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About SCMHRD
Leadership-Entrepreneurship B-School
SCMHRD was established in 1993. Ever since its inception, SCMHRD has strived to bring Indian ethos,
management concepts and technological advances together in an effort to redefine the
management paradigm in the new age.
SCMHRD has successfully pioneered the implementation of Kaizen on campus. The practice helps in
keeping the campus clean and gives the students a feeling of ownership, inculcating in them a
feeling of belonging and camaraderie. The SCMHRD culture provides the students an environment
that allows them to think and reflect, to explore and express.
Mission
To become a Centre of excellence for Global leadership and entrepreneurship- setting the standards
by which others are measured.
Vision
To create leaders and entrepreneurs of tomorrow, their dedication to excellence, absolute.
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EDITORIAL
What does a Finance Minister do - when his party is perceived to have lost 3 state elections; inflationis raising its head again; tax revenues are falling short of expectations; subsidies are ballooning; and
when those saner voices, who should seek fiscal consolidation, are advocating another populist
measure (read the Food Security Bill) that might sink the economy altogether? Pranab Mukherjee, or
Pranabda, does nothing in particular. Or, perhaps, he does! He avoids anything remotely
controversial altogether.
Budget 2012-13 was the last chance of the UPA-II to write up anything substantial on the pro-reform
side of its report card. The next Budget will come on the eve of the general elections and will be
totally voter catchy. There was complete unanimity among all about this. Though no one was sure
what he could do given the lefter-than-the-Left Mamata's track record of objecting anything seen tobe business friendly. Besides, issues like slow economic growth and high global oil prices were also
adding to the gloomy scenario. The Budget only reinforced the gloom.
It lacked major reforms and future direction. On the whole, it tried to appease many but was not a
bold and forward looking one, as Mr. Mukherjee's colleague Dinesh Trivedi, the railway minister
proposed in his rail budget.
Many experts believe that the growth projections in the budget are on the optimistic side and the
fiscal deficit target of 5.1 per cent of GDP is unlikely to be met. The bond market reacted adversely
with a 9 basis point rise in the 10 year benchmark yield, 6 bps rises in the 5 year rate and 7 bps in the
1 year rate. Easing of funding for stressed sectors through the ECB route, lower customs duties and
increase in personal tax cheered the markets. Doubling the amount of recapitalization at public
banks and making interest of Rs.10, 000 on saving bank accounts tax free were seen as some good
measures by Bankers. The Rajiv Gandhi equity scheme and STT reduction were seen among few
positives to enhance retail investor participation in equity markets.
The agriculture sector received a big push from the North Block in terms of increased outlay and
reduced interest rates for the farmers. However, lack of clear roadmap on fiscal consolidation, on
subsidies and strong reforms to bring India's growth to 8% had raised investors' concerns that
caused more than a per cent fall in SENSEX and NIFTY. There was nothing much for the
manufacturing and service sectors to cheer about. The lack of new steps for manufacturing was an
unpleasant surprise given the government's stated objective to enhance its share in GDP from the
current near 16% to 25%. The transition in the Service Tax regime to move from a positive list to a
negative list is a step towards introduction of GST, and make unviable the prospect of keeping
services like those of lawyers from out of service tax net, without any justification, save for the
political clout of lawyers. The fertilizer sector has gained the most with cheaper farm credit, increase
in subsidies and cutting down of import duties. There airline industry received the much needed
push with direct import of aircraft turbine fuel (ATF) being permitted. Textile sector received a
further boost with a number of major clusters proposed to be set-up in states of Andhra Pradeshand Jharkhand.
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The budget proposal to hike excise duty to 12 per cent from 10 per cent is likely to increase steel and
non-ferrous metal, pharmaceuticals and paper prices with the end burden being passed onto the
consumer. Increase in excise duty and customs on the automobiles will make automobiles dearer for
the middle class. Increase in cess on production of crude oil will make domestic oil production
dearer.
The education sector saw a few positive announcements like exemption from service tax which will
make education affordable. Infra funding and housing proposals will boost cement demand. The 2
year waiver of duty on imported coal will also aid the power sector.
The budget missed important opportunities to set a clear roadmap for implementation of GST. But
he did take baby steps towards stepping a framework for Central GST by bringing both excise and
service tax rates at par. The road map for implementing DTC is still not clear. Major policy reforms
like FDI in retail are still awaited.
