The Finance minister has presented the Budget with emphasis on striking a balance between fiscal consolidations and strengthening macroeconomic fundamentals. We will have to wait and see what is in the fine print.
According to me, following are the key outcomes for chemicals and fertilisers sector:
- The budget stresses on self-sufficiency over next five years in urea production, which is a welcome step.
- To promote balanced nutrition, which is core for long-term food productivity, FM could have addressed the issue of rising disparity between urea and non-urea fertilisers
- New policy on urea seems to be on agenda of the government and we hope it will be announced at the earliest, as this is a measure to reduce dependence on urea imports.
- Introduction of Mobile-based Fertiliser Management System (MFMS) will provide end-to-end information on the movement of fertilisers and subsidies, from the manufacturer to the retail level. We see a nationwide rollout of the above during 2012. Direct transfer of subsidy to the retailer, and eventually to the farmer will be implemented in subsequent phases. This announcement is a positive one resulting in lesser expenditure on subsidies as well as curtailing misuse of fertilisers.
- No issuance of fertiliser bonds for subsidy payments is a forward-looking step.
- In case of the potassic-phosphatic (P&K) fertiliser, use of single super phosphate (SSP) will be encouraged. SSP is manufactured entirely in the domestic sector and enhanced production would bring down India’s dependence on imports in the P&K sector.
- Reducing the rate of withholding tax on ECB from 20% to 5% for 3 years is a positive one for the fertiliser sector. This will reduce the cost of borrowing for new investments.
- Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services is in the right direction.
- Exemption limit is enhanced to 150% for capex in urea plants, which will boost the investment in this sector.
- Import of equipments for urea projects is being fully exempt from basic customs duty of 5% for next 3 years is a welcome move for fertiliser sector.
- Abolishing of customs duty on coal for next 2years will have some positive impact on raw material costs.
- Extension of 200% relief in R&D is a good move and will encourage Innovation Chemicals sector and benefit our Innovation Centre.
- 2% increase in standard excise rate and service tax is in line with our expectation and a right move towards adoption of GST.
--R Mukundan, Managing Director, Tata Chemicals
