Ventura india budget 2012 13

Friday, 16th Mar, 2012

Union Budget 2012-13

Speculating on the

Fiscal Deficit

2 Friday, 16th Mar, 2012


Tall fiscal deficit projections; implementation is the key

Keeping the increasingly complex political landscape in mind, the Finance Minister, Mr

Pranab Mukherjee has presented a compromise budget (in which the specifics of fiscal

discipline were not dealt with) with the intent to get it passed in the Parliament. The intent

to keep subsidies capped to less than 2% of GDP is encouraging and implies that policy

measures to be introduced in due course would help reign in the subsidy escalation.

While the subsidy cap is a step in the right direction, it seems a bit unrealistic given the

firm oil prices and the embargo on Iran which threatens us with run away oil prices. In

which case the fiscal discipline would be out of control leading to higher market

borrowings. A case in point is the budgetary allocation of Rs 53,640 crore to petroleum

subsidy of FY12 which was way behind the actual subsidy of Rs 68,481 crore and that too

when the average oil prices were much lower than the current Brent crude price of $125 per

barrel.

Already the government’s borrowing at Rs 4,79,000 for FY13 is higher than that of last

year. This is an uncomfortably large number and will ensure that the interest rates will

remain elevated, at least in the immediate future. Further if strict fiscal discipline is not

adhered to then we risk the danger of higher borrowings leading to fuelling of inflation and

crowding out the private sector from the credit markets hampering growth and make the

projection of GDP growth of 7.35 - 7.85 look ambitious.



Real GDP and its growth rate

6.7%

8.4% 8.4%

6.9%

7.6%

8.60%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

2008-09 2009-10 2011-12 2011-12E 2012-13E 2013-14E



Fiscal Deficit

6.4%

4.7%

5.9%

5.1%

4.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2009-10 2010-11 2011-12 RE 2012-13 2013-14

As

% o

f G

DP



Subsidy targets continue to be ambitious

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

0

50000

100000

150000

200000

250000

2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE

Rs. in Crore

Food Fertilizers

Petroleum Interest and Others

Subsidies as a %of GDP (RHS)

To be capped at 2%



Market Borrowings galloping away

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE

Rs. in Crore



Budgetary Measures

The government has taken several initiatives to boost revenues, scale down expenditure,

resolve mechanisms to curtail subsidy outflow and provide a boost to investment, savings

and development of capital markets. These are enumerated below :-

Revenue measures along expected lines

0

200000

400000

600000

800000

1000000

1200000

2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE

Rs. in Crore

Corporation tax Income tax Wealth Tax

Customs Union Excise Duties Service Tax

Taxes of the Union Direct Indirect



Revenue Measures- Indirect tax

The excise duty and service tax have been increased to 12% from 10% while a large

number of services have been bought under the service tax net (by clearly defining 17

services on the negative list).

Merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per

cent with few exemptions.

No change proposed in the peak rate of customs duty of 10 per cent on non-agricultural

goods.

Basic customs duty reduced for certain agricultural equipments and their parts.

Customs duties: Reduced for agri, thermal power producers, LNG, coal mining, railway

equipment, textiles inputs, while duties on cigarettes and tobacco were raised.

Full exemption from basic customs duty for import of equipment for expansion or setting

up of fertiliser projects upto March 31, 2015.

Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to

include unbranded jewellery.

Branded Silver jewellery exempted from excise duty.

Film industry exempted from service tax on copyright relating to recording of

cinematographic films.

Proposals relating to service tax are estimated to result in a net revenue gain of Rs 18,660

crore for the year.



Revenue measures - Direct Taxes

Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs 1,80,000 to Rs 2,00,000 giving tax relief of Rs 2,000

Slabs have been relaxed further as under:

– 10% of tax on income from Rs 2 lacs to Rs 5 lacs

– 20% of tax on income from Rs 5 lacs to Rs 10 lacs

– 30% of tax on income from Rs 10 lacs and above

Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50% to new retail investors, who invest upto Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh to be introduced. The scheme will have a lock-in period of 3 years

Deduction of upto Rs 10,000 on interest from savings bank accounts.

