India budget-2013-14

Infrastructure Thrust

Fiscal Deficit under
Uncertainty 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

Budget in brief Balancing fiscal consolidation with growth
The Union Budget 2013-14 promises to return the economy back to a high growth trajectory while at the same
time 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

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%

Fiscal Deficit Reigned in to manageable levels

As % of GDP
7.0%

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

Subsidies Should be of lesser concern going forward

Rs. in Crore
300000 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%

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).

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.

Revenue measures Pragmatic and achievable

In a bid to curtail revenue losses he has introduced several measures like the 1% TDS on immovable
property, withholding tax on royalty payments, voluntary disclosure scheme for Service Tax evaders since
2007 and final witholding tax on share buybacks by unlisted companies
Further there has been no revision of the income slabs and the rates which is pragmatic given the
pressures 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 to
asset creation and spur investment in the manufacturing sector. This is over and above the depreciation
rates prevailing.
Surcharge introduced on companies earning a taxable income of Rs 10 crore or more should also help
swell the kitty.
Pruning of the negative list to only two sectors should help increase the gamut of services liable to service
tax
But the biggest clincher is the Voluntary Compliance Encouragement Scheme on Service tax which
proposes to tax the 10,00,000 non service tax payers out of the 17,00,000 lacs registered assessees. This
itself 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 of
transactions for traders in the equity markets.
Non Tax revenue estimates (in the form of divestment, sale of other market securities and enhanced
dividends from PSEs) are also pragmatic and achievable

Wherever possible, revenues must also be augmented


Indirect Taxes Contributing to growth

Status quo on the normal rate of excise duty (12%), service tax rates (12%) and peak customs duty (for non
agricultura imports) maintained. Relief is from the fact that customs duty on crude oil imports was not
hiked (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%

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

Direct Taxes Additional tax on the super rich

Status 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 5,00,000
10% surcharge imposed on assessees with income of Rs 1 crore and above
Surcharge raised to 10% (5%) on domestic companies with taxable income above Rs 10 crore. For foreign
companies surcharge increased to 5% (2%)
1st home buyers who take a loan not exceeding Rs 25 lacs to be provided an additional deduction of
interest 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 have
been increased to 15% from 10% on the sum assured
Donations 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 a
domestic parent company extend to FY2013. Further Dividend Distribution Tax set to 0% on that portion of
the 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?

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% ….

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


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….

Expenditure

Government expenditure boosts aggregate demand and it has both good and bad
consequences.

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/FY13
Non-Discretionary Expenditure
Interest 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 Expenditure
Assistance 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 Debt
Relief 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 dividend
reliefs 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 and
NCCF/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.


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

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.

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


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

Savings, Investments &
Reduction in STT to benefit traders
Capital 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

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

Sector Summary Favouring infrastructure sector

Sector Budget Impact Key Highlights

Auto & Auto Ancillaries Neutral Excise duty on non-taxi SUV’s hiked

Aviation Neutral Concessions announced only for MRO industry
Additional interest deduction beneficial for
Banking / Financial Marginally
HFC’s; Interest subvention scheme extended to
Services Positive
private sector banks
Investment allowance of 15% on investment of
Capital 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 the
Cement Positive areas of road, irrigation and low cost housing

FMCG / Consumer Increase in the specific excise duty on cigarettes
Negative
Durables (not exceeding 65 mm) by 18%

While every sector can absorb new investment, it is the infrastructure sector that
needs large volumes of investment

Sector Summary
Healthcare and education clear cut beneficiaries
(contd)
Sector Budget Impact Key Highlights
Rs 37,330 crore allocated to the Ministry of
Healthcare / Pharma Neutral
Health & Family Welfare
Clearance of stalled road projects; setting up of
Infrastructure Positive
regulatory authority for road sectors
0% customs duty on plant & machinery for semi
IT / BPO’s Neutral
conductor industry

Media Negative Duty on STB increased from 5% to 10%

A PPP policy framework with Coal India Ltd as in
Metals & Mining Neutral
order to increase the production of coal
NELP blocks that were awarded but are stalled to
Oil & Gas Positive
be be cleared
80 IA benefit for power plants extended by
Power Positive
another year

The 12th Plan projects an investment of USD 1 trillion or Rs 55,00,000 crore in
infrastructure

Sectoral Measures and Impact

The key to restart the growth engine is to attract more investment, both from
domestic investors and foreign investors

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 vehicles

Impact Companies
Gainers Ashok Leyland, KPIT, Bharat Forge
Losers Tata Motors, Mahindra & Mahindra, MarutiSuzuki India Ltd

SUVs occupy greater road and parking space and ought to bear a higher tax


Aviation MRO industry given a boost

Time period for consumption/installation of parts
Tax incentives to
and testing equipments imported for MRO of
Maintenance, Repair & Positive
aircrafts by units engaged in such activities
overhaul (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
parts

Impact Companies
Gainers GMR Infra
Losers

Encouraging the MRO sector will generate employment besides other benefits


Banking / Financial
HFC’s to benefit from interest deductions
Services

Allocation of equity capital for
In order to comply with Basel III norms, allocated
infusion in PSU banks – Positive for PSUs
Rs14,000cr for capital infusion (Rs 12,517cr RE)
Rs15000cr- Rs20000cr
Commercial banks to be
allowed to issue tax-free N.A. Negative
infrastructure 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 capital
Infrastructure status to
N.A. Neutral
affordable 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.

