Professional Documents
Culture Documents
Union Budget FY15
Union Budget FY15
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Contents
Key Messages
Economy
Economic analysis
Industry
Overall sectoral impact
14
Capital markets
Capital market
22
26
27
Automobiles
29
Banking
31
Cement
32
Construction
33
Fertilisers
34
Hotels
35
Household appliances
36
Information technology
37
38
Non-ferrous metals
39
41
Paper
43
Petrochemicals
44
Pharmaceuticals
46
Ports
47
Power
48
Real Estate
49
Roads
50
Steel
51
Sugar
53
Telecom
54
Textile
55
Key Messages
Economy
Realistic fiscal targets, but slippage possible in disinvestment: The government has stuck to a realistic target of
fiscal deficit at 3.9% of GDP for 2015-16 as opposed to the Finance Commissions recommendation of 3.6%. It has
managed to increase allocation for capital expenditure (to go up by 25.5% to Rs. 2,414 billion) because of the
headroom created from savings in oil subsidies and hike in excise duties on petrol and diesel. As a share of GDP,
capital expenditure will increase from 1.5% in 2014-15 to 1.7% in 2015-16. Even though tax collection targets look
achievable, there are chances of slippage in capital (disinvestment) receipts, which might bloat the fiscal deficit to
4.2% in the absence of any expenditure cut.
Getting public sector to revive investments: The budget lays focus on public investments, which will have large
spillovers on growth if implemented effectively. Despite pressure on fiscal consolidation, enough room has been
created for infrastructure spending through the governments own resources and by nudging PSUs to invest more.
Focus clearly is on four sectors -- roads, railways, power and rural development. This emphasis on strengthening
transportation infrastructure will also boost manufacturing. Overall, the budget is growth-enhancing as it supports a
mild pick-up in public investments, which can draw in private investments over time.
Fiscal federalism is an enabler: The government has raised states share in total divisible pool of tax revenues to
42% from 32% as per the recommendation of the 14th Finance Commission, recording the biggest-ever increase in
vertical tax devolution. This not only increases the pool of resources available to the states but also raises flexibility
to help states design, implement and finance programmes according to their specific needs. Total transfers from the
centre to the states have increased from 4.5% of GDP in 2013-14, 5.5% in 2014-15 to 6.0% in 2015-16.
Industry
Financial sector reforms a structural positive: Inclusion of NBFCs under the SARFAESI Act and new
bankruptcy code will provide a boost to recovery efforts and help rein in asset quality problems over the long run.
The setting up of autonomous bank board bureau for public sector banks is a step in the right direction. It is
expected to provide greater functional autonomy and pave way for bank holding company structure which will
optimise governments capital contribution.
Greater public funding and innovative financing schemes to support infrastructure: Higher government
allocations coupled with increase in funding availability for the infrastructure sector through National Infrastructure
Investment Fund, higher fuel cess for roads and rationalisation of tax on Infrastructure Investment Trusts will provide
significant opportunity for construction and capital goods companies.
Minor changes in tax rates, but glide path to lower rates and simplification: True to its promise, the finance
minister has avoided undertaking many sector/product specific changes in duties or exemptions. On the direct tax
front, too, in line with the Finance Ministers stated philosophy, the budget has provided a path towards lowering of
corporate tax rate and simultaneously doing away with multiple exemptions to simplify the tax administration and
reduce disputes.
Capital Markets
Incentivising financial savings and social security: The Budget includes measures to promote financial savings
and enhancing coverage of pension and health insurance. Gold bond scheme is also intended to encourage shift
from non-productive to productive saving. However, the efficacy of the schemes needs to be watched - given the
countrys penchant for physical gold holdings.
Little to cheer for the bond markets: Tax-free infrastructure bonds, encouragement for insurance and pension
products, clarity of taxation for Alternative Investment Funds etc. will help channel more investment to the bond
markets. Also, given the ambitious plans for improving infrastructure, debt markets need to play a vital role.
However, measures to catalyse the bond markets continue to remain elusive.
