1. Strong growth in industrial production and healthy agricultural production has translated into buoyant freight availability for transporters in 2010-11. This, along with favourable financing environment, has led to healthy growth in sales of CVs. Two-wheeler and passenger car volumes have been driven by higher disposable incomes, launch of new models and increasing rural penetration.
2. In 2011-12, the domestic automobile industry is expected to grow at a relatively lower rate of 17-18 per cent given the increasing cost of ownership caused by hardening interest rates and rising vehicle and fuel prices. Revival in key export markets will enable a 19- 21 per cent growth in 2011-12.
3. Higher demand and tight supplies of key inputs like steel and tyres have led to an increase in raw material costs, which in turn resulted in a 3-8 per cent increase in vehicle prices in 2010-11. However, manufacturers have not been able to pass on the entire increase in input costs, which has exerted pressure on operating margins.
4. Operating margins are expected to decline marginally in 2011-12 with a sustained increase in prices of raw materials like steel and tyres, given the limited flexibility of automobile manufacturers to pass on the price increase to their consumers.

SHEET METAL & AUTO-COMPONENTS INDUSTRY

Healthy growth in domestic automobile production, recovery in exports drive Sheet Metal & Auto components Industry players’ revenues in 2010-11

1. Sheet Metal & Auto components Industry  production was estimated to grow by 21-23 per cent in 2010-11, led by strong demand from OEMs on the back of buoyant sales of commercial vehicles, cars, tractors and two-wheelers. Exports are estimated to grow by 16-18 per cent with revival of automobile production in key global export markets.  Growth in production of Sheet Metal & Auto components Industry  will moderate to 15-17 per cent in 2011-12. The OEM segment is expected to record a growth of 16-18 per cent. Exports are likely to grow by 19-21 per cent, while the replacement segment will grow by 7-9 per cent.
2. Raw material cost for Sheet Metal & Auto components Industry  has risen by 21 per cent from April-December 2010, leading to a pressure on margins. Operating margins are estimated to fall by 150-200 bps (y-o-y) to 12.2-12.8 per cent in 2010-11. In 2011-12, operating margins are likely to drop further by 90-120 bps due to a continuous increase in the raw material cost and the limited pricing flexibility of Sheet Metal & Auto components Industry players. 

Operating margins of tyre manufacturers to remain under pressure

1. The tyre industry’s revenues are estimated to grow by 26-30 per cent in 2010-11, aided by a 14-16 per cent growth in volumes (tonnage) and a 12-14 per cent increase in tyre prices. In 2011-12, growth (in tonnage terms) is projected to be 13-15 per cent, while tyre prices will rise by 12-14 per cent on account of higher input cost.
2. Raw material prices are likely to remain firm in 2011-12 and will keep margins under pressure.

 

Two Wheelers/Passenger Cars
 Proposals

1. Retention of Central Excise Duty at 10%.
2. 100% exemption from Basic Customs Duty and Special Additional Duty (SAD) and concessional Countervailing Duty (CVD) extended to specified parts of hybrid and electric vehicles till March 2013; reduction of excise duty from 10% to 5% on kits used for conversion of fossil fuel vehicles into hybrid vehicles
3. Marginal reduction in personal tax rates and corporate surcharges.
4. Full exemption from excise duty provided to electric vehicles that offer an eco friendly alternative to petrol or diesel vehicles and setting up of NATIONAL MISSION for Hybrid and Electric Vehicles to be launched in association with all stakeholders including car and battery makers.This mission will strive to provide green and clean transport to the masses.

 

Impact- Positive

1. Retention of the Central Excise Duty at 10% is a positive for the auto sector as manufacturers may not have been able to pass on the entire hike, had the duty been increased. The hike in MAT rate and simultaneous reduction of tax surcharge would result only in a marginal increase in tax liability for companies falling under its ambit. The continued thrust of the government on rural and infrastructural development remains a key positive for the sector.
2. National mission for hybrid and electric vehicles  will strive to provide green and clean transport to the masses
3. Excise duty exemption on electric vehicles will benefit the electric vehicle manufacturers and also incentivize other OEMs to produce eco friendly electric vehicles.

Proposal-CKD KIT ENGINES
Completely Knocked Down(CKD) KIT, imported with preassembled engines and transmission, to attract higher customs duty of  60% instead of existing concessional duty of 10%.