Allow deduction of upto Rs 5,000 for preventive health check up

Senior citizens not earing income from business operations to be exempt from advance tax payments

MAT introduced to 18.5% for individuals

STT reduced by 20% on delivery transactions to 0.1%.



Direct Tax Proposals and their impact

The direct tax proposals of the Union budget will lead to a revenue loss of ~ Rs 4,500 crore

to the exchequer.

Added benefits include relaxation in deduction of up to Rs 10000 for interest from savings

bank accounts to help small tax payers of income up to Rs 5,00,000 and Rs 5000 for

preventive health check

Old Slab Tax Rate (%) New Slab

Up to Rs1,80,000 0% Up to Rs 2,00,000

Rs 1,80,001-Rs 5,00,000 10% Rs 2,00,001 - Rs 5,00,000

Rs5,00,001-Rs 8,00,000 20% Rs 5,00,000 - Rs 10,00,000

Above Rs. 8,00,000 30% Above Rs 10,00,001

Taxable Income Pre-Budget tax Post Budget tax Saving

2,00,000 2,000 0 2,000

5,60,000 44,000 42,000 2,000

11,00,000 1,82,000 1,60,000 22,000



General Anti Avoidance Rule

Significant General Anti Avoidance Rule (GAAR) measures, including empowering the

Income tax department to open cases dating 16 years back in cases of assets held abroad

should also help to bolster the kitty. Further it has also been made mandatory to report

assets held abroad by assessees.

To deter the generation and use of unaccounted money

• Tax collection at source on purchase in cash of bullion or jewellery in excess of

Rs 2 lakhs

• Tax collection at source on trading in coal, lignite and iron ore

• Increasing the onus of proof on closely held companies for funds received from

shareholders as well as taxing share premium in excess of fair market value

• Taxation on unexplained money, credits, investments, expenditures etc., at the

highest rate of 30 per cent irrespective of the slab of income

• Tax deduction at source on transfer of immovable property (other than

agricultural land) above a specified threshold.

Extension of Alternate Minimum Tax (AMT) on all persons other than companies i.e. where

the regular income-tax payable by a person (other than a company) is less than the

alternate minimum tax payable for such previous year, the adjusted total income (if greater

than Rs 20 lakhs) shall be deemed to be the total income and he shall be liable to pay

income-tax on such total income @ 18.5%.



Moderate growth in expenditure forecasted

On the expenditure front, the government is emphasising on the Effective Revenue Deficit

(to address the structural imbalances in the revenue account) and the Medium term

Expenditure Framework (which would help set forth a rolling target for expenditure

indicators). The former would help in reducing the consumptive component of the revenue

deficit and create space for increased capital spending, while the latter would help in

allocating resources for prioritised schemes and weeding out others that have outlived

utility.

While interest payments, defence and subsidies are expected to go up sharply, other non

plan expenditure items are to be maintained at more or less last years levels. However the

worrying factor is the increase in interest payments to 3.2% of GDP

On plan expenditure the encouraging news is that the government has not gone overboard

in its allocation, however the allocations to energy sector which has been kept at last years

levels is slightly disappointing.



Non Plan Expenditure

(Rs. in Crore) 2010-11 2011-12BE 2011-12RE 2012-13BE Chg BE 13/12

Interest Payments and Debt

Servicing234022.1 267986.2 275617.7 319759.4

19%

Defence 154116.7 164415.5 170936.8 193407.3 18%

Subsidies 173419.6 143569.7 216296.7 190015.1 32%

Assistance to States from

NCCF/NDRF4179.3 4525.0 4525.0 4620.0

2%

General Elections 49.8 84.5 84.5 91.5 8%

Payment against Debt Waiver and

Debt Relief Scheme for Farmers 11340.5 6000.0 1500.0 0.0

-100%

Postal Deficit 6161.7 5017.7 5573.1 5727.1 14%

Reimbursement of losses to

Railways634.4 657.9 652.0 600.0

-9%

Subsidy to Railways towards

dividend reliefs and concessions2013.3 3022.6 2598.3 3003.9

-1%

General Services 101611.3 103225.9 108802.3 120086.1 16%

Social Services 35014.2 20861.1 19708.5 20784.1 0%

Economic Services 24685.4 21694.2 20294.8 20479.2 -6%

Other Non-Plan Exp 86290.9 85646.8 71550.9 95946.5 12%

Amt met from Famers Debt relief

fund and NCCF/NDRF-15240.5 -10525.0 -6025.0 -4620.0

-56%

Total 818298.6 816182.1 892115.6 969900.3 19%



Non Plan Expenditure

0

200000

400000

600000

800000

1000000

1200000

2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE

Rs. in Crore

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)