Economy
Economy analysis
Indian Economy Outlook
2013-14
2014-15F
2015-16F
GDP (y-o-y %)
6.9
7.4*
7.9
9.5
6.5
5.8
Budget Impact
The budget supports a mild pick-up in public investments
which can crowd in private investments over time
Despite shifting the fiscal target by a year, commitment to
stick to fiscal consolidation is a plus for the downward
trending inflation and augurs well for further rate cuts by
RBI
4.5
4.1**
3.9
8.8
7.7
7.5
The government continues to follow the path of fiscal consolidation by aiming to bring down fiscal deficit to 3.9%
of GDP in 2015-16 from 4.1% of GDP in 2014-15. There is, however, a relaxation of 30 basis points when
compared with the 3.6% target set by the 14th Finance Commission (FFC). This is justified because:
Greater devolution to states will constrain central government finances.
Thrust on capital spending means additional money generated by relaxing the fiscal deficit target will be
used to improve the productive potential of the economy
Nominal GDP growth target is realistic at 11.5% for 2015-16, same as for 2014-15.
Revenue targets look achievable though scope of slippage remains on the disinvestment front.
Rationalisation of the overall subsidy bill is still not adequate, though the trend of carrying forward arrears has
been reduced substantially.
0.60
Item
Revenue
accrued
0.55
(Rs. Bn.)
0.50
0.30
780
267
0.19
0.20
0.10
0.00
Petrol and Diesel Excise Hike
1.3
1.3
1.2
1
0.9
0.8
0.8
0.7
0.6
0.4
0.2
0.2
FY09
FY10
0.2
0
FY08
FY11
FY12
FY13
FY14
FY15 RE
FY16 BE
FY13
FY14
FY15RE
FY16BE
Average
Growth
growth
assumption for
during FY12-
FY16
FY15
10,362
11,387
12,514
14,495
12.1
15.8
Corporation Tax
3,563
3,947
4,261
4,706
9.7
10.5
Income tax
1,965
2,429
2,786
3,274
19.3
17.5
Customs
1,653
1,721
1,887
2,083
8.2
10.4
1,758
1,702
1,855
2,298
9.0
23.9
Service Tax
1,326
1,548
1,681
2,098
20.4
24.8
Non-tax revenue collections are projected to rise from Rs.2,178 billion in 2014-15 to Rs.2,217 billion in 2015-16, growing
by 1.8% compared with 9.5% in the last fiscal. The slowdown in non-tax revenue growth has been on a high base
because government revenues were boosted by spectrum auctions. Non-tax revenue gains are a one-off.
For
sustainable increase in revenues, it is critical to adhere to the timeline for the roll out of Goods & Services Tax.
This apart, government has an ambitious target of Rs.695 billion through disinvestments. But past trend suggests that
government has always fallen short. The learning from this is that the government needs to frontload efforts and
capitalise on the current market buoyancy. If disinvestment proceeds are similar to last year, fiscal deficit would shoot up
to 4.2% of GDP.
Figure 5: Disinvestment proceeds (Rs billion) have mostly trailed targets
800
695
700
634
600
558
500
400
400
400
300
300
200
100
0
2010-11
2011-12
2012-13
Disinvestment Budgeted
2013-14
2014-15
2015-16
Disinvestment Actual
-113
-300
-400
-500
-600
-700
-706
-800
-900
-869
-867
FY13
FY14
-1000
FY12
FY15
Figure 7: Direct benefit transfer can re -write the food subsidy script
Direct benefit transfer, or DBT, will likely prove to be a game changer in food subsidy. We estimate that DBT could help
the government save as much as 20% (or Rs 250 billion) in food subsidy expenditure by eliminating costs associated
with procuring, distributing and storing foodgrains. Moreover, DBT will help bring millions of poor households that
currently do not have access to PDS into the food subsidy net. We estimate that at fiscal 2016 prices, the cash transfers
under the DBT will amount to almost Rs 5,800 per year for a family of five, which will implicitly raise their disposable
income. At first glance, Rs 5,800 may seem small, but it is higher than the reported total annual expenditure (food +nonfood) of the poorest 5% of the rural households and more than half the annual expenditure of the poorest 10% of urban
households. Given the high marginal propensity to consume at lower income levels, such a significant unconditional cash
transfer will undoubtedly raise discretionary spending of the recipient households, providing a consumption boost the
economy.
2.5
2.3
2.2
2.6
2.2
2.2
2.4
2.1
1.8
2.0
1.4
1.8
1.7
1.6
FY08
FY09
1.7
1.7
1.7
1.5
FY10
FY11
FY12
FY13
FY14
FY15 RE
FY16 BE
What has the budget done to aid public investments and infrastructure creation?