The budget mentioned a lot about improving the infrastructure. The doubling of issuance of tax-free
infrastructure bonds to Rs 60,000 crore to be issued by the infrastructure sector will reduce funding
constraints and boost investments. The access to viability gap funding for irrigation projects is
expected to facilitate private sector participation in the sector. Increased allocation towards NHDP
will favourably impact road construction companies.
It is believed that the revenue growth projections in the budget are on the optimistic side and the
subsidies may increase on account of oil due to price spike and food due to the Food Security Act.
Thus the expected fiscal deficit target of 5.1 per cent of GDP seems unrealistic. Much like the Budget
last year, where a domestic slowdown caused actual revenue collections fall short of targets and a
more than expected hike in oil prices bled oil companies dry. But there are international pointers
today that may gladden the FinMin's heart. American employment is highest in three years. And the
trend is expected to continue. The 5 state elections are expected to add half a percentage point to
the GDP growth, given the bad habits of our politicians and voters alike!! Euro seems to have sorted
out its mess, at least for now. Till it again reaches breakpoint, Pranabda can solve other problems of
the government. The election of the President and Vice President, Mamata's tantrums, Rahul
Gandhi's launch, Narendra Modi's possible re-election in Gujarat, replying to the BJP's taunts about
inaction on black money can occupy his mind space. Or perhaps he could just sit down with Dr.
Manmohan Singh and talk about the drift this government finds itself in. Three years ago, the superb
performance of the Congress in Lok Sabha elections was attributed to the PM. Maybe Da could tell
him that this slog over of his 2nd term as PM is his final chance at redemption. Either the
government willingly performs and boldly reforms the economy, or Dr. Singh risks proving true the
BJP's attack of his being the weakest PM ever.
We have covered some of the important sectors in our analysis and have tried bringing you a
wholesome picture of impact of various announcements made by Pranabda. We invite your valuable
suggestions and feedback at financeclub@scmhrd.edu.
Abhishek Maheshwari
Anshu Saboo
Jatin Gajwani
Samira Vemparala
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Sectors Covered
Coal 6
Energy 6
Education 7
Taxation 8
Telecom 9
Pharmaceutical 9
Retail 10
Steel 11
Cement 12
Automobile 12
IT & ITES 14
Infrastructure 14
Aviation 15
Agriculture 16
Banking 17
Power 17
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COAL
The 2012-13 budget has been favourable tocoal industry though doesnt give any major
boost to coal industry.
Announcements and Impact
The tax on imported coal of 5.1% hasbeen waived off for a period of 2
years to boost coal imports and meet
the growing energy demands.
However, coal industry players feel
that it will not raise imports
significantly due to high price
differential between domestic and
international coal prices, which
cannot be passed onto the
consumers. The waiving off tax will
reduce revenue for the government
and thus, may add to fiscal deficit.
The budget has also been generous topower sector, which consumesmaximum of coal for generation of
power. The import tax waiver will
boost power sector which has
received favourable initiatives such as
additional depreciation on new
machinery, 100% profit based
deduction and also reduced tax
withholding rates on interest on ECB
from 20% to 5%.
Coal India aims to produce 464 milliontonnes of coal in 2012-13 from 440
million tonnes in 2011-12.
The budget also proposes to providefull exemption from basic customs
duty and a concessional CVD
(Countervailing Duty) of 1% to steam
coal for a period of two years till
March 31, 2014. This would increase
the import of non-coking coal byaround 1 million ton. According to
the Planning Commission, the
demand-supply gap for coal in the
ongoing year is likely to touch 142
MT, with domestic availability being
only 554 MT against the requirement
of 696 MT.
Saurabh Singhania
Yashwardhan Goenka
Vibhu Gangal
Jyoti Sharma
Harichandana Madira
ENERGY
Announcements and Impact
The provision for cash subsidy provided tostate-owned oil firms by the government
for selling fuel below cost has been
revised to Rs. 65,000 crores in current
fiscal which was at the level of Rs. 20,000
crores in the previous years. Raised
compensation will result in the
government paying oil marketing
companies like Indian Oil Corp, Hindustan
Petroleum Corp and Bharat Petroleum
Corp for selling diesel, domestic LPG and
kerosene to Rs. 65,000 crore for current
fiscal as against Rs. 20,000 crore
provisioned in the budget estimate for
2011-12.
Currently the crude producing companiesin India pay a cess of Rs. 2,500 per ton of
crude produced to the government which
is at these levels from the year 2006-07
when it was last revised in the budget.
