The Hindu Business Line : Tuesday, March 01, 2005

Auto sector disappointed
THE automobile industry is disappointed over the absence of excise duty relief in today's Union Budget. The industry had been hoping to see the duty on passenger vehicles with seating capacity of 13 or less reduced to 16 per cent by removing ... More

Indirect momentum
THE Finance Minister has put paid to the automobile industry's hopes of landing another cut in excise duty. However, the Budget's overall focus on boosting investment in infrastructure, particularly in rural development and highways, should ... More

BUDGET

Stimulus for economy, hopes for the poor
THE Finance Minister, Mr P. Chidambaram, has delivered on the expectations of almost all sections of the society. His Budget for 2005-06, presented to Parliament on Monday, has a welcome income-tax package for the middle class, a response to ... More

Law soon to allow banks to issue pref shares
IN a move that would go a long way in helping banks to meet their future capital requirements under tightened norms, the Finance Minister, Mr P. Chidambaram, today said that he would move legislative amendments to allow them to issue preference ... More

Tax savings: Choices galore
THE Budgets presented over the past few years had but one larger message for the retail investor: Invest more in equities. Budget 2005 seeks to facilitate such investments. The revamp of personal tax laws proposed by the Finance Minister will ... More

FIIs can submit collateral for derivatives
THE Finance Minister has sought to correct an anomaly in the derivatives margin payment norms for FIIs. He said that "FIIs are to be permitted to submit appropriate collateral, in cash or otherwise" when trading in domestic derivatives. ... More

Equity-linked schemes to lose lustre
EQUITY linked savings schemes (ELSS) will lose their relevance in the wake of the Budget. These schemes, which provided tax rebates under Section 88 of the I-T Act, may from now on not be considered by investors in their bid to generate tax ... More

`No concrete step to hike FDI limit' — Insurers welcome I-T changes
While the introduction of income tax deduction on Rs 1 lakh on account of savings was welcomed, no concrete move to raise foreign direct investment (FDI) in the insurance sector was bemoaned. Mr Sunil Mehta, Country Head & Chief Executive, ... More

Bankers welcome nod for preference shares, seek clarity
BANKS have welcomed the Union Budget proposal to allow them to raise capital through preference shares in the Union Budget 2005-06. According to the Budget, banking companies have been allowed to issue preference shares, since preference share ... More

Outlay up 29 pc
THE Central Plan outlay for the next fiscal 2005-06 has been substantially stepped up by 29 per cent in nominal terms at Rs 2,11,253 crore against the budgeted Rs 1,63,720 crore for the current fiscal, with important segments such as ... More

Fuel cess for road development up by 50 paise per litre
THE Government has decided to impose an additional cess of 50 paise per litre on both petrol and diesel to raise additional resources to finance the National Highways Development Project (NHDP). Accordingly, the cess on petrol and diesel has ... More

Centre's market borrowings may rise 68 pc next fiscal
THE Centre's gross market borrowings during 2005-06 are budgeted to grow by 68 per cent, to touch a record Rs 178,466 crore. This is against the revised figure of Rs 106,395 crore in the current fiscal. The main reason for the borrowings going ... More

The big picture: Social sector thrust
GROWTH, stability and equity are mutually reinforcing objectives. The National Common Minimum Programme (NCMP) leans towards decisive intervention by the State in favour of the poor. Given the resilience of the Indian economy, it is possible to ... More

Corporate income-tax — A mix of lower tax shelters & rates
The corporate income tax rate, the surcharge thereon and the rates of depreciation are inter-linked. Any reform would have to address all three elements. The international best practice is to provide for depreciation at rates that would enable ... More

Petro-products and services — Rates cut, coverage expanded
Petro products: Finally, there is the issue of taxes on petroleum products. After examining the Lahiri committee's report, I propose to make major changes in the Customs and excise duty rates.

The Customs duty on crude petroleum ... More

Domestic airlines flying abroad need not pay ATF tax
IN a move that will benefit Indian carriers operating abroad, the Budget has proposed declaring sale of Aviation Turbine Fuel (ATF) to any designated Indian carrier operating abroad as deemed export. The move will enable designated Indian ... More

The right ring
THE telecom sector continues to enjoy sunrise status. A flurry of proposals such as

Continuation of the tax holiday benefits under Section 80IA.