The budget plans a 25% increase in capital expenditure in 2015-16, compared to 2.5% increase in 2014-15, taking
its ratio in GDP up by 20 basis points to 1.7%. Central plan outlay is budgeted to increase by 35.5% in 2015-16
compared to an average fall of 3.4% in the last three years. The budget lays focus on four sectors providing crucial
Figure 9: Sectors with higher plan outlay (%, y-o-y) Figure 10: CPSUs shoulder most capital spending
%, y-o-y
174.5
60.6
66.5
53.0
61.1
56.4
43.6
39.4
38.9
2011-12
2012-13
55.5
44.5
55.0
45.0
15.5
11.1
7.3
-10.6
Roads and
Bridges
-30.6
Rural
Development
Railways
Power
FY16 B.E.
2013-14
Budget support
2014-15 RE 2015-16 BE
I.E.B.R.
1.
2.
37.1% is to come from accruals (down to 49% from last year), 37% from capital market (up from 26%) and 26% from
external commercial borrowings and other sources. From the bond markets, PSUs in the roads and railways sector
are together slated to borrow Rs 803 billion in 2015-16 compared with Rs 208 billion last year. The budget allows for
a large part of this borrowing to be in the form of tax-free bonds.
3.
2015-16
5.5
6.0
Total Transfers
6,930
8,522
3,378
5,240
Fully flexible/Untied
2,703
1,958
Change in Flexibility
Rs billion
46
239
803
1,086
Inflexible/tied
Note : Total transfers include grants and loans under the central assistance for state and UT plans, non -plan
grants and loans, revenue share of states and centrally sponsered scheme transfers.
Source: Budget documents, Crisil Research
10
Overall, this budget showcased a strong resolve towards encouraging cooperative federalism in India. That said, certain
sections of the transfers continue to be tied/conditional. Therefore, continued steps towards increased federalism will be
needed in the coming years. In addition, the ball is in the states court now and they need to use these resources
judiciously to enhance growth.
11
12
Industry
Leg-up to rural income: With increased allocation to MGNREGA, rural incomes should rise. Add a good monsoon
and what you get is greater consumption of FMCG products and higher sales of consumer durables and twowheelers. Increased agricultural credit would also lead to higher sales of tractors and irrigation equipment. Better
volume growth and softer commodity prices will improve the margins of companies in this arena.
14
Industry
Impact
Neutral
Positive
15
Neutral
Positive
16
Positive
Neutral
17
on the sector. Increase in basic excise duty will only slightly raise aluminium and steel prices by Rs 200 and Rs 50 per
tonne, respectively. Hike in clean energy cess will also have only a mild impact on sponge iron and aluminium players.
Similarly, impact of hike in customs duty on metallurgical coke will be negligible as most Indian steel players import
coking coal and subsequently convert it into coke.
Oil & gas: Higher Govt share in under-recovery burden for 2015-16: positive for oil companies Positive
Key budget proposals:
Government announces oil subsidy of Rs 300 billion for 2015-16.
Change in excise duty structure on petrol and diesel: Reduction in CENVAT by Rs 3.5-3.7 per litre, increase in road
cess by Rs 4 per litre, removal of 3 per cent education cess levied on overall excise duty
Exemption of special additional customs duty on petrol and diesel, in excess of Rs 6 per litre
CRISIL Researchs View
The overall impact is marginally positive. The government's estimate of oil subsidies in 2014-15 and 2015-16 will wipe
out the subsidy rollover of Rs 90-100 billion from 2014-15, reducing working capital requirements of oil marketing
companies. With the government contributing Rs 300 billion towards fuel subsidies (including rollover), upstream oil
companies will see a 5% decline in their contribution to under-recoveries in 2015-16.
Increase in road cess on petrol and diesel has been completely offset by the decline in basic excise duty and removal of
education cess. Hence, there will be no impact.
As petrol and diesel imports are marginal, exemption in special additional customs duty will not have any major impact.
Power: Higher budgetary allocations and fund availability to boost investments
Positive
18
planned expenditure. We believe that a healthy growth in capacity additions and augmentation of T&D infrastructure will
reduce power deficit to about 1% by 2018-19. However, a favourable regulatory framework coupled with states
facilitating implementation of projects will be critical to boost investments.