Interest Payments

2.8%

2.9%

2.9%

3.0%

3.0%

3.1%

3.1%

3.2%

3.2%

3.3%

3.3%

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE

Rs. in Crore

Int. Payment and Debt Servicing (LHS) Interest Payment as a %of GDP (RHS)



Plan Expenditure

(Rs. in Crore) 2010-11 2011-12BE 2011-12RE 2012-13BE Chg BE 13/12

Agriculture and Allied Activities 15715.7 14744.1 14854.8 17692.4 20%

Rural Development 42059.9 46292.1 39132.2 40763.5 -12%

Irrigation and Flood Control 476.5 565.3 489.3 1275.0 126%

Energy 110977.1 155495.2 147189.5 154841.9 0%

Industry and Minerals 35951.3 45213.8 40580.9 57226.8 27%

Transport 94205.3 116860.9 109205.5 125357.1 7%

Communications 10335.7 20255.5 11994.4 15411.4 -24%

Science Technology & Environment 11921.2 16186.3 12712.7 16591.7 3%

General Economic Services 13680.8 15802.1 19420.4 24777.3 57%

Social Services 127633.0 153812.2 157056.2 188871.7 23%

General Services 1359.8 7229.7 5536.2 8700.7 20%

Total 464316.1 592457.0 558172.0 651509.3 10%



Plan Expenditure

0

100000

200000

300000

400000

500000

600000

2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE

Rs. in Crore

RE- State Plan RE- Central PlanCE- State Plan CE- Central PlanCapital Expenditure (CE) Revenue Expenditure (RE)



Measures to control subsidy spending seem to be ambitious

On the issue of subsidies, while the food subsidies including the Food Security Act have

been completely provided for, the balance subsidies would be provided to the extent

possible keeping in mind the cap of 2%.

The roll out of the mobile- based Fertiliser Management System (mFMS) will not only help

in curtailing misuse of fertilizer subsidy, but also provide direct transfer of subsidy to the

retailer (and eventually to the farmer) while providing information on end to end movement

of fertilizers and subsidies.

Pilot project for selling LPG at market price and reimbursement of subsidy directly into the

beneficiary’s bank account is being conducted in Mysore. Similarly, a pilot project on

direct transfer of subsidy for kerosene into the bank accounts of beneficiaries has been

initiated in Alwar district of Rajasthan and eventually it will be rolled out in at least 50

selected districts within the next six months.



Measures to augment savings / investments and boost capital markets

To promote investments and improve depth of the capital markets, a number of measures

are being introduced like

– Allowing Qualified Foreign Investors (QFIs) to access Indian Corporate Bond market

– Simplifying the process of issuing Initial Public Offers (IPOs)

– Two-way fungibility in Indian Depository Receipts

– Providing electronic voting facilities for wider share holder participation in the

important decisions of the companies.

In addition a new scheme called Rajiv Gandhi Equity Savings Scheme is being introduced.

The scheme would allow for income tax deduction of 50 per cent to new retail investors,

who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10

lakh. The scheme will have a lock-in period of 3 years. The details will be announced in

due course.

Further funds deployed in gold purchases (which have grown by 50% and has been one of

the primary drivers of the current account) have been competing with other sources of

investments. In order to discourage investments in gold, the basic customs duty has been

increased from 2% to 4% on standard gold bars and on non standard gold from 5% to 10%.

In sync with this , the basic duty on gold ore, concentrate and ore bars for refining is being

enhanced from 1% to 2%. On the excise side, duty on refined gold is being increased in

the same proportion from 1.5% to 3%.



Measures to augment savings / investments and boost capital markets

(contd)

Further relaxation in ECB limits particularly to part finance rupee debt of existing power

projects and allow ECB for capital expenditure on the maintenance and operations of toll

systems for roads and highways (so long as they are a part of the original project) are

investment boosters for the Infrastructure sector. Further, permit to ECB for working

capital requirements of the airline industry for a period of one year, subject to a total

ceiling of $1 billion would help the ailing aviation sector significantly.