Exemption from customs duty for specified telecom equipment (which includes base ... More

Alignment of tariffs welcome
IN A WELCOME move, the Government has revamped the excise tariff by introducing an eight-digit classification and, thereby, completely aligning the excise tariff with the Customs tariff, which is again aligned with the ... More

More workload for taxman
THE Finance Minister, Mr P. Chidambaram, has pleased the vast body of taxpayers by raising the exemption limit and revising the tax slabs. True to the promise he made last year, the Finance Minister has now come up with ... More

AMCs gearing up for gold funds
The mutual fund industry has made a concerted effort in the last year to try and introduce mutual fund products that would invest in commodities instead of equity or debt. This effort just got a shot in the arm with the Finance Minister, Mr P. ... More

108 SSI items likely to be dereserved
HINTING at a further dereservation in small-scale industry, the Finance Minister, Mr P. Chidambaram today said that the Ministry of Small Scale Industry has identified 108 items for dereservation including 30 items in the category of textile ... More

A level playing field for MFs
Mutual fund houses will also be allowed to float special pension funds to manage pension money, which will also qualify as savings. More

Gold funds: A new investment avenue
INDIAN investors who would like to add gold to their portfolio have been faced with a Hobson's choice so far. Either you invest in jewellery and sacrifice a significant portion of your investment to variations in caratage, wastage and making ... More

Good for housing sector, says Mistry
THOUGH there is nothing very specific to the housing sector in the Budget, housing continues to get the benefits that it did, says Mr Keki Mistry, Managing Director, HDFC Ltd. Also, although the rebate under Section 88 for repayment of housing ... More

Emphasis on infrastructure projects
TELECOMMUNICATION is the best way to provide connectivity in urban and rural India. By the end of January 2005, we had achieved a tele-density of 8.75 per cent. However, we are concerned with the low tele-density in rural areas. So far, ... More

Budget estimates for 2005-06
WHAT gives me satisfaction is that, while faithfully attempting to implement the mandate of the NCMP, I have been able to remain on the path of fiscal consolidation. According to the revised estimates for 2003-04, the revenue deficit was 3.6 ... More

Demand-led growth: End of incentive mindset
THE Union Budget presented in Parliament today may make no overt claims to it, but it could be a definitive step towards a new philosophy of economic management. It relies less on investment outlays than on the generation of consumer demand, ... More

Service tax net widens — Small players exempt
SMALL service providers had some good news coming their way from the Union Budget proposals announced by the Finance Minister, Mr P. Chidambaram, on Monday. The Government has decided to exempt from service tax those service providers whose ... More

Backward Regions Grant Fund
THE Finance Minister, Mr P Chidambaram, has announced the creation of a Backward Regions Grant Fund, with an allocation of Rs 5,000 crore for 2005-06. During the last Budget, the UPA Government had announced its intention to set up a grant ... More

Bloom time for floriculture sector
THE doubling of customs duty on cut flower imports from 30 per cent to 60 per cent is likely to benefit the growers of orchids and chrysanthemums, as the increased levy is expected to curb the imports at cheaper prices. Florists mainly in ... More

A few things to cheer for plantations
THE Union Finance Minister, Mr P. Chidambaram's decision to withdraw the additional excise duty of Re 1 per kg on tea is expected to help the sector to reduce the cost of production, making it a little more cost-competitive in the global ... More

21% tax revenue growth target not unrealistic: Chidambaram
THE Finance Minister, Mr P. Chidambaram, has said that the 20.91-per cent budgeted growth in the Centre's gross tax revenues was not unrealistic. This is even as the revised estimates for the current fiscal show a shortfall of Rs 11,712 crore ... More

Businesslike, he had them all ears
HE may not be the Baadshah of Bollywood, but when Mr P. Chidambaram said Main Hoon Na in his last Budget speech, he was setting the tone for what was to come. Optimistic, upbeat and unperturbed by minor commotions, the Finance ... More

Good news on the whole
THE Budget is good news. It has no major negatives to spook the bullish undertone in equities and could provide stimulus for industrial growth. Over the longer term, the possibility of a larger part of domestic savings getting routed to equities ... More