While the provisions are positive, addressing fuel availability issues and improving the financial health of state distribution
companies is important to alleviate financial stress in the sector
Real Estate: Commercial real estate developers to benefit in the medium term
Neutral
Neutral
Neutral
19
IT: Rs 10 billion has been allocated towards the Techno-Financial Incubation and Facilitation Programme for
technology start-ups and self-employment activities. Also, input components used in manufacturing tablet computers
have been exempted from basic customs duty, countervailing duty (CVD) and special additional duty (SAD).
CRISIL Researchs View
The proposals are unlikely to have a significant impact on the telecom and media sectors. The hike in excise duty on
mobile handsets would result in an increase in their prices, which would somewhat impact the rate of growth in
smartphone adoption. The hike in the service tax rate would inflate the bills of postpaid subscribers, who, however,
constitute only about 5 per cent of Indias wireless subscriber base. The budgeted receipts from telecom services
indicate that another round of spectrum auctions can be expected in 2015-16.
Service tax to be levied on event ticket prices exceeding Rs 500 is unlikely to have a major impact as organisers would
pass on the resultant price hikes to the ticket buyers.
The proposals will not have a significant impact on the IT industry. Allocation of funds for start-ups will help the IT
industry adopt new technologies and provide employment opportunities. Tablet computer prices are set to reduce with
the removal of custom duties.
20
Capital markets
Capital markets
Focus on social security a good augury for future
A.
B.
C.
22
D.
New agency for government borrowings, yet very few measures for deepening debt market
The proposal to establish a Public Debt Management Agency for government borrowings is expected to facilitate
better planning and management of domestic and foreign market borrowings for the Centre. This will also reduce the
operational burden on the Reserve Bank of India and help it focus on core functions related to monetary policies.
Introduction of tax-free infrastructure bonds will help channnelise investments to the bond market. While provisions
for pension funds and AIFs are also likely to have a positive impact on asset flow to the debt markets, given the role
that the debt markets have to play in the realisation of several of the measures that have been announced in the
Budget, there is very little to cheer. No concrete measures have been announced for deepening or broadening the
markets.
E.
F.
23
Airport Infrastructure
Increase in service tax to marginally impact non-aero revenues
Company
Impact
Impact factors
A,B
A,B
Impact factors
A. Increase in service tax to 14% from 12.36% to marginally affect airports non-aero revenues. Non-aero revenues
constitute 30-40% of total revenues for Mumbai, Bengaluru, Hyderabad and Delhi airports.
B. Improved funding availability through establishment of National Investment and Infrastructure Fund and
rationalisation of taxes for Infrastructure Investment Trust.
C. Service tax exemption on construction of airports has been withdrawn. Accordingly, service tax (including education
cess) of 14% is applicable. Greenfield airports will be largely affected as these comprise about 77% share of total
investments over next 5 years.
26
Impact
Impact factors
Apollo Tyres
Exide
Motherson Sumi
Bosch
Bharat Forge
Impact factors
A.
We do not expect concessional customs and excise duty rates (6%) on specified parts of electrically operated and
hybrid vehicles to have a major impact as sales of electric vehicles are very low.
(per cent)
2014-15
2015-16
2014-15*
2015-16
7.7
7.7
12.4
12.5
10.3
10.3
12.4
12.5
7.7
7.7
12.4
12.5
7.7
7.7
12.4
12.5
Excise
Excise duty includes education cess @ 3% (not applicable on 12.5% rate in 2015-16)
* Effective from 01/01/2015
Notes:
1) Raw materials for auto components include galvanised plate (GP)/galvanised coil (GC) steel,
hot rolled (HR), steel, aluminium, copper and lead.
Source: CRISIL Research
27
Custom s
Excise
Dom estic
International
2014-15 2015-16
2014-15 2015-16
(Rs/tonne)
($/tonne)
New tyres
Post-budget
10.3
10.3
10.3
10.3
10.3
10.3
10.3
10.3
10.3
10.3
10.3
10.3
127,446
1,703
143,063
143,063
Used/retreaded tyres
(Note 2) (Note 2)
(Note 1) (Note 1)
SBR (1502)
10.3
10.3
12.4
12.5
n.a.
1,338
91,800
91,800
PBR (1220)
10.3
10.3
12.4
12.5
106,000
1,500
105,381
105,381
NTC fabric
10.3
10.3
12.4
12.5
n.a.