The restriction on venture capital funds to invest only in nine specified sectors (under SEBI

regulations of 1996) is proposed to be removed which is likely to enhance capital flow into

the high growth sectors that have substantial capital requirements. So far, venture funds

could only invest in information technology, software, nanotechnology, biotechnology,

basic drugs and seed development and research, bio-fuels, hotels, dairy and poultry

projects in India.



Legislative Reforms to be undertaken in the current budget session

The Micro Finance Institutions (Development and Regulation) Bill, 2012

The National Housing Bank (Amendment) Bill, 2012

The Small Industries Development Bank of India (Amendment) Bill, 2012

National Bank for Agriculture and Rural Development (Amendment) Bill, 2012

Regional Rural Banks (Amendment) Bill, 2012

Indian Stamp (Amendment) Bill, 2012

Public Debt Management Agency of India Bill, 2012



FRBM Act

Introduction of amendments to the FRBM Act as part of Finance Bill, 2012.

Concept of “Effective Revenue Deficit” and “Medium Term Expenditure Framework”

statement are two important features of amendment to FRBM Act in the direction of

expenditure reforms.

Effective Revenue Deficit is the difference between revenue deficit and grants for creation

of capital assets. This will help in reducing consumptive component of revenue deficit and

create space for increased capital spending.

Medium-term Expenditure Framework statement will set forth a three-year rolling target for

expenditure indicators.

Recommendations of the Expert Committees to streamline and reduce the number of

centrally sponsored schemes and to address plan & non-plan classification to be kept in

view while implementing Twelfth Plan.



Budget Summary

(Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Chg 12 BE/RE Chg BE 13/12

Revenue Receipts 572,811 788,471 789,892 766,990 935,684 -3% 18%

Net Tax Revenue 456,536 569,869 664,457 642,252 771,070 -3% 16%

Non tax Revenue 116,275 218,602 125,435 124,738 164,614 -1% 31%

Capital Receipts 453,062 402,427 447,837 576,396 555,241 29% 24%

Recoveries of receipts 8,613 12,420 15,020 14,258 11,650 -5% -22%

Other Reciepts (Disinvestments) 24,581 22,846 40,000 15,493 30,000 -61% -25%

Debt Reciepts 419,868 367,161 392,817 546,645 513,591 39% 31%

Draw Down Balance of Cash (1,386) 6,430 20,000 (24,664) -

Total Receipts 1,024,487 1,197,328 1,257,729 1,318,722 1,490,925 5% 19%

Non Plan Expenditure 721,096 818,299 816,182 892,117 969,900 9% 19%

Non Plan Revenue 657,925 726,491 733,558 815,741 865,596 11% 18%

Interest Payments 213,093 234,022 267,986 275,618 319,759 3% 19%

Non Plan Capital 63,172 91,808 82,624 76,376 104,304 -8% 26%

Plan Expenditure 303,391 379,029 441,547 426,605 521,025 -3% 18%

Plan Revenue 253,884 314,232 363,604 346,201 420,513 -5% 16%

Plan Capital 49,507 64,797 77,943 80,404 100,512 3% 29%

Total Expenditure 1,024,488 1,197,328 1,257,729 1,318,722 1,490,925 10% 19%

GDP Nominal 6,550,271 7,877,947 8,986,860 8,912,179 10,159,884 -1% 13%

Gross Fiscal Deficit 418,483 373,591 412,817 521,981 513,591 26% 24%

Fiscal deficit as a % of GDP 6.4% 4.7% 4.6% 5.9% 5.1% 28% 10%

Revenue Deficit 338,998 252,252 307,270 394,952 350,425 29% 14%

Revenue deficit as a % of GDP 5.2% 3.2% 3.4% 4.4% 3.4% 30% 1%

Primary Deficit 205,389 139,569 144,831 246,363 193,832 70% 34%

Primary deficit as a % of GDP 3.1% 1.8% 1.6% 2.8% 1.9% 72% 18%



Sectoral Measures and Impact



Sector Summary

Sector Budget Impact Key Highlights

Automobiles Neutral No additional excise duties on diesel cars &

increase in excise duty from 10% to 12%

Aviation Neutral Slight increase in duties

Banking / Financial

Services Neutral

Re-capitalization of PSU banks & Reduction of

STT

Capital Goods Negative No import duty imposed on power equipments.