Reprieve for domestic aviation
THE domestic aviation industry has got a reprieve for another six months with the Finance Minister, Mr P. Chidambaram, extending till the end of September the exemption from tax on agreements to acquire aircraft or aircraft engines on lease. ... More

A survival guide to PC-speak
SINCE not everybody as smart as the whiz kid on the finance channel, here is a quick help to those who got stumped by the lingo that the FM deployed in his Budget speech. Let's start with `liquidity overhang' at the ... More

Local PC makers fear CVD burden
THE IT hardware association MAIT today said that the Union Budget announcements would make import of personal computers (PCs), notebooks and servers cheaper by about five per cent, even as the Made-in-India computers would become marginally more ... More

Telecom: Customs relief diluted
THE Finance Minister, Mr P. Chidambaram, on Monday announced a slew of initiatives for the telecom sector including exemption of customs duty for items covered under the Information Technology Agreement (ITA) like mobile handsets, reduction in ... More

Gain for cos with lower depreciation charges
THE direct tax proposals announced in the Union Budget 2005-06 are expected to have a far-reaching impact on the corporate sector. The corporate tax rates, including surcharge and education cess, for domestic companies are proposed to be ... More

Time to rejoice for insurance sector
THE flexibility given to investors in the Budget to decide on the proportion of asset allocation across instruments must certainly be music to the ears of players in the insurance sector. For quite a while now, insurers had been demanding an ... More

Moods swing for B-day brokers
"WE only hope that even if the Finance Minister does not do much good, he will not do much to harm the markets," said a broker on his way to his office at the BSE on Budget Day. This sense of uncertainty hung over the bourses during Mr P. ... More

Govt borrowings may hit bonds
THE net borrowings of the Government, as presented in the Union Budget 2005-06, are slightly higher than expected, due to the increased allocations made for social spending. This may have an adverse impact on the bond market, which reacted by ... More

I commend...
ONE of India's proudest sons, Dr Amartya Sen, argues in his book Development as Freedom that development is a process of expanding the real freedoms that people enjoy. He says, "Growth of GNP or of individual incomes can, of course, be ... More

Experts see red over banking cash transaction tax
TAX professionals, while welcoming the steps to rationalise tax treatment of savings in the Budget, are seeing red over the proposed Banking Cash Transaction Tax (BCTT) to check tax evasion, under which tax at the rate of 0.1 per cent of the ... More

While bosses fail to see the big idea, bourses take off
BLAME it on the media, but the increasingly clear thing about the Budget is that things get clearer only the day after. For a long while at the city's Taj Mahal Hotel, corporate chiefs gathered for the Budget viewing session appeared hard ... More

Budget favourable to NCMP: Montek
THE Deputy Chairman of the Planning Commission, Dr Montek Singh Ahluwalia, endorsed the Budget proposals presented by the Finance Minister, Mr P. Chidambaram, today. "Most of the critical areas suggested in the National Common Minimum ... More

`A progressive Budget'

No effort to bring down deficit: S&P

CEMENT

Solid, for now
THE focus on infrastructure, especially highways with enhanced dedicated funding through a higher cess on petrol and diesel, rural housing and the continuation of the tax incentives on housing loans are likely to keep cement demand ticking at a ... More

Mixed reaction from cement cos
INCREASED allocations for the development of national highways as well as the Budget's emphasis on infrastructure development got the cement stocks looking up on the bourses. But, apart from the measures that kindled hopes of demand growth, the ... More

Duty on clinker goes up
THE Finance Minister, Mr P. Chidambaram, has hiked the excise duty on cement clinker from Rs 250 a tonne to Rs 350 a tonne. According to cement manufacturers, the proposed increase may not lead to an increase in the price of the product. ... More

ENGINEERING

Slew of positives
ABB, Siemens, Crompton Greaves, Larsen & Toubro, Gammon India, IVRCL Infrastructure, Hindustan Construction, Kirloskar Brothers and Praj Industries: these are some of the more prominent stocks from the engineering and construction sector that ... More

EXCISE AND CUSTOMS

TAX PROPOSALS

Excise duty: Cess on petrol & cigarettes
CENVAT'S preference: The Government's intention is to bring as many goods as possible to the Cenvat rate of 16 per cent. Today, 5 items attract 24 per cent. Out of the 5, I have picked out three — polyester filament yarn, tyres ... More