IMPACT-Negative
Cars being imported in CKD Condition, particularly popular models of BMW, Mercedes, Audi etc and some of the models of Maruti and Hyundai, where CKD kits are being imported with engines prefitted, would become costlier
.

Commercial Vehicles
Proposals

1. Excise duty remains unchanged at 10%
2. Increased thrust on infrastructure spending with improving funding arrangement measures such as increased FII limits for investments in corporate bonds (issued by infrastructure companies) and creation of special vehicles for infrastructure debt funds

Impact: Positive
Over the past 12-15 months, prices of commercial vehicle have increased substantially as OEMs have affected successive price increases averaging over 10% to recover the increase in input material prices and impact of change in emission norms. Thus with any increase in duties, OEMs would not have been in a position to completely pass on the impact in view of increased vehicle prices and hardening interest rates which have started exerting some pressure on fleet operator’s cash flows/viability. The increased thrust on infrastructure spending and measures being announced on improving funding however augurs well for commercial vehicle sector from the growth perspective.

TRACTORS
Proposals

1. Institutional Credit flow to farmers raised by Rs. 100,000 to Rs. 475,000 crore in 2011-12; interest subvention scheme for crop loans to continue in 2011-12 and additional subvention to farmers who repay crop loan on time increased from 2% to 3%.
2. Allocation for Bharat Nirman programme proposed to be increased by Rs. 10,000 crore from the current year to Rs. 58,000 crore in 2011-12; allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased by Rs. 1,105 crore to Rs. 7,860 crore; specific budgetary allocations to aid increased production of pulses, oil palm plantation, vegetables, nutri-cereals.
3. Basic Custom Duty reduced from 5% to 2.5% for specified agricultural machinery (including paddy transplanter, cotton picker, sugarcane harvester and laser land leveler) and from 7.5% to 5% for micro irrigation equipment.
4. The Government has decided to index the wage rates notified under the NREGA to the Consumer Price Index for Agricultural Labour.
5. Full exemption from excise duty to trailers and semi trailers used in agriculture. 

Impact: Positive

1. The increase in agricultural credit target augurs well for the industry as financing availability remains one of the most critical factors. Additionally, the 3% subvention (earlier 2%) resulting in effective interest rate of 4% is expected to reduce the interest burden on the farmers. The Government’s thrust on rural and agricultural development continues with increased allocations to Bharat Nirman programme, which are likely to stimulate demand in medium term. The reduction in custom duty on specified agricultural machinery and micro irrigation equipments is expected to help improve farm mechanization levels in India.
2. Excise duty exemption on trailers and semi trailers will boost sale of agriculture machinery.

SHEET METAL & AUTOMOTIVE COMPONENTS INDUSTRY
Proposal

1. In December 2010, the government had reduced the basic customs duty on natural rubber (upto the limit of 40,000 tonnes) to 7.5 per cent from 20 per cent for January-March 2011. This customs duty will be revised to 20 per cent or Rs 20 per kg, whichever is lower, effective from April 2011
2. The customs duty on Carbon Black Feedstock (which is used to manufacture carbon black) has been reduced to 2.5 per cent from 5 per cent and customs duty on caprolactum, which is used to produce Nylon Tyre Cord (NTC), has been reduced to 7.5 per cent from 10 per cent.
3. LED Lights to attract only 5% excise from 10%, exempt from special CVD.
4. Full exemption of basic custom duty and concessional central excise of 4% extended to batteries imported for electric vehicles in replacement market.

Impact –Neutral

1. No significant impact on the tyre industry.
2. The Reduction in custom duty will result into marginally lower input cost.

POWER SECTOR

PROPOSAL-EXCISE DUTY EXEMPTION FOR MPPs & UMPPs

1. Domestic equipment manufacturers for Mega Power Projects (MPPs) and Ultra Mega Power Projects (UMPPs) have been exempted from central excise duty to bring them on an even platform with foreign suppliers which currently enjoy a concessional customs duty of 2.5 per cent and exemption from countervailing duty.

IMPACT-Neutral
This will have a marginal positive impact on domestic equipment manufacturers.

