Tightrope walking

Agriculture Remove 5% import duty on LNG; bring VAT at 4% on natural gasPositive for urea and nitrogen-based fertiliser companies Rationalise input prices; tax benefits for new projectsAttract new investments and capacities  Cut in excise duty on pesticides from 16% to 8%Positive for Aries Agro, Monsanto. Would lead to increased pesticide usage Excise reduction of 67% on molasses to Rs 250/ tonne Positive for sugar producers having large ethanol capacities Auto Sector Cut excise duties on bigger cars and utility vehicles from 24% to 16%, from 16% to 12% on two wheelersBenefits likely to be passed on to consumer and will improve sales volumes
Companies: M&M, Maruti Suzuki, Hero Honda, Bajaj Auto Tax concession on technology imported by auto component companiesWill boost indigenous research activity and benefit auto component sector Banking Reduction in lock-in period from the current 5 to 3 years on term deposits under section 80 (C)To make deposits attractive and solve banks' asset liability mismatch
Companies: Large public sector banks such as SBI, PNB and Canara Bank Exemption of interest income from deposits; restoration Sec 80L  Increase ceiling for TDS on FDs from Rs 5,000 to Rs 10,000  Increase in interest subsidy on farm loans from 2% Will help achieve higher agricultural growth. All PSBs to benefit  Interest earned on infrastructure lending to be exempted Lending to infrastructure sector will become attractive and PSBs will benefit Capital goods and Engineering Continuation of reforms and higher allocation for the power sector, road segment, mine allocationHelp the sector in creating better demand outlook. Companies in the power equipment, mining and construction equipment sectors to benefit Reduction in peak import duties of 10% for construction equipmentMarginally negative, as the companies will be able to import at lower rates Excise duty on power equipment may be reduced from 16 to 8 %.Help companies to cope up with the rise in raw material prices Extension of subsidy for shipbuilding industry enjoying 30 % export subsidy expired in August 2007)Positive if extended
Companies: ABG Shipyard, Bharati Shipyard FMCG VAT on biscuits to be reduced from 12.5% to 4%. Also biscuits irrespective of the retail piece should be fully exempt from excise dutyWill make biscuits cheaper
Companies: Britannia, ITC Lowering of duties on inputs like vegetable oil and palm oilTo reduce input costs Companies: Godrej Consumer, HUL Reduction on dividend distribution taxPositive, especially for companies with high dividend payout ratio.  Information technology Extension of tax exemption for STP units beyond 2009Positive for most IT companies  Relax Rs 10 crore limit for facilities on advance tax payments Faster tax collections, simpler administration for software companies Relax FBT provisions, treat BPOs at par with IT companiesAvoid taxation of genuine business expenditure, simpler tax structure Waiver on taxing of ESOPsSimpler tax structure to attract talent Infrastructure Hike investments in road, mining, port, water, oil & gasPositive for all the companies engaged in the construction Reintroduction of the tax sops under section 10(23G)Help in mobilising funds Reduce customs duty under project imports from 7.5% to 5%Latest technology at lower rates Some clarification on section 80IAThe benefit is given to the developers and may be extended to contractors as well Metals  Cut excise from 16% to 8% on long steel productsPositive for manufacturers and thus also help construction companies Scrap 5% customs duty on coke and refractoriesPositive for major companies in the context of rising coal and refractory prices.  Scrap 5% custom duty on import of scrapPositive, due to rising prices of scrap Increase export tax on iron orePositive for steel companies outsourcing iron ore Infrastructure status for captive miningBenefits will accrue for the next 10 years and encourage new capacities Oil and Gas Exemption of 12.36% service tax for E&P activities To attract investments and reduce costs for Cairn, ONGC and RIL Infrastructure status to E&P; extend tax holiday 10 yrs for discoveries  Excise duty cut on petrol and diesel To reduce the burden on HPCL, BPCL and IOC Reduction of customs duty on various petroleum products including LNGTo reduce the prices of final products Sales tax cut in gas and LPG from about 20-29% to flat 4%Increase in consumption of gas to benefit GSPL and IGL  Pharmaceuticals 150% deduction for demerged or independent R&D unitsWill promote research and IPR activity and benefit pharma majors Include clinical trials and patent filing under R&D expenses  Power  Extension of 80IA benefits to UMPPs till 2017 It will benefit UMPPs as most of these projects are coming after 2010 Exempt transmission cos associated with UMPP from import duty This will help faster and cost effective execution of the UMPP projects Tax exemption for power infrastructure bonds Will bridge funding gap for 78,000 MW of new capacity under 11th plan ECB norms relaxed for the power companiesHelp companies to raise cheaper funds Cut in excise on power equipment from 16% to 8%Help power companies to source power equipment at lower prices Textiles Hike TUF allocation by 175% to Rs 110 billion in 11th plan Will help achieve economies of scale and benefit cotton yarn, fabric players Cut excise duty on textile machinery from current 16%Will encourage modernisation and improve efficiency Increase in duty drawback rate from 11%Make Indian textile exports competitive Cut import duty on cotton; rationalise excise on man-made yarnWill reduce input costs and bring man-made yarn on par with cotton  While the Budget may not end up appeasing everybody, if it can manage to strike a balance namely, sustain growth, address inflationary issues, push tax reforms further, provide reasonable emphasis to social sectors, as well as agriculture without compromising on fiscal discipline, it will be an achievement. To know more on what the industry expects and the sectors that stand to gain, read on:  Agriculture  The budget is expected to be positive for the sector by way of creation of infrastructure like water resources, availability of funds, procurement centers, warehousing, power, etc, aimed at improving output. Hence, better prospects for companies in the irrigation, seeds and fertilizer segments.  Regards rising input costs, the fertiliser companies are expecting important changes with respect to availability of gas and other inputs at cheaper prices. Secondly, to reduce India