| Mini
Budget keeps the “feel good factor”
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The
measures announced in the budget are largely beneficial
to the corporate sector, and clearly aimed at boosting
economic growth. The highlights of the mini budget
are available on the official government website
at http://www.indiabudget.nic.in/ub2004-05/bh/bh1.pdf.
Following
are some of the impacts of the recent initiatives
on some key industry sectors-
1]
Reduction in peak customs duty from 25 per cent
to 20 per cent and abolition of special additional
customs duty (SAD)- |
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| Probable
Outcome |
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Capital
goods: Imported equipment becoming much
cheaper than what's available in domestic
markets |
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Automotives
and Auto components: Cut in peak customs
duty will result in a drop in steel
prices, which in turn reduces input
costs for domestic auto components &
foreign manufacturers. The move will
also reduce the import cost of completely
knocked down (CKD) kits, engines and
parts of transmission systems that are
imported by most foreign original equipment
manufacturers (OEMs). The reduction
in peak duty will result in a 7-8 per
cent decrease in the cost of imported
components. |
|
Consumer
Durables: Reduction in customs duty
on CTVs, Colour Picture Tubes, compressors,
refrigerators, ACs and washing machines
will result in CTV makers benefiting
from reduction in picture tube prices.
Refrigerator players focused on the
higher capacity refrigerator segment
will also benefit, as these are largely
imported. |
|
Power
sector: These as well as reduction of
customs duty on electricity meters from
25 per cent to 15 per cent and duty
on imported coal from 25 per cent to
15 per cent will significantly cut down
project costs. Thus, raking in savings
for utility and transmission and distribution
(T&D) companies. The gainers on
this front are multinational subsidiaries,
who will benefit by way of higher business
volumes, since these companies import
equipment from their parents. Setting
up new plants will be cheaper now, thus
bringing down capex. |
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Companies
with imported coal-based power plants
will also benefit from the reduction
in customs duty on imported coal. Projects
based on coal will be able to compete
better with other fuel-based plants.
Cost of production for coastal imported
coal-based power plants is likely to
decline by Rs 0.15 per kwh. |
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2]
Reduction of excise duty for IT hardware to 8 per
cent, abolition of special additional duty and exemption
for recorded video compact discs (VCDs) and digital
video discs (DVDs) from excise duties. |
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3]
Reduction of customs duty on project imports from
25 per cent to 10 per cent, excise duty on Aviation
Turbine Fuel (ATF) from 16 to 8 per cent. |
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| 4]
Reduction of |
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peak
duty on bulk drugs, intermediates and formulations
to 20 per cent from 25 per cent |
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customs
duty on many life saving drugs from 25 per cent
to five per cent |
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abolition
of SAD |
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customs
duty on parts of artificial limbs and specific rehabilitation
aids to 5 per cent. |
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excise
duty from 16 per cent to 8 per cent for medical,
surgical, dental and veterinary furniture |
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customs
duty on sulpha drugs and alkaloids (which are used
as drugs) from 19 per cent to 14 per cent. |
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| Probable
Outcome |
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The
duty cuts relating to the pharma and
healthcare industry will bring tariffs
in the domestic pharma industry closer
to global tariff rates. |
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The
peak duty cut is expected to benefit
companies, which import bulk drugs and
intermediates. |
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Indian
companies do not have to pay duties
on raw materials to make products for
exports. MNCs, which import products
from their parents to be sold in the
domestic market, will also benefit from
duty reduction. |
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