Now they have to shelve out Rs.. 4500 per
ton for the same which is an increase of
80 percent. This increase in cess will be
reflected in the cost of production ofcrude in the country which is likely to go
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up by $ 5 -7 per barrel. It will further add
pressure on the public sector Oil
Manufacturing Companies (OMC) which is
also impacted by sharing of under
recoveries of oil marketing companies.
OMC are currently incurring daily under
recovery of Rs. 474 crore on sale of diesel,
kerosene and LPG.
Full exemption from basic customs dutyand a concessional CVD of 1 per cent to
Steam coal for a period of two years
This excise duty reduction seeks to
address the coal shortage affecting the
power and steel sectors; government has
announced a slew of measures forenhancing its availability in the Budget.
Coal imports unlikely to spike despite tax
cut as Global coal prices are about 40%
more than domestic price, so imports will
still be far more expensive than domestic
coal.
Liquefied Natural Gas import tax hasbeen abolished. This move still may not
spur imports due to limited infrastructure
to get the fuel to power plants.
Pay for gas now, get money back later -The gradual roll out of a scheme that
would make people pay market rates for
LPG cylinders and then receive partial
payments in their accounts depending on
the subsidy they are eligible for. It will
allow direct transfer of subsidies to the
needy and allow the government save
wasteful expenditure on subsidies. Lower budgeted fuel subsidy for 2012-13
at Rs..43, 000crores reduced by Rs..25,
000croresto bring subsidy to 1.7% of GDP
in next 3 years. Reduction in fuel subsidy
hints towards deregulation of petroleum
product prices, especially diesel.
Ankit Maggu
Nitin bansal
Rachit JainRavi Matalia
EDUCATION
A lot of announcements were made for the
education sector to boost the level of literacy
in the country.
Announcements
In 2012-13 INR 25,555 crore providedfor Right to Education Act-Sarva
Siksha Abhiyan (RTE-SSA)
representing an increase of 21.7 per
cent over 2011-12.
6,000 schools proposed to be set upat block level as model schools in
Twelfth Plan.
To ensure better flow of credit tostudents, a Credit Guarantee Fund
proposed to be set up.
INR 3,124 crore provided for RashtriyaMadhyamik Shiksha Abhiyan (RMSA)
representing an increase of 29 per
cent over BE 2011-12
INR 1000 crore allocated for NationalSkill Development Fund in 2012-13.
In order to incentivize companies toinvest on skill development projects in
the manufacturing sector, it is
proposed to insert a new provision in
the Income-tax Act to provide
weighted deduction of 150 per cent of
expenses (not being expenditure in
the nature of cost of any land or
building) incurred on skill
development project.
Impact
A thumbs up to the Government forbeing more concerned towards the
aim of educating everyone in the
country! Focus on RTE, SSA gives a
hope of literacy campaign of the
government.
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The allocation to the National SkillDevelopment Fund will help in
capacity building and developing a
quality workforce to meet its ever
growing demand.
Also, the setting up of the CreditGuarantee Fund will be a boost for
students across the country as
guaranteed access to finances will
ensure that no deterrents hinder their
progress, especially the economically
weaker sections of the society.
But the budget failed to address few concerns
like Industry expectation to grantinfrastructure status to education sector, no
focus on quality education and higher
education and Education sector allocation to
GDP is still low comparing to other developed
countries.
Jimit Shah
Chandni Chaterjee
Debi Prasad DashSatyabrata Pal
TAXATION
In his Budget for 2012-13, presented to
Parliament amid hope of reforms after a year
of policy stasis, the Finance Minister has
increased tax rates in almost every area with
the aim of controlling the fiscal deficit and his
only form of relief has been for the individual
tax payers.
The other area for which much needed
reforms have been presented is the stock
market trading where all the processes
(Foreign Investments) have been simplified
and costs for trading have been reduced. TheFinance minister has introduced measures for
increasing foreign participation in the Indian
market.
These new taxation measures are to mop up
net additional revenue of Rs. 41,440 crore
(which is coincidently around the figure the
RBI has released into the economy with the
reduction in the CRR to avoid the liquidity
crunch this year due to the advance tax).
Direct Taxes
The basic slab for income tax hasbeen proposed to be raised to Rs.. 2
lakhs from the current Rs.. 1.8 lakhs.
Introduction of new tax slabs. Unexplained money will be at taxed at
the highest rate of 30%
Tax exemption of Rs. 5000 forexpenses incurred on preventive
health check-up
Corporate taxes have been leftuntouched. While this is good for
corporate profits, a moderate
increase would have been very good
for fiscal deficit and that could havelowered interest rates.
