N.A Higher allocation of Rs 2,03,672.1 crore to Positive defence (+14.1% over FY13 RE) N.A More than doubled the allocation to Rs 14,873 Positive crore for JNNURM (v/s Rs 7383 RE) Exemption on specified parts of electric and N.A. Positive hybrid vehiclesImpact CompaniesGainers Ashok Leyland, KPIT, Bharat ForgeLosers Tata Motors, Mahindra & Mahindra, MarutiSuzuki India Ltd SUVs occupy greater road and parking space and ought to bear a higher tax 26 Thursday, 28th Feb, 2013
  27. 27. Aviation MRO industry given a boost Budget Expectations Budget Declaration Impact Time period for consumption/installation of partsTax incentives to and testing equipments imported for MRO ofMaintenance, Repair & Positive aircrafts by units engaged in such activitiesoverhaul (MRO) service extended from 3 months to 1 year Basic customs duty exemption extended to parts N.A and testing equipments for MRO of aircrafts’ Positive partsImpact CompaniesGainers GMR InfraLosers Encouraging the MRO sector will generate employment besides other benefits 27 Thursday, 28th Feb, 2013
  28. 28. Banking / Financial HFC’s to benefit from interest deductions Services Budget Expectations Budget Declaration ImpactAllocation of equity capital for In order to comply with Basel III norms, allocatedinfusion in PSU banks – Positive for PSUs Rs14,000cr for capital infusion (Rs 12,517cr RE)Rs15000cr- Rs20000crCommercial banks to beallowed to issue tax-free N.A. Negativeinfrastructure bonds Farm loan interest subvention scheme @4% N.A Negative continued and extended to private sector banks To set up India’s first Women’s bank via public N.A Positive sector; provided for Rs 1000cr as initial capitalInfrastructure status to N.A. Neutralaffordable housing Positive for AMC’s (L&T N.A. RGESS investee’s can invest in MF’s Finance, Bajaj Finserv and Bajaj Holdings) I propose to set up India’s first Women’s Bank as a public sector bank and I shall provide Rs 1,000 crore as initial capital. 28 Thursday, 28th Feb, 2013
  29. 29. Banking / Financial Interest subvention scheme extended to Services (cntd) private banks Budget Expectations Budget Declaration Impact Reduced STT in - a. Equity futures – 0.017% to 0.01% b. MF/ETF redemptions at fund counters – 0.25% Positive for IIFL, MOSL and N.A. to 0.001% Religare c. MF/ETF purchase/sale on exchange – 0.1% to 0.001% Introduction of CTT at 0.01% on non-agricultural N.A. commodities (gold, silver, base metals) futures Negative for MCX contracts; to be allowed as deduction Positive for HFC’s like LIC Additional deduction of interest upto Rs 1,00,000 Housing Finance, HDFC, on loan upto Rs 25 lacs for first home Dewan Housing and Gruh FinanceImpact CompaniesGainers HFC’s, IIFL, MOSL and ReligareLosers Private sector banks, MCX, FT I propose to provide a further amount of Rs14,000 crore for capital infusion. 29 Thursday, 28th Feb, 2013
  30. 30. Capital Goods Indirect beneficiary Budget Expectations Budget Declaration Impact Basic customs duty reduced from 7.5% to 5% on 20 specified machinery for use in leather and Positive footwear industryBudgetary provision towards State Governments to prepare the financialrestructuring of state power restructuring plans. No specifications about any Neutraldistribution companies allocation Rs 1,400 cr provided for setting up of water Positive purification plantsAccelerated depreciation on Investment allowance of 15% on investment ofplant & machinery from Rs 100 crore or more during 1/4/2013 to 31/3/2015 Positivecurrent 15%-20% to 25%-30% in plant and machinery (additional)for the next 3-5 yearsImpact CompaniesGainers Sadbhav Engineering, Jindal Saw, BHEL, Praj Industries, ThermaxLosers To attract new investment and to quicken the implementation of projects, I propose to introduce an investment allowance for new high value investments. 30 Thursday, 28th Feb, 2013
  31. 31. Cement Boost from infra & housing push Budget Expectations Budget Declaration ImpactIncrease in excise duty oncement by changing the N.A. Positiveexisting slabAnnouncements of infra A boost to infrastructure in the areas of road,projects related to highways, Positive irrigation and low cost housingfreight corridor and irrigationGovernment could reviewimport duty on coal, pet coke Duties on Steam Coal and Bituminous Coaland gypsum, which are used equalised with 2% custom duty and 2% CVD Neutralin the cement manufacturing levied on bothprocessImpact CompaniesGainers AllLosers Bottlenecks stalling road projects have been addressed and 3,000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh…. 31 Thursday, 28th Feb, 2013
  32. 32. FMCG / Consumer Cigarette manufacturers impacted sharply Durables Budget Expectations Budget Declaration ImpactDirect tax relief for the middle Relief of Rs 2,000 for tax payers with total Neutralclass income upto Rs 5 lacs10%-12% increase in excise Increase in the specific excise duty on cigarettes Negativeduty on cigarettes (not exceeding 65 mm) by 18 percent Increase in the rate of tax on payments by way of N.A. royalty and fees for technical services to non- Negative residents (foreign company) from 10% to 25%NREGA had an allocation of Allocation at Rs 33,000 cr NeutralRs 33,000 cr in 2012-13Impact CompaniesGainersLosers ITC, Godfrey Phillip, VST Industries What does a Finance Minister turn to when he requires resources? The answer is cigarettes 32 Thursday, 28th Feb, 2013