Cement Neutral Infrastructure spending to boost demand, cost

pressures to persist

FMCG / Consumer

Durables Neutral Increase in excise duty from 10% to 12%

Fertilizers Positive Abolition of import duty; Increase in Export &

Ad valorem Duty

Healthcare / Pharma Neutral Tax exemptions for in-house R&D extended

further by 5 years

Infrastructure Positive Change in duty structure and reduction in duty

of critical raw material



Sector Summary

Sector Budget Impact Key Highlights

IT / BPO’s Neutral Rs. 14,232 crore allocated to complete

enrolment of 40 crore persons under UID

mission

Media Neutral No declaration on raising FDI limits

Metals & Mining Neutral Import duty on flat-rolled steel enhanced from

5% to 7.5%

Oil & Gas Negative Cess on crude petroleum oil produced in India

revised to Rs 4,500 per metric tonne.

Power / Utilities Positive

Coal India advised to sign FSA with power

plants and full exemption from basic customs

duty on fuel



Autos and Autos Ancillaries

Budget Expectations Budget Declaration Impact

Increase in excise duty from

current 10% to 12%.

Excise duty raised to 12% and duty on large cars

raised from 22% to 24%. Negative

No additional excise on

diesel cars

No additional excise duty on diesel cars

imposed. Positive

Higher allocation to rural

sector

Custom duty to be increased on completely built

large cars/SUV’s/MUV’s of value exceeding

$40,000 to 75% from 50%

Positive

N/A Exemption of import duty on specific parts

required for manufacturing of hybrid vehicles Positive

No imposition of excise duty on diesel vehicles a major positive

Impact Companies

Gainers Mahindra & Mahindra, Maruti Suzuki India Ltd, Tata Motors

Losers



Aviation


Direct Import of ATF

Direct import of Aviation Turbine Fuel permitted

for Indian Carriers. However infrastructure

development would take 2-3 years.

Neutral

Proposal to allow foreign

airlines to participate up to

49% of the total equity.

Under active discussion. Positive

N/A

ECB to be permitted for WC requirement (up to

$1bn) for a period of one year. Positive

N/A

Basic custom duty exemption on import of

aircraft parts. Marginally Positive

No timeline on enhancement of FDI limit

Impact Companies

Gainers

Losers



Banking and Financial Services


Interest subvention for loans

to SEBs. No Declaration Negative

Reduction of STT by 20% to 0.1% on cash

delivery transactions

Positive for Motilal Oswal,

Edelweiss and IIFL

Clarity on Private Sector

Bank Licenses No Declaration

Negative for L&T Finance,

Shriram Transport

Allocated Rs 15,888 crore for Capitalization of

Public sector banks and financial institutions Negative for PSB`s

Permission to raise funds by

issuing long-term infra bonds Permission granted for long term infra bonds

Positive for IFCI, ICICI and

IDFC , PFC and REC

Double the limit of tax-free infrastructure bonds

to raise Rs 60,000 crore in this year

Positive for ICICI, IFCI,

REC and IDFC

Reduction in FD lock-in

period to 3 years from 5 years No Declaration Neutral for all Banks

MFI Bill a major positive



Banking and Financial Services


Agricultural credit is targeted to increase to

Rs5.75 lakh crore (21% yoy basis) Neutral for All Banks

Microfinance institutions(development and

regulation) bill to be passed in this year

Positive for SKS

Micro finance

Interest subvention of 1% on housing finance

loans up to 15lakh

Positive for Banks and

HF`s

National Housing banks Bill to be passed this

year Positive for NBFC- HF`s

Int. subvention up to Rs 10,000 from savings

bank account holders (salary income upto Rs 5

Lacs)