Indirect Taxes
Central excise duty rate up to 12% 17 services on negative list STT cut by 20%This was an intelligent more by the
finance minister as raising excess revenue
from indirect taxes does not requireParliamentary approval.
Scheduled for later this year
DTC Bill to be enacted at the earliestafter expeditious examination of the
report of the Parliamentary Standing
Committee.
Drafting of model legislation for theCentre and State GST in concert with
States is under progress.
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GST network to be set up as aNational Information Utility and to
become operational by August 2012
The finance minister has done a good job of
balancing the rebates and levies. He has givenrebates on personal tax at the cost of levying
higher taxes on all the commodities.
Anshu Saboo
Gunjot Singh
Parmesh A V
Tanvi Choudhary
Tejasvini Vijayaraghavan
TELECOM
The budget for the year 2012-13 has had its
share of good and bad news for the
telecommunication industry. The second
largest telecom industry in the world
continues to be seen as a revenue earning
sector by the Indian Government. The trend
set by the previous year budget seems to
continue with an emphasis on growth in the
rural sections of the country. However, this
has been coupled with fixed network for
telecoms and towers coming under eligible
sectors for viability gap funding, thereby
providing an incentive for telecom companies.
Announcements and Impact
Budget 2012 also proposes a lawasserting the states right toretroactively tax cross-borders share
sales in which the underlying asset is
located in India. This comes as a move
against the Supreme Courts recent
ruling in support of Vodafone.
Overall, the impact is expected to beneutral or mildly positive. Focus on
the rural economy could improve
rural connectivity, which could drive
up sales of the telecom companies.
This will increase rural penetration of
telecommunication services and
serve the social cause and aim of the
budget.
Service tax hike will be seen a slightnegative for the sector. It is already
highly taxed and the costs will go up.
It is expected that this will increase
costs for mobile phone users.
With inclusion in viability gapfunding, telecom infrastructure will
improve and chances of more
investments will increase. This will
contribute to further growth of the
sector. The exemption from customs duty on
mobile phone parts could boost the
mobile handset industry. This will
make mobile phones cheaper and
hence, contributing to further market
penetration.
Anshu Saboo
Aparna P
Haripreetha PNandini
Shweta Shukla
PHARMACEUTICAL
The overall impact is neutral on
Pharmaceutical Industry and growth is likely
to depend on the exports only.
Announcements and Impact
The concessional 5 per cent basiccustoms duty has been extended to
six life-saving drugs/vaccines and to
bulk drugs used to manufacture the
said drugs. Impact is likely to be
neutral. These drugs account for a
small proportion in the Indian
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pharmaceutical market, so it is not
likely to affect the market.
Increase in the excise duty onformulations from 5 per cent to 6 per
cent and increase in the excise duty
on bulk drugs from 10 per cent to 12
per cent. There will be no significant
impact. Pharmaceutical players will
pass on the duty increases to
consumers.
200 per cent weighted deductions forin-house R&D expenses are extended
for 5 years. It is assumed to be of little
benefit to the pharmaceutical players,
as R&D expenditure forms less than 5per cent of their net sales.
Saurabh Singhania
Smit Shah
Bhaveka Arora
Divya Katre
RETAIL
Announcements
While the decision on FDI in the multi-brand sector has been suspended, the
government has gone ahead with
increasing foreign investment level in
single-brand retail to 100 per cent
from the earlier 51 per cent. Similarly,
no announcements regarding the roll
out of GST were made.
Increase in standard excise duty from10% to 12%. Excise duty on branded
apparels would now be levied after an
abatement of 70% on MRP instead of
55%. However, there will be a
reduction in excise duty on soya food
products to 6%.
Increase in the service tax rates fromexisting 10% to 12% and introduction
of negative list in service tax.
Provision has been made for subsidiesdirectly to farmers.
Unbranded jewellery will be subjectto excise duty levy of 1 per cent.
Removal of education cess on CVDcomponent of customs duty will result
in reduction in effective rate of
customs duty. The basic customs duty
on wool waste and wool tops would
be reduced to 5 per cent from 15 per
cent, currently.
Impact
Increase in service tax to 12 percent islikely to have an adverse impact on
the already wafer-thin margins of
retail companies, especially since
service tax is not offset-able against
VAT. The service tax increase will
cause a rise in price of products such
as apparel, luggage, electricity and
even electronic appliances. Prices of
electronics items are likely to increase
by 2-4% amid the slowdown in thedemand also. Similarly, increase in
standard excise duty from 10 percent
to 12 percent may increase the prices
of products.