Banking / Financial Interest subvention scheme extended to
Services (cntd) private banks

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
Finance

Impact Companies
Gainers HFC’s, IIFL, MOSL and Religare
Losers Private sector banks, MCX, FT

I propose to provide a further amount of Rs14,000 crore for capital infusion.


Capital Goods Indirect beneficiary

Basic customs duty reduced from 7.5% to 5% on
20 specified machinery for use in leather and Positive
footwear industry
Budgetary provision towards State Governments to prepare the financial
restructuring of state power restructuring plans. No specifications about any Neutral
distribution companies allocation
Rs 1,400 cr provided for setting up of water
Positive
purification plants
Accelerated depreciation on
plant & machinery from
Rs 100 crore or more during 1/4/2013 to 31/3/2015 Positive
current 15%-20% to 25%-30%
in plant and machinery (additional)
for the next 3-5 years

Impact Companies
Gainers Sadbhav Engineering, Jindal Saw, BHEL, Praj Industries, Thermax
Losers

To attract new investment and to quicken the implementation of projects, I propose
to introduce an investment allowance for new high value investments.

Cement Boost from infra & housing push

Increase in excise duty on
cement by changing the N.A. Positive
existing slab
Announcements of infra
A boost to infrastructure in the areas of road,
projects related to highways, Positive
irrigation and low cost housing
freight corridor and irrigation
Government could review
import duty on coal, pet coke Duties on Steam Coal and Bituminous Coal
and gypsum, which are used equalised with 2% custom duty and 2% CVD Neutral
in the cement manufacturing levied on both
process

Impact Companies
Gainers All
Losers

Bottlenecks stalling road projects have been addressed and 3,000 kms of road
projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh….

FMCG / Consumer
Cigarette manufacturers impacted sharply
Durables

Direct tax relief for the middle Relief of Rs 2,000 for tax payers with total
Neutral
class income upto Rs 5 lacs
10%-12% increase in excise Increase in the specific excise duty on cigarettes
Negative
duty 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 Neutral
Rs 33,000 cr in 2012-13

Impact Companies
Gainers
Losers ITC, Godfrey Phillip, VST Industries

What does a Finance Minister turn to when he requires resources? The answer is
cigarettes

Healthcare / Pharma Healthy dose of allocations

Increase in MAT rate from
N.A. Positive
18% to 20%
Weighted deduction on
Inhouse Research to increase N.A. Negative
from 200% to 225%
Rs 37,330 crore allocated to the Ministry of
Increase in allocation to
Health & Family Welfare out of which New
NRHM (National Rural health Positive
National Health Mission to get an allocation of
Mission)
Rs 21,239 crore (+24.3% from FY13 RE)

Impact Companies
Gainers
Losers

Health for all and education for all remain our priorities


Infrastructure Major beneficiary of the budget

With 4 Infrastructure Debt Funds (IDF) registered
Creation of long term
and 2 launched, they are to be encouraged to
dedicated debt funds for Negative
provide long-term low-cost debt for
infrastructure
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
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


Infrastructure

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 Positive

Impact Companies
Gainers IRB Infra, L&T, Suzlon, Adani Ports
Losers

Five inland waterways have been declared as national waterways


IT / BPO’s Greater focus to education through IT

0% customs duty on plant & machinery for semi
N.A. Positive
conductor industry
Removal of MAT on SEZ units N.A. Negative
Increased allocation under
schemes such as RAPDRP, Allocated Rs 65,867 cr to the MHRD (+17% of RE)
Positive
UIDAI and N-eGP e- Allocated Rs 27,258 cr for Sarva Siksha Abhyaan
governance

Impact Companies
Gainers CMC, Redington, HCL Info, Educomp, Everonn
Losers

Investment in the Rashtriya Madhyamik Shiksha Abhiyan (RMSA) cannot be
postponed any longer.

Radio broadcasters to benefit from
Media
impending auction

Custom duty on set-top box
(STB) likely to be reduced Duty on STB increased from 5% to 10% Negative
from existing 5%
About 839 new FM radio channels to be
N.A. Positive
auctioned in 2013-14

Impact Companies
Gainers ENIL
Losers 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.

Metals & Mining No surprise for the steel sector

Likely increase in import duty
N.A. Negative
on 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 coal

Impact Companies
Gainers CIL
Losers Steel sector, Hindustan Zinc

In the medium to long term, we must reduce our dependence on imported coal


Oil & Gas Impending NELP clearances a big positive

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 cleared
Exemption of 5% import duty
N.A. Negative
on LNG

Impact Companies
Gainers ONGC, RIL, IOC, BPCL
Losers

The 5 MMTPA LNG terminal in Dabhol, Maharashtra will be fully operational in 2013-
14

Power / Utilities Hints at power sector revamp

Extensions of sunset clause
80 IA benefit for power plants extended by
for power generating co’s Positive
another year
beyond 2013
Duties on Steam Coal and Bituminous Coal
Relief from import duty on
equalised with 2% custom duty and 2% CVD Neutral
Thermal coal
levied on both
Generation-based incentive for wind energy
N.A. Positive
projects with allocation of Rs 800 cr

Impact Companies
Gainers NTPC, Power Grid Corp, NHPC, Suzlon
Losers

I would urge State Governments to prepare the financial restructuring plans quickly, sign
the MOU, and take advantage of the scheme

Miscellaneous Govt. looks to revive textile sector

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.

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India budget-2013-14

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