Neutral

Impact Companies

Gainers

Losers



Capital Goods


Imposition of 19% import

duties (currently nil) on

power generation equipment

No declaration Negative

Expect 10% hike in capital

outlay for defense sector

Defense capital outlay up by 14% to Rs 79500

crore Marginally positive

Increase in depreciation rate No declaration Negative

Higher allocation to R-ARDRP Allocation to R-ARDRP up by 53.0% to Rs 3114

crore. Positive

No declaration on levy of import duties on power equipments

Impact Companies

Gainers BEL, Siemens

Losers BHEL, BGR Energy, L&T



Cement


Higher infrastructure

spending

Government to spend Rs 25 lakh crore in the

12th Five year plan Positive

Review of the duty structure

on imports of Coke, Pet Coke

(current 2.5%) and Gypsum

No declaration Negative

Government spending to boost demand

Impact Companies

Gainers

Losers



FMCG/Consumer Durables


Increase in excise duty by

10‐12% for cigarettes.

•Increase in basic excise duty on cigarettes of

more than 65mm length by 10% advalorem

•Increase in basic excise duty on hand-rolled

bidis from Rs 8 to Rs 10 per thousand and on

machine-rolled bidis from Rs 19 to Rs 21 per

thousand

Positive for ITC and VST

Industries

Increase in excise duty from

current 10% to 12%. Excise duty increased to 12% from 10% Neutral for the sector

Clarity on FDI in retail sector Efforts being put for consensus on FDI in multi-

brand retail Neutral for retail sector

Higher allocation to rural

spending

Allocation of Rs 73,175 crore as against

Rs 74,100 crore

Negative for the sector

Full exemption from basic customs duty on LCD

and LED TV panels

Positive for the sector

Hike in excise duty

Impact Companies

Gainers

Losers



Fertilizers


Urea will be brought under

the NBS regime

Mobile-based Fertilizer Management System on

movement of fertilizer and subsidies

Positive

Per unit subsidy to be cut

under the Nutrient Based

Subsidy (NBS) system for

non-urea fertilizers

Government to finalize pricing and investment

policies for urea Positive

Viable Gap Funding for capital investment Positive

Full exemption from basic customs duty for

import of equipment for expansion or setting up

of fertilizer projects

Positive

Reduction of customs duty on some water

soluble & liquid fertilizers other than urea, from

7.5 per cent to 5 per cent and from 5 per cent to

2.5 per cent;

Positive

Policies on urea to be the decision maker

Impact Companies

Gainers Nagarjuna Fertilizer, Chambal Fertilizer

Losers



Healthcare / Pharma


Higher Weighted Deduction

for R&D (From 150% to 200%)

Weighted deduction remains unchanged,

however tax exemptions for in-house R&D

extended further by 5 years

Positive

Tax holiday on healthcare in

Tier‐II and III towns should be

extended from 5 years to 10

years

No declaration

Increased spending on

healthcare

Rs. 20,822 crore earmarked for National Rural

Health Mission against Rs. 18,115 crore in FY11. Positive

In line with expectations

Impact Companies

Gainers

Losers Sun Pharmaceuticals, Cadilla Healthcare (impacted negatively due to domestic

formulations partnerships bought under perview of MAT)



Infrastructure


Higher infrastructure

spending

Infrastructure spending in Twelfth Plan period to

go up to Rs. 50 lakh crore. Positive

Increased spending on

Bharat Nirman

Rate of withholding tax for interest payment on

ECBs proposed to be reduced from 2% to 5% for

3 years for certain sectors.

Positive

Higher allocation to road

transportation

Allocation to road transport enhanced by 14% to

Rs. 25,360 crore. Positive

Increase in limit for

infrastructure bonds

Exemption from import duty on certain

equipment needed for road construction Positive

Higher spending on rural

development

Plan outlay for rural development is Rs. 73,175

crore Neutral

Higher investment limits for

FII in corporate bonds

Increased spending to boost growth

Impact Companies

Gainers

Losers



IT / BPO’s


Revival of these benefits

under section 10A/B of the

Income tax Act for STP/EOU

units

No Declaration

Financial incentives for IT-

BPO vendors who take up

eGovernance projects

Rs. 14,232 crore allocated to complete enrolment

of 40 crore persons under UID mission Neutral.