Branded garments will becomecheaper despite hike in its excise duty
as a result of the government raising
the abatement from 55 per cent to 70
per cent. Thereby the effective excise
duty would stand reduced to 3.6 percent from 4.5 per cent. However, the
benefits are expected to be
minuscule.
If the concept of making subsidiesavailable directly to the retailers and
farmers is realized, a substantial
amount of money that is otherwise
lost to the middlemen (and probably
invested in other sectors including
real estate) would be available in the
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hands of the farmers. Going by some
of the estimates of this amount, it
could be significantly large and impact
the consumer product companies
very positively. This would lead to an
increase in consumption in small
towns and villages, strengthening an
already burgeoning buying class in the
rural areas.
Prices of gold and platinum jewelleryare set to go up by at least 2%,
making them that much costlier for
the consumer. Jewellers also fear that
the increase in basic customs duty
would increase the likelihood ofsmuggling in gold.
Reduction in basic customs duty onpro-biotic from 10% to 5% would
benefit the likes of Amul. However,
the increase in excise duty on ice-
cream and flavoured milk from 1% to
2% at the onset of the summer season
may not augur well for the largest
maker of ice-cream.
From a direct tax perspective, nosignificant announcements have been
made to meet the expectations of the
retail sector. Though increase in the
basic exemption limit for individuals
to INR 2 lakh is likely to marginally
increase the disposable income in the
hands of the consumers which could
benefit the retailers.
The message that this Budget reallycarries is that there will be a lot of
opportunities in rural markets in the
long term. Several measures such as
providing subsidies directly and
reduction of interest rates in some
areas will mean additional income for
rural consumers. This calls for a
strategy of penetrating this segment
through better reach and the right set
of products.
STEEL
Announcements
Steel sector of India has a Favourablebudget this year, with Expected cut in
duties and protecting the interests of
Domestic steel Producers.
Propose to reduce basic customs dutyon plant and machinery imported for
setting up or substantial expansion of
iron ore pellet plants or iron ore
beneficiation plants from 7.5 per cent
to 2.5 per cent. This move will
encourage enrichment of low-grade
iron ore, of which India has huge
reserves,
Basic customs duty on coatingmaterial for manufacture of electrical
steel has been reduced from 7.5 per
cent to 5 per cent
Budget has reduced basic customsduty on nickel ore and concentrateand nickel oxide/ hydroxide from 2.5
per cent or 7.5 per cent to Nil
Enhance export duty on chromiumore from INR 3000 per tonne to 30
per cent ad valorem
Enhance basic customs duty on non-alloy, flat-rolled steel from 5 per cent
to 7.5 per cent. The move would
discourage imports and thus and go a
long way in protecting the interests of
the domestic industry
Ashok Reddy Y
Niladri Dey
Rishi Shah
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CEMENT
Announcements
Excise Duty has been raised from 10%to 12%
Specific duty component has beenreduced from Rs.. 160 to Rs.. 120 per
tonne for non-mini cement plants
There is no change in VAT and customduty on the raw material.
Goods and Services tax (GST) will beoperational by August 2012
Impact
Price Hike in cement will come ineffect very soon
Property prices are expected to rise inthe coming days
The net impact will vary for eachcompany based on the extent of its
dependence on imported coal.
The proposal to exempt importednon-coking coal from basic customs
duty (earlier at 5 per cent) to have a
positive impact of 1-1.5 per cent on
the cement industrys operating
profit.
Jimit Shah
Rishu Sukhija
Maithili Kolamkar
Pooja Singh
AUTOMOBILE
The automobile sector is one of the fastest
growing sectors in the country. Though largely
dominated by the small cars segment, the
auto sector is characterised by the presence
of large variety of different types of vehicleswhich includes passenger cars, multi-purpose
vehicles, utility cars, commercial vehicles,
goods carriers, two wheelers and three
wheelers etc. The automobile sector of the
country has a critical role to play in Indias
external trade sector which also has made a
significant impression as the fourth largest
auto exporter in the world, behind South
Korea, Thailand and Japan
Announcements
Basic Excise duty hiked to 12 per centfrom 10 per cent Budget 2012.
Excise duty on large cars from 22 percent to 24 per cent.
Large cars to attract up to 27 per centduty, MUVs, SUVs enhanced
Hybrid Vehicles Components Gets TaxSops
Custom Duty on CBU (CompletelyBuilt Unit) Imported Cars Increased
From 60% to 75%
Income tax exemption limit raised toRs.. 2 lakh
Customs duty on bicycles and partsincreased Standard excise duty rate raised from
10 per cent to 12 per cent, to
add additional revenue of Rs.