Customs tariff: Lower peak rate
Lower peak rate: I intend to advance the Government's declared policy of making the Customs duty structure closer to that of our East Asian neighbours. Therefore, I propose to reduce the peak rate for non-agricultural products from 20 ... More

Duty on molasses to cost mills extra Rs 200 crore
THE 2005-06 Union Budget decision to double the excise duty on molasses to Rs 1,000 per tonne will cost the sugar industry an extra Rs 200 crore on an annual basis. Sugar mills in the country crush on an average 180 million tonnes (mt) of ... More

Excise duty on molasses `retrograde'
THE Finance Minister's decision to considerlooking into the problems of the sugar industry is welcome but the sharp increase in the excise duty on molasses will hit the industry very deeply. It is a highly retrograde step. Today 50 per cent of ... More

Excise duty on refined oils, vanaspati goes
TWO years after its imposition, the Finance Minister, Mr P. Chidambaram, in his 2005-06 Budget proposal, has abolished excise duty on manufacture of refined edible oils (Rs 1,000 a tonne) and vanaspati (Rs 1,250 a tonne). Although the revenue ... More

FERTILISERS

Fertiliser subsidy hiked to Rs 16,254 cr
NEW DELHI: The Government has increased the planned allocation on account of fertiliser subsidy. The Budget has proposed to allot Rs 16,254 crore for subsidising fertiliser to the farmers for fiscal 2005-06, which is substantially higher ... More

INFRASTRUCTURE

Mumbai set for makeover, to become financial hub
PROPONENTS of Mumbai makeover plans, who have been debating whether the city should fashion itself after Shanghai or Hong Kong, finally have reason to smile. The Union Finance Minister, Mr P. Chidambaram, was not exactly the toast of the town ... More

Shot in arm for infrastructure
FOR the corporate sector, this budget promises to deliver a significant boost. A number of initiatives whose impact is quite predictable and not subject to the whims of an inefficient delivery system will add to both ... More

PETROCHEMICALS

Cracked down the middle
CUSTOMS duties have been reduced across-the-board for petrochemicals and intermediates. While the duty on finished polymers is down to 10 per cent from 15 per cent, those on basic chemicals and intermediates is down from 10 to 5 per cent. ... More

Customs duty on petrochem products cut
THE Budget has proposed a number of reductions of customs duty for various chemical and petrochemical products that will help bring down the cost of a number of imported chemicals and petrochemicals. The import duty on all polymers of ethylene, ... More

... but product prices to stay flat
THE Budget announcements on customs duty cuts for petrochemical products, including ethylene and propylene polymers, are not expected to affect prices. According to analysts, the benefits from the 5-per-cent duty cuts on products such as HDPE, ... More

PETROLEUM

A mixed measure
THERE is a host of interesting proposals for the oil and gas sector in the budget. The stand-alone refining companies — Chennai Petroleum Corporation, Kochi Refineries, Bongaigaon Refinery and Petrochemicals, Mangalore Refinery and ... More

Customs, excise duty on crude, petro products cut
IN a major duty re-jig in the oil sector, the Finance Minister, Mr P. Chidambaram, has cut customs and excise duties on crude oil and petroleum products in the Union Budget, but consumers will not be able to enjoy the benefits from the changes in ... More

PHARMACEUTICALS

Customs duty cut on pharma equipment
THE Finance Minister, Mr P. Chidambaram, today recognised pharmaceuticals and biotech as sunrise sectors. He announced a reduction in customs duty on nine specified equipment for the sectors from 20 per cent to 5 per cent. Recognising the ... More

Little to spur pharma industry
`SWEET nothings' is how the pharmaceutical industry describes the segment-specific announcements made this Budget. "It is just lip service, there is nothing that will spur growth in the industry. Despite being an essential commodity, excise ... More

No shot in the arm
FOR the pharmaceutical industry, Budget 2005 has been more a case of unfulfilled expectations. About the only silver lining, if it can be said so, is the extension of exemption from income-tax an amount equal to 150 per cent of weighted R&D ... More

Not a strong enough dose
Special concessions for the pharma industry, which the FM described as a sunrise industry, are regrettably absent. More

POWER

Rural electrification gets a boost
IN a big push to rural electrification, the Finance Minister, Mr P. Chidambaram, today announced the allocation of Rs 1,100 crore during the next fiscal for distributing electricity to households in 1.25 lakh villages. The programme, which ... More