3,665
251,548
251,548
5.2
5.2
12.4
12.5
n.a.
n.a.
n.a.
n.a.
NTC: Nylon tyre cord; PBR: Polybutadiene rubber; SBR: Styrene butadiene rubber
n.a.: Not available
* Domestic carbon black prices are available on quarterly basis. Included prices are for Q4 2014-15.
Notes
1) For natural rubber, there is a cess of Rs 2 per kg in lieu of excise duty w ith effect from September 1, 2011.
2) Customs duty on natural rubber w ill be charged at 20% or Rs 30 per kg, w hichever is low er, w .e.f. December 20, 2013.
3) New tyres include the follow ing categories: Truck and bus, light truck, car (cross ply and radial), tractor front,
tractor rear, tractor trailor, moped, scooter and motorcycle.
4) An additional countervailing duty of 4% is levied on raw materials except for NTCF
5) Prices and landed cost are average rates for January 2015.
Source: CRISIL Research
28
Automobiles
Marginally positive for tractors; neutral for other segments
Company
Impact
Impact factors
B,D
A,B
A,B
C,D,F
A,B,C,E,F
Impact factors
A.
Increase in effective rate of customs duty on import of fully-built commercial vehicles (CV) to 20% from 10% will not
have a significant impact as fully-built CV imports are negligible.
B.
Reduction in excise duty on ambulance chassis to 12.5% from 24% will not have a major impact on CV sales as
they form a small proportion of total sales.
C.
Concessional customs and excise duty rates (6%) on specified parts of electrically operated and hybrid vehicles are
not expected to have a major impact as sales of electric vehicles are very low.
D.
Reduction in tax on royalty payments to foreign companies to 10% from 25% will have a marginally positive impact
for Indian companies who import techonolgy.
E.
The increase in funds allocated for farm credit by Rs 500 bn to Rs 8.5 trillion and agricultural initiatives such as
increase in allocation to MGNREGA and NABARD will be marginally favourable for tractor sales.
F.
Allocation of Rs 750 million to promote manufacturing of electric vehicles (EVs) is another directionally positive step
but will not have much impact in the near term.
29
Automobiles: Tariffs
Custom s
(%)
Excise
2014-15
2015-16
2014-15*
2015-16
10.3
10.3
61.8
61.8
128.8
128.8
12.4
12.5
24.7
24.7
128.8
128.8
24.7
24.7
128.8
128.8
30.9
30.9
New cars
Tw o-w heelers
10.3
10.3
12.4
12.5
10.3
20.6
12.4
12.5
10.3
20.6
12.4
12.5
10.3
10.3
7.7
7.7
12.4
12.5
10.3
10.3
12.4
12.5
Electrical parts
7.7
7.7
12.4
12.5
Steel items
7.7
7.7
12.4
12.5
Pig iron
5.2
5.2
12.4
12.5
Excise duty includes education cess @ 3% (not applicable on 12.5% rate in 2015-16)
LCV: Light commercial vehicles; MHCV: Medium and heavy commercial vehicles
Notes:
* Effective from 01/01/2015
1
Specified small cars include cars w ith length not exceeding 4000 mm and engine
capacity not exceeding 1200 cc for petrol cars and 1500 cc for diesel cars.
2
engine capacity exceeding 1200 cc for petrol cars and 1500 cc for diesel cars.
3
Represents effective rate for fully-built vehicles. Customs duty on commercial vehicles in
30
Banking
Positive for NBFCs and PSBs
Company
Impact
Impact factors
A,C
A,C
ICICI Bank
HDFC Bank
HDFC Ltd
Impact factors
A.
The Union Budget has proposed to provide Rs 79.4 billion as capital support to all PSBs (PSBs) in 2015-16, lower
than the average Rs 131 billion provided in the past five years till 2014-15. This cut in allocation has come at a time
when PSBs are witnessing significant pressure on profitability and need to comply with stringent Basel III capital
requirements. To support credit growth of 15-16% in 2015-16, PSBs will need much more capital than the levels
budgeted for. Weaker banks with a lower capital adequacy, would be impacted the most if the required capital
infusion does not occur.
B.