Abolishing MAT levy on the

SEZ developers/ units and

carry forward of MAT credit

entitlement for an indefinite

period

No Declaration

Budget – A non event for the sector

Impact Companies

Gainers

Losers



Media


Raising of FDI limit for

broadcast carriage services

to 74% (Current Radio 26%,

DTH -49% and Cable 49%)

No Declaration

Reduction of customs duty

on digital head‐ends and set

top boxes (current 5%)

No Declaration Negative

Relief from levy and

collection of service tax on

subscription charges

Service tax rate increased from 10% to 12%. Negative

Amortization rules for

intangibles like license fees

paid by radio broadcasters

Film industry will get tax exemption on

copyright relating to recording of

cinematographic films

Positive

Lack of steps on FDI limit, weakens investor sentiments

Impact Companies

Gainers

Losers



Metals & Mining


Rise in import duty on Hot

Rolled Coils (steel) from

prevailing 5% to 10%.

Import duty on flat-rolled steel enhanced from

5% to 7.5%

Positive for the domestic

steel companies

Reduction or removal of 5%

import duty on coke / coking

coal

Basic customs duty on machinery for surveying

and prospecting minerals reduced from 10% or

7.5% to 2.5%. Full exemption from basic

customs duty to coal mining projects

Neutral for mining sector

Export duty on Iron Ore fines

and lumps (low grade fines)

may be reduced to 20% from

the current level of 30%

Reduced basic customs duty on plant &

machinery imported for setting up/ expansion of

iron ore pellet plants or iron ore beneficiation

plants from 7.5% to 2.5%

Positive for the iron ore

pelletisation industry

Increase in import duty on

manganese ore from 2% to

5%.

No declaration

Positive policies to improve investment scenario

Impact Companies

Gainers

Losers



Oil & Gas


Cess on crude petroleum oil produced in India

revised to Rs 4,500 per metric tonne. Negative

Removal of current 5% import

duty on LNG & natural gas. Only for Power Generation Neutral

Oil and Gas, LNG storage facilities, oil & gas

pipelines eligible for VGF (Viability Gap

Funding)

Neutral

Declaring Goods Status to

natural gas & LNG to limit

sales tax to less than 5%.

No declaration No Impact

Reduction in excise duty of

branded diesel No declaration Negative for OMCs

Increase in cess – a major disappointment

Impact Companies

Gainers

Losers Cairn India, ONGC



Power / Utilities


Reduction/removal of duties

on imported coal but no

changes in cess for coal

•Coal India advised to sign FSA with power

plants

•Full exemption from basic customs duty and a

concessional CVD of 1% for a period of two

years till March 31, 2014 for steam coal

•Full exemption from basic duty to natural gas

and LNG

Positive for the power

sector

Tax-free bonds of Rs 10,000 crore allocated to

power sector


sector

To allow External Commercial Borrowings (ECB)