18,650 crore
No extra tax for diesel vehicles,Impact
Basic Excise duty hiked to 12 per centfrom 10 per cent Budget 2012.The
announcement means that the
profitability of the transport sector
will reduce further. Also it is likely that
the Indian auto companies may
increase their prices in order to pass
on the hike in excise duty to the
customers. This will add additional
burden on customers which will lead
to a drop in automobile sales. Thetruck sales will also get a hit. The Auto
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Component Manufacturers
Association (ACMA) has announced
that the excise hike will add to input
costs due to excise hike on flat rolled
steel.
Excise duty on large cars from 22 percent to 24 per cent. Large cars
attracted an excise duty of 22%
earlier, now they will attract a duty of
24% which is 2% higher which will
roughly increase the price of most
cars in sedan segment and above by
about 2%. For a car which coasted
about Rs.. 10 Lakhs before budget will
approximately cost Rs.. 20,000 morepost April 2012.this will have a
negative impact on the international
brands trying to expand in India.
Mixed Excise Vehicle Excise IncreasedFrom 22% + Rs.. 15000 to 27%Cars
which attracted mixed excise rate of
22% + Rs.. 15,000 will attract higher
tax rate of 27% which will increase the
price of larger cars and SUVs.
Hybrid Vehicles Components GetsTax Sops Import of components for
development and manufacturing
of Hybrid vehicles like Lithium ion
batteries etc. has been provided
exemptions from excise and import
duties to promote the use of hybrid
and eco-friendly cars in India. The
excise duty on specified parts of
hybrid vehicle is being reduced to 6per cent from 10 per cent.
Custom Duty on CBU (CompletelyBuilt Unit) imported cars increased
from 60% to 75%CBU or completely
built units or cars which are imported
into India completely assembled from
abroad will attract more duties and
taxes which will increase the price of
most high end luxury cars in India.
This is done to encourage more of
local assembling of the cars and
promote Indian automobile industry.
The matter of relief is that there has
been increase by 15%.
Income tax exemption limit raised toRs.. 2 lakhAlthough, the excise duty
hike has taken a wrong turn in the
auto sector, an increase in income tax
exemption limit to Rs.. 2 lakh may be
of some sort of relief by improving the
per capita income which should in
turn increase the two/four wheeler
sales.
No extra tax for diesel vehicles :Thiscomes as a relief for the customersand the manufacturers. With no tax
on diesel cars, it is likely that the
companies will consider increasing
investment on diesel side now as
demand on diesel vehicles remains
robust.
No impact on auto components aswell as tyres industries Auto
component and tyre manufacturers
are expected to fully pass on the
increase in basic excise duty. Further,
a reduction in the excise duty on
replacement batteries for electric
vehicles from 10 per cent to 6 per
cent, and decrease in the customs
duties for specified parts of hybrid
vehicles will have no major positive
impact on demand for auto
components, given the lowpopulation of eco-friendly vehicles in
India.
As predicted, the reduction in excise duty
from 10 per cent to 6 per cent on specific
parts supplied to manufacture of electrical
and hybrid vehicles will promote the growth
of environment friendly cars. Excise duty on
lithium ion battery packs for supply to electric
vehicle or hybrid vehicle manufacturers hasalso been reduced to 6 per cent from 10 per
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cent. Also, the new budget has bought
changes in the tax slabs as predicted. The
taxable income has now increased to Rs.. 2
lakhs.
Jimit ShahRakesh Kumar Singh
Vishal Jojowar
IT & ITES
Announcements
No changes to Minimum AlternativeTax (MAT).
No extension of the tax holiday forSoftware Technology Parks of India
(STPI) units under section 10A and
10B.
Allocation of Rs. 14000 crore forUnique Identification Authority of
India (UIDAI) for FY12 for enrolment
of 40 crore Indians by June 2013.
Advance Pricing Agreements to beintroduced
Faster refunds of service tax andscope for input credits for service tax.
Impact
The MAT was hoped to be decreasedso as to give the bleeding IT & ITES a
competitive advantage, but a status
quo means companies will have more
impact on the bottom line; the
smaller firm being most hit.
The STPI will end on March 31 2012;bring to an end the heavy incentives
given to the sector. The non-renewal
of STPI and MAT are likely to nullify
any incentive received by the sector
due to SEZs and DTC.