In this context, the governments intention to create a holding and investment company and an Autonomous Bank
Board Bureau for PSBs is a positive. This would provide autonomy to banks and help them raise funds. The bureau,
a precursor to the holding company, will search and select heads of PSBs and help them develop differentiated
strategies and capital raising plans through innovative financial methods and instruments. This step is in the right
direction as it will improve operating efficiency of PSBs.
C.
NBFCs registered with RBI and having an asset size of Rs 5,000 million and above, would now be covered under
the SARFAESI Act, 2000. This, coupled with formulation of a new Bankruptcy Code, would help the banking and
financial sector manage their asset quality better.
D.
Establishment of the Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 200 billion,
and credit guarantee corpus of Rs 30 billion has been proposed. MUDRA Bank will be responsible for refinancing all
microfinance Institutions, which lend to small business units through the Pradhan Mantri Mudra Yojana. A Trade
Receivables discounting System (TReDS) - an electronic platform for facilitating financing of trade receivables of
MSMEs is proposed to be established, which will help ease liquidity for companies.
31
Cement
Measures to boost construction activity a positive; cost escalations minor
Company
Impact
Impact factors
ACC Ltd.
Impact factors
A.
Duties and tariffs directly levied on cement hiked marginally. An increase in freight, power and fuel costs to drive up
players operating costs by 0.8%. However, they will be able to hike prices to offset this increase owing to rising
demand.
B.
Clean energy cess on coal (domestic and imported) doubled to Rs 200 per tonne, which will increase power and fuel
costs (that form about 20% of cost of sales) by 2%.
C.
Rail freight rate for cement hiked by 2.7% and for coal by 6.3%. This would drive up freight costs (which account for
25-30% of cost of sales) by 1%.
D.
E.
Investments towards roads and highways more than doubled to about Rs 856 billion.
F.
G. The above moves would improve demand for cement over the medium term; however execution capability of
funding institutions/ players has to be scaled up appropriately. Further, steps taken to improve access to financing
for infrastructure projects could aid higher credit offtake over the long term.
Cement: Tariffs
(Per cent)
Custom s
2014-15
Portland cement
2015-16
2014-15
10.3
10.3
12.4
12.5
30
30
Cement clinker
10.3
10.3
12.4
12.5
Limestone
5.2
5.2
Gypsum
2.6
2.6
Pet coke
2.5
2.5
14.4
14.4
2014-15 2015-16
White cement
Imported coal
32
Excise
Construction
Public funding to propel construction investments
Company
Larsen & Toubro Ltd
Hindustan Construction Co Ltd
Impact
Impact Factors
A,B,C,D,E,F
A,B,D,E,F
IVRCL Ltd
A,B,C,D,E,F
A,B,C,D,E,F
A,B,C,D,E,F
Impact factors
A.
Hike in allocation towards infrastructure sectors by 1.5 times to around Rs 2.8 trillion to provide strong construction
opportunity to EPC players. Roads & highways, railways and urban infrastructure segments to be major
beneficiaries. As private sector interest is muted, the budget plans to step up public funding. However, institutional
capacity to execute projects across sectors will have to be monitored.
B.
Investment for development of national highways has been increased by 178% y-o-y to Rs 856 billion. A significant
portion will be funded through a Rs 4 per litre hike in road cess on petrol and diesel. The increase in public funding
has the potential to boost national highway execution by about 5,800 km annually, creating strong construction
opportunity for road EPC companies.
C.
In railways, outlay has been increased by 52% to Rs 1 trillion, with focus on capacity expansion and decongestion of
the existing network. There have been significant PPP announcements in coastal connectivity, gauge conversion,
Direct Freight Corridor and expansion of the Mumbai suburban railway network.
D.
Planned outlay on urban infrastructure development, which includes development of smart cities and metro rail
projects, has been increased by 37%.
E.
Issuance of tax-free bonds for roads, railways and irrigation projects and establishment of the National Investment
and Infrastructure Fund (with corpus of Rs 200 billion) proposed to be explored as means for additional finance.
Rationalisation of tax regime for infrastructure investment trusts could free up private capital locked in completed
projects.
F.
Governments intent to table Public Contracts Resolution of Disputes Bill to provide speedy dispute redressal in
large public projects and create conducive environment for PPP projects.
33
Fertilisers
Announced subsidy adequate; overall neutral impact
Company
Impact
Impact factors
A, B
A, B
A, B
A, B
A, B
Impact factors
A.