to part finance rupee debt of existing power

projects


sector

Withholding tax on interest payments on ECBs

to be reduced to 5% from 20%


sector

Bag full of positives

Impact Companies

Gainers

Losers



Miscellaneous

Budget Declaration Impact

Coal India to sign FSAs with power projects commissioning

companies before 31st March’15 Negative impact for Coal India

Cascading impact of dividend distribution tax to be eliminated All companies

No excise duty on branded silver jewellery whereas non branded

gold jewellery to attract 1% excise duty Branded Jewellery Players

Increase in excise duty from 1.5% to 3% on import of refined gold

Exemption of basic custom duty for waste paper NR Agarwal, Rainbow Paper, TNPL

Abatement on excise duty for branded retail business enhanced to

70% from 55% earlier, reducing the incident of duty from 4.5% to

3.6%

Shoppers Stop, Pantaloon, Provogue



Appendix



Receipts

(Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Chg BE 13/12 Chg 12 BE/RE

Total Receipts 1,024,487 1,197,328 1,257,729 1,318,722 1,490,925 19% 5%

Revenue Receipt 572,811 788,471 789,892 766,990 935,684 18% -3%

Tax revenue (Gross) 624,527 793,072 932,440 901,664 1,077,611 16% -3%

Corporation tax 244,725 298688 359990 327680 373227 4% -9%

Income tax 132,315 146587 172026 171879 195786 14% 0%

Wealth Tax 507 687 635 1092 1244 96% 72%

Customs 83,324 135813 151700 153000 186694 23% 1%

Union Excise Duties 103,621 138299 164116 150696 194350 18% -8%

Service Tax 58,422 71016 82000 95000 124000 51% 16%

Taxes of the Union 1,614 1982 1973 2317 2310 17% 17%

Less: Share of State, UT 164,832 219303 263458 255414 301921 15% -3%

Less: Transfer to NCCF 3,160 3900 4525 3998 4620 2% -12%

Tax Revenue for Central (Net) 456,536 569,869 664,457 642,252 771,070 16% -3%

Non Tax Revenue 116,275 218,602 125,435 124,738 164,614 31% -1%

Interest Receipts 21,756 19733 19578 20125 19231 -2% 3%

Dividends and Profits 50,248 47992 42624 50122 50153 18% 18%

Other non-tax 44,271 150877 63233 54491 95230 51% -14%

Capital Receipt 453,062 402,427 447,837 576,396 555,241 24% 29%

Debt Receipts 419,868 367,161 392,817 546,645 513,591 31% 39%

Market Borrowings 398,424 325414 343000 436414 479000 40% 27%

Other short, medium & long term loan (9,769) 7759 15000 116084 9000 -40% 674%

External Debt 11,038 23556 14500 10311 10148 -30% -29%

Others 20,175 10,432 20,317 -16164 15443 -24% -180%

Non Debt Receipts 33,194 35,266 55,020 29,751 41,650 -24% -46%

Recoveries of loan and Advances 8,613 12420 15020 14258 11650 -22% -5%

Others 24,581 22846 40000 15493 30000 -25% -61%

Draw Down Balance of Cash (1,386) 6430 20000 -24664 0 -100% -223%



Expenditure

(Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE % Change Chg 12 BE/RE

Total Expenditure 1,024,488 1,197,328 1,257,729 1,318,722 1,490,925 19% 5%

Non Plan Expenditure 721,096 818,299 816,182 892,117 969,900 19% 9%

Revenue Expenditure 657,925 726,491 733,558 815,741 865,596 18% 11%

Int. Payment and Debt Servicing 213,093 234022 267986 275618 319759 19% 3%

Defence 90,669 92061 95216 104793 113829 20% 10%

Subsidies 141,351 173420 143570 216297 190015 32% 51%

Others 212,812 226,988 226,786 219,033 241,993 7% -3%

Capital Expenditure 63,172 91,808 82,624 76,376 104,304 26% -8%

Loan and Advances to State, UT 83 85 85 75 85 0% -12%

Defence 51,112 62056 69199 66144 79579 15% -4%

Others 11,976 29,667 13,340 10,157 24,640 85% -24%

Plan Expenditure 303,391 379,029 441,547 426,605 521,025 18% -3%

Revenue Expenditure 253,884 314,232 363,604 346,201 420,513 16% -5%

State Plan 75,082 81778 95317 93604 116985 23% -2%

Central Plan 178,802 232454 268287 252597 303528 13% -6%

Capital expenditure 49,507 64,797 77,943 80,404 100,512 29% 3%

State Plan 9,408 11,301 10,709 11,595 13,013 22% 8%

Central Plan 40,099 53,496 67,234 68,809 87,499 30% 2%



Deficit Ratios

(Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Chg 13/12 Chg 12 BE/RE

GDP Nominal 6,550,271 7,877,947 8,986,860 8,912,179 10,159,884 13% -1%

Gross Fiscal Deficit 418,483 373,591 412,817 521,981 513,591 24% 26%

Fiscal deficit as a % of GDP 6.4% 4.74% 4.59% 5.86% 5.06% 10% 28%

Revenue Deficit 338,998 252,252 307,270 394,952 350,425 14% 29%

Revenue deficit as a % of GDP 5.18% 3.20% 3.42% 4.43% 3.45% 1% 30%

Primary Deficit 205,389 139,569 144,831 246,363 193,832 34% 70%

Primary deficit as a % of GDP 3.14% 1.77% 1.61% 2.76% 1.91% 18% 72%



Ventura Securities Limited.

Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079

This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be

reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in

the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the

above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation.

Ventura india budget 2012 13

Business

Transcript of Ventura india budget 2012 13