  33. 33. Healthcare / Pharma Healthy dose of allocations Budget Expectations Budget Declaration ImpactIncrease in MAT rate from N.A. Positive18% to 20%Weighted deduction onInhouse Research to increase N.A. Negativefrom 200% to 225% Rs 37,330 crore allocated to the Ministry ofIncrease in allocation to Health & Family Welfare out of which NewNRHM (National Rural health Positive National Health Mission to get an allocation ofMission) Rs 21,239 crore (+24.3% from FY13 RE)Impact CompaniesGainersLosers Health for all and education for all remain our priorities 33 Thursday, 28th Feb, 2013
  34. 34. Infrastructure Major beneficiary of the budget Budget Expectations Budget Declaration Impact With 4 Infrastructure Debt Funds (IDF) registeredCreation of long term and 2 launched, they are to be encouraged todedicated debt funds for Negative provide long-term low-cost debt forinfrastructure infrastructure projects 3,000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar N.A. Positive Pradesh to be awarded in the first six months of 2013-14 N.A. To set up regulatory authority for road sector Positive Investment allowance of 15% on investment of Rs 100 crore or more during 1/4/2013 to 31/3/2015 Positive in plant and machinery (additional) ‘Doing business in India’ must be seen as easy, friendly and mutually beneficial 34 Thursday, 28th Feb, 2013
  35. 35. Infrastructure Budget Expectations Budget Declaration Impact Generation-based incentive for wind energy N.A. Positive projects with allocation of Rs 800 cr N.A. Upto Rs 50000 cr Tax Free Infra Bonds issuance PositiveImpact CompaniesGainers IRB Infra, L&T, Suzlon, Adani PortsLosers Five inland waterways have been declared as national waterways 35 Thursday, 28th Feb, 2013
  36. 36. IT / BPO’s Greater focus to education through IT Budget Expectations Budget Declaration Impact 0% customs duty on plant & machinery for semi N.A. Positive conductor industryRemoval of MAT on SEZ units N.A. NegativeIncreased allocation underschemes such as RAPDRP, Allocated Rs 65,867 cr to the MHRD (+17% of RE) PositiveUIDAI and N-eGP e- Allocated Rs 27,258 cr for Sarva Siksha AbhyaangovernanceImpact CompaniesGainers CMC, Redington, HCL Info, Educomp, EveronnLosers Investment in the Rashtriya Madhyamik Shiksha Abhiyan (RMSA) cannot be postponed any longer. 36 Thursday, 28th Feb, 2013
  37. 37. Radio broadcasters to benefit from Media impending auction Budget Expectations Budget Declaration ImpactCustom duty on set-top box(STB) likely to be reduced Duty on STB increased from 5% to 10% Negativefrom existing 5% About 839 new FM radio channels to beN.A. Positive auctioned in 2013-14Impact CompaniesGainers ENILLosers Den Networks, Hathway Cable, Dish TV To encourage domestic production of set top boxes as well as value addition, I propose to increase the duty from 5 percent to 10 percent. 37 Thursday, 28th Feb, 2013
  38. 38. Metals & Mining No surprise for the steel sector Budget Expectations Budget Declaration ImpactLikely increase in import duty N.A. Negativeon steel Levy of 4% excise duty on silver manufactured N.A. Negative from smelting zinc or lead A PPP policy framework with Coal India Ltd as in order to increase the production of coalImpact CompaniesGainers CILLosers Steel sector, Hindustan Zinc In the medium to long term, we must reduce our dependence on imported coal 38 Thursday, 28th Feb, 2013
  39. 39. Oil & Gas Impending NELP clearances a big positive Budget Expectations Budget Declaration Impact The oil and gas policy regime is set to move from N.A. profit sharing to revenue sharing (or production- Positive linked) contracts Exploration and production of shale gas to be Positive announced Natural gas pricing policy to be reviewed and Positive uncertainties regarding pricing to be removed NELP blocks that were awarded but are stalled to Positive be clearedExemption of 5% import duty N.A. Negativeon LNGImpact CompaniesGainers ONGC, RIL, IOC, BPCLLosers The 5 MMTPA LNG terminal in Dabhol, Maharashtra will be fully operational in 2013- 14 39 Thursday, 28th Feb, 2013
  40. 40. Power / Utilities Hints at power sector revamp Budget Expectations Budget Declaration ImpactExtensions of sunset clause 80 IA benefit for power plants extended byfor power generating co’s Positive another yearbeyond 2013 Duties on Steam Coal and Bituminous CoalRelief from import duty on equalised with 2% custom duty and 2% CVD NeutralThermal coal levied on both Generation-based incentive for wind energy N.A. Positive projects with allocation of Rs 800 crImpact CompaniesGainers NTPC, Power Grid Corp, NHPC, SuzlonLosers I would urge State Governments to prepare the financial restructuring plans quickly, sign the MOU, and take advantage of the scheme 40 Thursday, 28th Feb, 2013
  41. 41. Miscellaneous Govt. looks to revive textile sectorBudget Expectations Budget Declaration Impact Positive for GE Shipping, N.A. Excise duty exempted on ships & vessels Gujarat Pipavav, Pipavav Defence Zero excise duty route restored on readymade N.A. Positive for textile sector garments; TUFS to be allocated Rs 2,400 crore Excise duty on marble slabs increased from Rs Negative for real estate N.A. 30 per sq mtr to Rs 60 per sq mtr sector Additional deduction of interest upto Rs 1,00,000 Positive for real estate N.A. on loan upto Rs 25 lacs for first home sector The major focus would be on modernisation of the powerloom sector. I propose to provide Rs 2,400 crore in 2013-14 for the purpose. 41 Thursday, 28th Feb, 2013
  42. 42. Ventura Securities LimitedCorporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to bereliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in thesecurities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the aboveinformation/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation. All the strength and succour you want is within yourself. Therefore, make your own future. 42 Thursday, 28th Feb, 2013