`Rural power demand will go up'
THE Budget proposal to rationalise the rates of depreciation to encourage new investment in all infrastructure facilities is likely to benefit the power sector companies. "The Budget initiative enhancing the initial depreciation on new ... More

STEEL

Import duty on stainless steel, alloy cut; excise duty raised
THE metallurgical industry, particularly steel, has received a boost through duty rate adjustments in the Budget. The import duties on stainless steel, alloy steel and other ferro-alloys have been reduced from the existing 15 per cent to 10 per ... More

TAXATION

Making the right noises
THE Finance Minister has reiterated the full support of the Central Government for the implementation of VAT from April 1, 2005, and the commitment to compensate the States as per the agreed formula, in the event of a ... More

TEXTILES

Sops for textiles and sugar
IN the last Budget, I made a beginning in addressing the tax-induced rigidities in the textile sector in order to prepare the sector for the post-quota regime. There is a new vigour in the sector, especially in the handloom and powerloom ... More

Special focus on textile sector
THE Finance Minister, Mr P. Chidambaram, has cut the excise duty on polyester filament yarn (PFY) from 24 per cent to 16 per cent and halved the customs duty on textile machinery to 10 per cent. In his Budget for the next fiscal, the Finance ... More

Intricately woven
THE textile industry stole the limelight yet again this Budget, with the Finance Minister announcing a number of packages for the sector. While the cotton textiles segment was the main beneficiary of the Budget announcements last July, it was the ... More

TYRES

On a bounce
TOP tyre producers such as MRF, Apollo Tyres, J.K. Industries and Ceat would stand to benefit out of the proposal to reduce excise duty on tyres sold in the replacement market; this has been reduced from 24 to 16 per cent, while the tyres sold ... More

Cut in excise duty to give fillip to tyre industry
THE Rs 13,500-crore tyre industry has received a shot in the arm, with the Finance Minister, Mr P. Chidambaram, announcing a reduction in excise duty on tyres, tubes and flaps from 24 per cent to 16 per cent. But there could be some paybacks ... More

`Tyres will be more affordable'
"As part of the tyre industry, we are glad that the Finance Minister has finally acted on a long-standing demand and brought down the excise duty on tyres from 24 per cent to 16 per cent. Mr D. Ravindran, Director General of Automotive Tyre ... More

BREWERIES

Paying more for the pint
IT'S going to cost more for tipplers. Indian Made Foreign Liquor, popularly known as IMFL, is likely to cost more as the special duty on molasses has been doubled from Rs 500 to Rs 1,000 per metric tonne. According to Mr Vijay Rekhi, President, ... More

CIGARETTES

Cess for health
THE hike in excise duties is not a major setback for cigarette companies. By now, cigarette companies would have come to expect a 10 per cent increase in excise duties every alternate year. In addition, this year, the hike in excise duties ... More

PERSONAL PRODUCTS

On fast track
THE Budget may give the FMCG sector a few things to cheer about. The cut in the peak rate of customs duty from 20 to 15 per cent could temper prices of many key FMCG inputs that go into the manufacture of soaps, detergents and personal products, ... More

Consumer goods prices may stay put
YOU can have your cake and eat it too now with the Budget halving the excise on cake and pastries from 16 per cent. With the proposed tax regime likely to put more disposable incomes in consumers' hands, it could well propel a thrust in spending. ... More

AIR-CONDITIONERS & REFRIGERATORS

Excise cut on ACs may not really soothe
IF you thought that purchasing a new air-conditioner was going to be easier on your pocket following an excise cut of 8 per cent on ACs announced in the Union Budget, think again. There is unlikely to be much benefit for the end consumer, the ... More

GEMS & JEWELLERY

Branded baubles to be dearer
WITH the Finance Minister imposing a maiden two per cent excise duty on branded jewellery, the companies are looking at passing on the additional impact to the customer. "A two per cent impact is quite significant in the jewellery business," ... More

Excise levy angers jewellery makers
THE proposed two per cent excise duty on branded jewellery has angered gold jewellery makers and makers of diamond and other high-value jewellery. The protest is primarily on the grounds that branded jewellery is an emerging segment and that a ... More