More allocation to UID-Aadhar projectis likely to translate more into
revenues for this sector and act as a
precedent for many such projects in
the future.
Advance Pricing Agreement whichwas long overdue will help on more
clarity on Transfer pricing front and
give a respite from the tax woes faced
by the IT firms.
Overall the Budget 2012-13 was a very
mediocre one for the IT & ITES sector. There
were a lot of expectations on areas like STPI,
MAT and DTC which were not fulfilled and tax
still continues to be a major factor in the
development in IT & ITES sector.
Saurabh Singhania
Ajit Yadwadkar
INFRASTRUCTURE
Announcements
During Twelfth Plan period,investment in infrastructure to go up
to Rs..50 lakh crore with half of this to
be from private sector.
More sectors added as eligible sectorsfor Viability Gap Funding under the
scheme Support to PPP in
infrastructure.
Tax free bonds of Rs..60, 000crore tobe allowed for financinginfrastructure projects in 2012-13.
IIFCL has put in place a structure forcredit enhancement and take-out
finance for easing access of credit to
infrastructure projects.
Allowing ECB for low cost housingprojects and setting up of a credit
guarantee trust fund.
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Impact
Credit enhancement will easefinancing constraints faced by certain
infrastructure segments.
Viability gap funding will help improveprivate sector participation.
Measures for housing to address theshortage of housing for low income
groups in major cities.
Moves to reduce withholding tax oninterest payments for ECBs from 20
per cent to 5 per cent will be a
positive for the roads and ports
sectors.
Tax free bonds will boost investmentin this sector and will help improve
retail investor participation.
AVIATION
Announcements
Unlike the last years budget, this year the FM
gave a sigh of relief to the aviation sector. This
sector which has been in distress since a long
time, with most of the airlines in the red; this
budget will definitely help ease out some
pain.
The highlights with respect to the Airlines and
Aviation Sector (incl. Civil Aviation):
The airline industry is facing financialcrisis. The high operating cost of the
sector is largely attributable to thecost of Aviation Turbine Fuel (ATF). To
reduce the cost of ATF, Government
has reiterated direct import of
Aviation Turbine Fuel (ATF) for Indian
carriers as actual users.
To address the immediate financingconcerns of the Civil Aviation sector, it
has been proposed to allow aviation
companies to raise money (up to
US$1bn) through ECBs for their
working capital requirements for a
period of one year.
A proposal to allow foreign airlines toparticipate up to 49 per cent in the
equity of an air transport undertaking
in the form of FDI is also underconsideration.
Airline is one of the sectors in whichthe rate of withholding tax on interest
payments on ECBs is proposed to be
reduced from 20 per cent to 5 per
cent for three years. This has been
done to provide low cost funds to this
distressed sector.
The central plan outlay for CivilAviation Ministry in 2012-13 is
estimated at Rs. 7,293 cr. and ademand for plan allocation of Rs.
4,000 cr. to Air India in the next
financial year has also been proposed
in the budget.
CIVIL AVIATION
India has potential for establishingitself as a hub for third-party
Maintenance, Repair and Overhaul
(MRO) of civilian aircrafts. To realizethis potential, a proposal to fully
exempt companies from basic
customs duty on parts of aircraft and
testing equipment imported for this
purpose. As a measure of support to
the airline industry, it is also proposed
to fully exempt both new and
retreaded aircraft tyres from basic
customs duty and excise duty.
Impact
Companies, such as Spice Jet, withrelatively healthy balance sheets and
good repayment history may be
benefitted from this.
This has come as a disappointment forcompanies under severe financial
stress, as they were relying on FDI to
raise capital for running their
operations because FDI is still kept
under consideration.
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This move is positive for aviationcompanies, as it would reduce ATF
cost, which accounts for 50% of the
total operating cost of a company.
However, this development has a low
probability of benefiting aviationcompanies in the short term, as we
believe companies do not have the
required infrastructure or capital to
build the infrastructure required to
import and store ATF directly.
1. third party maintenance, repair andoverhaul of civilian aircraft.
2. Direct import of Aviation Turbine Fuelpermitted for Indian Carriers as actual
users.
3. ECB to be permitted for workingcapital requirement of airline industry
for a period of one year, subject to a
total ceiling of US $ 1 billion.
4. Proposal to allow foreign airlines toparticipate up to 49 per cent in the
equity of an air transport undertaking
under active consideration of the
government.
Akshay Narang
Harshal Patkar
Vikas Gupta
AGRCULTURE &
RELATED SECTORS
Announcements
Basic customs duty reduced forcertain agricultural equipment and
their parts.