Budgeted subsidy of Rs 730 billion for 2015-16 will be adequate to cover the subsidy burden of Rs 697 billion. The
subsidy spillover to 2016-17 will be lower at Rs 260 billion, compared with Rs 290 billion in the previous year.
B.
Customs duty on sulphuric acid (used for manufacturing phosphatic fertilisers) has been reduced to 5% from 7.5%.
However, sulphuric acid accounts for a small proportion of overall costs. Hence, the impact will be marginal.
Excise
(Rs/tonne)
Dom estic
International
Pre-
Post-
(Rs/tonne)
($/tonne)
budget
budget
Urea
5.0
1.0
5,360
303
21,190
21,190
DAP
5.0
1.0
23,000
484
35,019
35,019
MOP
5.0
1.0
17,000.0
325
21,897
21,897
Ammonia
5.0
1.0
n.a.
515
36,590
36,590
Phosphoric acid
5.0
NT
765
51,055
51,055
Sulphur
2.5
n.a.
193
12,470
12,470
Rock phosphate
2.5
NT
121
9,410
9,410
26,609
428
28,539
28,539
27,262
280
18,399
18,399
5.0
713
46,588
46,588
Naphtha
Fuel oil
Contracted LNG2
34
Hotels
Impetus to tourism, positive for hospitality industry
Company
Impact
Impact factors
EIH Ltd
A,B
A,B
A,B
Impact factors
A.
The budget proposes to increase the service tax from 12.36% to 14%. For hotels in India, the service tax is
applicable for both rooms and food & beverage (F&B). CRISIL Research expects the increase in the service tax to
have a negligible impact on the hotel industry as hoteliers will be able to pass it on to the customers.
B.
The budget proposes to extend the Visa on Arrival (VoA) facility, currently available for 43 countries, to 150
countries in a stagewise manner. This is expected to improve the tourism competitiveness of India and boost foreign
tourist arrivals (FTAs) in the country, which were 7.5 million in 2014. As per a survey conducted by the World
Economic Forum in 2013, India ranked 65th in the overall travel and tourism competitiveness but ranked a dismal
132nd in terms of visa restrictiveness (which factors in the ease in obtaining visas). Among the BRICS nations,
South Africa, Brazil and Russia outrank India in terms of flexible visa policies. In another move to boost FTAs along
with domestic tourist arrivals (DTAs), the budget proposes to carry out restoration work on nine World Heritage Sites
across India churches and convents of Old Goa, Hampi in Karnataka, Elephanta Caves near Mumbai, Kumbalgarh
and other hill forts of Rajasthan, Rani ki Vav in Patan, Gujarat, Leh Palace in Ladakh, Varanasi Temple Town in
Uttar Pradesh, Jalianwala Bagh in Amritsar and Qutub Shahi Tombs in Hyderabad. Since tourist growth typically
boosts demand for premium segment hotels, the proposals bode well for the hospitality industry in India.
35
Household Appliances
Basic customs duty exemption on OLEDs to have miniscule impact
Company
Impact
Impact factors
A,B
A,B
A,B
Voltas Limited
A,B
Impact factors
A.
The basic customs duty for Organic LED (OLED) panels has been reduced to nil from 10%. However, as OLED TVs
account for less than 0.5% of total panel TV sales, this cut will not have any significant impact.
B.
Increase in MNREGA allocation is expected to improve rural incomes, thus supporting consumer durable sales. This
will have a marginal positive impact on the sector.
Custom s
Excise
2014-15
2015-16
2014-15
2015-16#
2014-15
2015-16
B/W TVs
10.3
10.3
12.4*
12.5
10.3
10.3
12.4*
12.5
30
30
Refrigerators
10.3
10.3
12.4*
12.5
35
35
Room ACs
10.3
10.3
12.4*
12.5
25
25
Washing machines
10.3
10.3
12.4*
12.5
35
35
CPT
0.0
0.0
12.4*
12.5
0.0
0.0
12.4*
12.5
OLED panels
10.3
0.0
12.4*
12.5
Compressors
7.7
7.7
12.4*
12.5
7.7
7.7
12.4
12.5
Steel coils
7.5
7.5
12.4
12.5
Polymers
5.2
5.2
12.4
12.5
36
Information Technology
No significant impact
Company
Impact
Impact factors
TCS
Infosys
Wipro
HCL Technologies
Tech Mahindra
Impact factors
A.