REAL ESTATE & CONSTRUCTION

Real estate sector cries foul
THE Government on Monday imposed a 10-per cent service tax on services such as construction of residential complexes with over 12 houses or apartments with common areas and other appurtenances. Terming the decision as "retrograde," the real ... More

METALS

Stealing the show
THE reduction of import tariffs on key non-ferrous metals, namely aluminium and copper, from 15 per cent to 10 per cent, is unlikely to affect the pricing power of companies such as Hindalco, Sterlite Industries and National Aluminium. The firm ... More

Positive charge
THE decision to reduce import duty on lead will have a positive impact on storage battery producers such as Exide Industries, Amara Raja Batteries and Tudor. Domestic lead prices are benchmarked against the price prevailing in the ... More

`No impact on prices of non-ferrous metals'
THE Budget proposal to reduce 5-10 per cent customs duty on select base metals will not have any major impact on the domestic prices as the market has already discounted this news, trade sources said. ``The duty reduction will have hardly ... More

INDUSTRY ASSOCIATIONS

Cautious optimism among industry captains
IT seemed a mood of `cautious optimism' amongst the captains of industry as they sat patiently through the two-hour long Budget speech of the Finance Minister, Mr P. Chidambaram, in the leading chambers of industry in the Capital. The first ... More

TOBACCO

Cess on pan, tobacco products to fund rural health mission
TAKING a cue from the success of the education cess, the Finance Minister, Mr P. Chidambaram, has decided to levy a cess on pan masala and tobacco products to fund the health sector. The Government expects to mop-up revenues of Rs 700 crore to ... More

PAINTS

Coat of cheer
THE cut in peak import duty should be a positive augury for companies in the paints sector such as Asian Paints, Goodlass Nerolac and Berger. As such, raw material costs account for almost half of revenues and Titanium Dioxide, a key raw ... More

DISINVESTMENT

Disinvestment — going off at a tangent
BREAKING a convention followed by successive Finance Ministers for more than a decade, the ruling UPA Government has decided against fixing a target for divestment in the Budget estimates for 2005-06. The Finance Minister, Mr P. Chidambaram, ... More

FOREIGN DIRECT INVESTMENT

A case for more FDI
On foreign direct investment (FDI), I would urge Hon'ble Members to take a pragmatic view. At the recent meeting of the Finance Ministers of G-7 countries, to which India and China were invited, the Finance Minister of China looked in my ... More

INCOME TAX

At the heart of a tax on the `fringe'
THE Budget has imposed what it calls a `fringe benefit' tax on certain expenses incurred by corporates. These expenses are deemed to be in the nature of fringe benefits extended to employees. The specified expenses when incurred on ... More

A recast of personal taxation
LAST July, as an interim measure, I made a provision under which a person with a taxable income of Rs 1,00,000 would not be required to pay any income tax. About 1.4 crore assessees got relief. I promised to revisit the subject in this Budget. ... More

Fringe Benefit Tax
I HAVE looked into the present system of taxing perquisites and I have found that many perquisites are disguised as fringe benefits, and escape tax. Neither the employer nor the employee pays any tax on these benefits, which are certainly of ... More

More in your purse for the nonce
THE common man has every reason to cheer except perhaps when he smokes. Tobacco products would cost 10 per cent extra unless the manufacturers agree to take the tax increase in their stride. The Finance Minister would have targeted liquor also ... More

Personal income-tax structure overhauled — Advantage lower, middle income groups
LOWER and middle income groups are likely to gain from the major personal income-tax structure overhaul proposed by the Finance Minister, Mr P. Chidambaram, through the Finance Bill 2005. Besides altering the tax brackets, the Finance Minister ... More

ECONOMIC OFFENCES

Cash withdrawals will leave a trail
THE NCMP requires the Government to introduce special schemes to unearth black money and assets. I am obliged to carry out the mandate, but without giving undeserved relief or an amnesty. I am concerned about large cash transactions, ... More

`Tax on cash withdrawals an anti-evasion step'
DESCRIBING his move to impose a 0.1-per cent tax on cash withdrawals of Rs 10,000 a day from bank as "a small part of the Budget", Mr Chidambaram said it was a purely an anti-tax evasion measure, not aimed at penalising account holders. "I am ... More

CARTOON