Full exemption from basic customsduty for import of equipment for
expansion or setting up of fertiliser
projects up to March 31, 2015.
Plan Outlay for Department ofAgriculture and Co-operation
increased by 18 per cent.
Outlay for AshtrayKrishiVikasYojana(RKVY) increased to Rs..9,217crore in
2012-13.
Target for agricultural credit raised byRs..1, 00,000crore to Rs..5,
75,000crore in 2012-13.
Interest subvention scheme forproviding short term crop loans to
farmers at 7 per cent interest per
annum is to be continued in 2012-13.
Additional subvention of 3 per cent
available for prompt paying farmers. Kisan Credit Card (KCC) Scheme to be
modified to make KCC a smart card
which could be used at ATMs.
A new centrally sponsored schemetitled National Mission on Food
Processing will be started in 2012-13
in co-operation with State
Governments.
Allocation for AIBP in 2012-13stepped up by 13 per cent to Rs..14,
242crore.
Impact
Interest subvention for farmers willhelp lower the rate of interest of
borrowing for farmers.
A number of measures will increasedemand for fertilizers and improverevenues and profitability for fertilizer
players.
KCC smart cards will help improveliquidity for farmers, by providing
them more timely access for loans if
implemented in a sophisticated
manner.
Experts believe that although anumber of measures have been
proposed for agricultural schemes,
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many of them are believed to be
superficial and the need of the hour is
to have better agricultural
infrastructure to meet the challenge
of rising input costs for farmers.
BANKING
Announcements
To protect the financial health ofPublic Sector Banks and Financial
Institutions, Rs..15, 888crorehas been
proposed to be provided for
capitalisation.
Possibility of creating a financialholding company to raise resources to
meet the capital requirements of PSU
Banksis under examination.
As per the Union Budget 2012-13,Rs10, 000crore will be allotted to
NABARD for refinancing of regional
rural banks (RRBs). Official amendment to The Pension
Fund Regulatory and Development
Authority Bill, 2011, The Banking
Laws (Amendment) Bill, 2011 and
The Insurance Law (Amendment) Bill,
2008 to be moved in this session.
Impact
The capitalization of PSU banks willhelp them and take them closer to the
goal of capital adequacy as proposed
by BASEL III Norms.
The refinancing of RRBs is a positivestep in the direction of financial
inclusion.
RBIs ability to cut interest rateswould be impeded by the high fiscal
deficit which could negatively impact
investments and credit growth in
2012-13.
POWER
Announcements
A proposal to extend the sunset datefor setting up power sector
undertakings by one year for claiming
100 per cent deduction of profits for
10 years.
Abolition of customs duty on steamcoal and LNG. CVD reduced to 1%from 5% on steam coal. Both these
reductions will be available till 2014.
Full exemption from basic duty hasbeen provided for certain fuels for
power generation.
There will be nonimposition ofimport duty on power equipments
Allowance to part finance Rupee debtof existing power projects via ECB .
Rate of withholding tax on interest
payment on ECB to be reduced to 5%
from 20% for 3 years.
80IA benefits to be extended by oneyear.
Impact
Easier access to funds, extension of80IA and availability of cheaper fuel
will benefit power suppliers and EPC
players.
No customs duty on importedequipments is a negative for some
domestic players , but at the same
time will help curb capital costs in this
sector.
Reduction of interest payments onECBs will encourage funding.
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The Finance Club
The Finance Club of Symbiosis Centre of Management & HRD is a student initiative which started in
2005. The Finance Club functions as the interface between the student community and the financial
world. Its objective is to enable prolific interactions among the student community, coupled with
valuable inputs from the faculty, the academia and representatives from the industry. The club
provides a platform for all students to come together and explore the field of finance, leading to
awareness amongst students with respect to the current financial aspects surrounding the economy
and the industry.
Activities of the Finance Club
Finalyst - The Monthly Finance Journal of the Finance Club Knowledge Series Bizfluence Pre Budget and Post Budget Analysis
Events
Past Events
First Academic Summit on Valuation and Financial Modeling - Nov 2010 Integrated Risk Management Seminar-2009 Banking Conclave-2005 Research Seminar on Commodity Market-18th Feb2012
Members
Abhishek Maheshwari
Anshul Sood
Charul Mahajan
Samira Vemparala
Sumit Dawra
Anshu Saboo
Jimit Shah
Ravi Matalia
Saurabh Singhania
Sudip Bain
Surbhi Bhandari
Taha Lanewala
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