PROPOSAL

1. Submit (by USD 20 billion to USD 25 billion) for investment by FIIs in corporate infrastructure bonds
2. Increased allocation to Bharat Nirman programme, which includes Rajiv Gandhi Vidyut Vitaran Yojna
3. Window of raising the funds through tax-free bonds by Infrastructure Finance Companies extended for FY 2011-12
4. Increase in MAT rate from 18% to 18.5% and surcharge reduced from 7.5% to 5%; units in SEZ areas will be covered under MAT

 

Impact- Neutral
Budget measures are expected to improve the availability for long term funding for power sector through creation of infrastructure debt fund, hike in investment limit by FIIs on corporate bonds as well as provision of tax-free bonds by infrastructure finance companies; this is a positive for all players across the value chain of power sector. Further, the availability of long term funding is expected to improve from take-out financing scheme being implemented by IIFCL. Impact of levy of MAT on the units operating in SEZ would depend upon the extent of pass-through of such increase through ‘change of law adjustment’ clause in PPA for competitively bid based tariff. However, this is a negative in case of merchant sales.

 TELECOM SECTOR

PROPOSAL-SERVICE TAX
 Service tax now payable on gross amount charged to subscriber .
IMPACT-Positive
Ambiguity removed.
 
PROPOSAL-CIVIL CONSTRUCTION
 Credit of duty paid on input or input services used in civil construction not available.
IMPACT-Negative
 This will impact telecom infrastructure companies .

PROPOSAL-SERVICE RULES
Point of service rules have been issued .
IMPACT-Negative
 The provisions itself and ambiguities are likely to impact cash flows of telecom companies as also increase the difficulty in compliances.

PROPOSAL-DUTY ON MOBILE HANDSET.
   The exemption from basic, countervailing duty (CVD) and special additional duty (SAD) on components and accessories of mobile handsets has been extended for the next financial year and a few more items have now been included in its ambit (like battery chargers, headphones, components for manufacture of PC connectivity cables and subparts of parts and components of PC connectivity cable).
IMPACT-Neutral
 The extension of duty exemptions would help sustain the current low prices of mobile handsets.

PROPOSAL-MISCELLANEOS

1. Bidding for the auction and allotment of spectrum for BWA license has been successfully completed through 117 rounds of bidding across the 22 service areas in the country. 

► DoT has amended telecom license agreements (UAS/ CMTS/ Basic Service license) for addressing security related concerns about expansion of telecom services.

► DoT, vide notification dated 1 September 2010, amended the UAS license of various licensees to allow usage of 3G spectrum for provision of telecom access services.

► MNP service has been introduced all over the country on 20 January 2011. MNP allows customers to retain their existing mobile number when they switch from one service provider to another or from one technology to another within the same service provider.

► With the objective of achieving efficient utilization of numbering resources in India, TRAI has issued a recommendation for migration to an integrated numbering scheme for both fixed and mobile services by 31 December 2011. 

IMPACT-POSITIVE  

 OIL & GAS SECTOR

 

Proposals

1. Provision of subsidy for sensitive petroleum products: Rs. 38,401 crore for 2010-11 (RE) and Rs. 23,656 crore for 2011-12 (BE)
2. Continuation of payment of subsidy in cash to the OMCs rather than by way of oil bonds
3. Direct payment of subsidy to the people living below poverty line (BPL) on LPG (domestic) and SKO (PDS) based on the final recommendations of task force headed by Mr Nandan Nilekani
4. Increase in MAT from 18% to 18.5% and reduction in surcharge from 7.5% to 5%
5. Deduction available for commercial production of ‘mineral oil’ will not be available for blocks licensed under a contract awarded after March 31, 2011
6. Decrease in basic customs duty (BCD) on carbon black feedstock and petroleum coke from 5% to 2.5%.

 

Impact-Negative
The subsidy for 2011-12 seems grossly inadequate and the gross under recoveries could cross Rs. 100,000 crore mark, even assuming 50% share to be borne by the GoI. Hence additional provision of subsidy and deregulation of diesel prices are imperatives for the PSU OMCs to report meaningful profits.

Continuation of payment of subsidy in cash is as per the practice followed since the last budget. However, timely release of cash subsidy continues to be an issue resulting in additional working capital borrowings for the PSU OMCs. Direct payment of subsidy to BPL people will help arrest the subsidy level, although implementation will be a huge challenge.

Clarification on income tax deduction for blocks awarded after March 31, 2011 is negative for the upstream companies considering bidding for NELP IX and beyond, and could be a dampener in attracting oil majors.
Reduction in BCD on carbon black feedstock and petcoke, will marginally reduce the import duty differential for the refineries and hence impact their gross refining margins.

MINES SECTOR

    PROPOSAL
► Draft Mines and Minerals (Development and Regulation), Act has been introduced and referred to GoM. Post incorporating the suggestions made by the GoM, the proposed legislation is presently being legally vetted and on completion of this exercise would be presented before the Cabinet for approval.
   
  

CEMENT SECTOR

 

Proposals

1. Rationalisation in excise duty rates; change from MRP based excise duty to ad valorem excise duty
2. Reduction in customs duty on petcoke and gypsum from 5% to 2.5%
3. Liberalisation of interest subvention scheme to include housing loans of up to Rs. 15 lakh and Rs. 25 lakh for housing loans in urban areas
4. Increased allocation to Bharat Nirman programme
   Impact-Positive

 

The change in excise duty computation is likely to result in a marginal reduction in effective excise duty incidence and thus improved margins for the cement industry, although given the competitive pressures some of it may have to passed onto the consumers. Reduction in customs duty on petcoke and gypsum is also likely to result in a marginal decrease in input costs. Increase in allocation for infrastructure and increased long term funding availability for infrastructure projects will facilitate more investment in these sectors and thereby boost cement demand. Subventions on housing and increased rural income under NREGA will also boost urban and rural housing demand and in turn demand for cement.

PHARMACEUTICAL SECTOR

Proposals

1. Increase in weighted reduction from 175% to 200% on R&D activities outsourced to specific institutions
2. Excise duty of 1% on certain good such as medicaments, intravenous fluids and vaccines (not covered under national immunization programme)
3. Basic custom duty reduced on lactose used in homeopathic medicines from 25% to 10%
4. MAT rates increased from 18.0% to 18.5%; however surcharge decreased from 7.5% to 5.0%, thereby leaving the effective MAT rate unchanged

Impact: Neutral
The impact of most proposals announced during the budget is unlikely to have a material impact on the pharmaceutical sector. Increase in weighted reduction from 175% to 200% on R&D activities outsourced to specific institutions is now in line with exemption available on in-house scientific research. Such measures would continue to support higher investments by research-led pharmaceutical companies in areas of NCE/NDDS related R&D activities.

BIOTECHNOLOGY SECTOR
  
Proposals
The CDSCO has amended its guidance for post approval changes in biological products. The CDSCO has omitted provisions for automatic approval of post approval
changes, thus making the companies mandatory to file fresh new drug or manufacturing licenses for such products with the regulator.
IMPACT-Negative

HEALTHCARE SECTOR 

Proposals

1. Planned allocation increased by 20% to Rs. 26,760 crore for healthcare
2. Service tax imposed on services provided by hospitals with 25 beds or more with air-conditioning, on higher-end treatments and diagnostic tests (with 50% abatement)
3. Endovascular stents have been fully exempted from basic customs duty of 5%

Impact: Neutral
Contrary to the expectations, there have been no specific announcements on improvement of healthcare infrastructure apart from the 20% increase in planned expenditure on healthcare. The implementation of service tax on aforementioned services in the healthcare space is likely to be passed on to the end-consumers thus having marginal/no impact on the sector.

 

FERTILISER SECTOR
Proposals

• Extension of Nutrient Based Subsidy (NBS) for urea under consideration
• Direct payment of subsidy to the farmers  living  below poverty line  (BPL)  based on  the final recommendations of task force headed by Mr. Nandan Nilekani
• Budgetary provision for subsidy: Rs. 57,844 crore (RE 2010-11) and Rs.     53,600 crore (BE 2011-12)
• Continuation of payment of subsidy in cash to the fertiliser companies rather than by way of bonds
• Infrastructure status for capital investments in the fertiliser sector
• Investments linked deductions on Income Tax for fertilisers producers
• Thrust on agriculture through higher agricultural credit and subvention of interest on farm loans and several measures such as mega food parks, cold chains and promotion of oil palm plantations.
• Reduction in basic customs duty from 5% to 2.5% on specified agricultural machinery
• Reduction in basic customs duty from 7.5% to 5% on micro irrigation equipment

S.NO.	PARTICULARS	EXISTING/PROPOSED
1.	Hospital & Research Centre Chandigarh Rd., Ludhiana	15 Acres
2.	Dental Hospital, Ludhiana	10 Acres
3.	Multipurpose Centre	10 Acres
4.	Rural Health care, education & Research Centre	100 Acres for 20 Research Centre
5.	Education Centre, London	1 Acre
6.	Guest Houses/Community Centre/Mediation Centres	10 Acres