Exemption of basic customs duty, countervailing duty and special additional duty on input components used in
manufacturing tablet computers to lower tablet prices.
B.
Allocation of Rs 10 billion towards Techno-Financial Incubation and Facilitation Programme for technology start-ups
and self-employment to help industry adopt new technologies and provide employment opportunities.
Custom s *
Excise
2014-15 2015-16
2014-15 2015-16**
10.3
10.3
10.3
10.3
Personal computers
0.0
0.0
12.4
12.5
Monitor
0.0
0.0
12.4
12.5
Keyboard
0.0
0.0
12.4
12.5
Mouse
0.0
0.0
12.4
12.5
0.0
0.0
12.4
12.5
0.0
0.0
12.4
12.5
0.0
0.0
12.4
12.5
0.0
0.0
12.4
12.5
Routers
0.0
0.0
12.4
12.5
Modems
0.0
0.0
12.4
12.5
Printer
FDD, HDD, CD-ROM drive and other storage drives
Motherboards
Microprocessors
FDD: Floppy disk drive; HDD: Hard disk drive; CD-ROM: Compact disk-read only memory.
** Education Cess and Secondary Higher Education Cess are subsumed in Central Excise Duty
and general rate of Central Excise Duty rounded off to 12.5%.
Source: CRISIL Research
37
Impact
Impact factors
Balaji Telefilms
Dish TV
HT Media
PVR
Impact factor
A.
Service tax is to be levied on tickets purchased for events such as concerts, pageants, sporting events and award
functions if the admission amount exceeds Rs 500 per person. However, this is unlikely to have a major impact as
we expect the event organisers to pass on the hike in ticket prices to buyers.
Excise
2014-15
2015-16
2014-15
2015-16
7.7
7.7
12.4
12.5
Broadcast equipment
10.3
10.3
12.4
12.5
Set-top boxes
10.3
10.3
12.4
12.5
38
Customs
Non-ferrous metals
Neutral impact
Company
Impact
Impact factors
A, B, C, D
A, C, D
A, D
A, B, C, D
A, B, C, D
Impact factors
A.
Basic excise duty hiked to 12.50% from 12.36%; as a result, domestic prices of aluminium, copper, lead and zinc
will inch up marginally by Rs 200-300 per tonne
B.
Clean energy cess on coal doubled to Rs 200 per tonne, which will also have a negligible impact as it accounts for
about 2% of total coal cost per tonne for aluminium players.
C.
The Special Addtional Duty (SAD) on aluminium and copper scrap has been halved to 2%. This reduction would
address the problem of CENVAT credit accumulation emanating from the exisiting differential between the Central
Sales Tax (CST) of 2% and the SAD of 4%. In the existing structure, players are eligible for a CENVAT credit refund
of only 2% on an SAD levy of 4%. With both CST and SAD being equalised, players will be able to get a full refund
on the SAD.
D.
The budget proposes to increase allocation towards the infrastructure segment by about 53% to Rs 2.8 trillion.
Higher public investments in infrastructure segments such as urban & rural development, power and aviation (endusers of aluminium, copper and zinc) will marginally benefit the domestic non-ferrous metals industry.
39
2014-15 2015-16
Excise
Pre-budget Post-budget
2014-15
2015-16
5.2
5.2
12.4
12.5
163,667
2,210
170,363
170,581
- Flat-rolled products
5.2
5.2
12.4
12.5
- Foils
Aluminium ingots
(Rs/tonne) ($/tonne)
Aluminium products
5.2
5.2
12.4
12.5
Aluminium scrap
5.2
5.2
12.4
12.5
Non-coking coal
2.1
2.1
6.2
6.2
Caustic soda
7.7
7.7
12.4
12.5
Calcined
2.6
2.6
14.4
14.4
Copper
5.2
5.2
12.4
12.5
450,000
5,693
437,049
437,607
Copper scrap
5.2
5.2
12.4
12.5
2.6
2.6
4.1
4.1
Lead
5.2
5.2
12.4
12.5
135,000
1,809
139,660
139,838
2.6
2.6
4.1
4.1
Zinc
5.2
5.2
12.4
12.5
173,000
2,105
162,324
162,531
2.6
2.6
4.1
4.1
petroleum
coke
concentrates
concentrates
concentrates
Note:
1) Tariff rates are inclusive of 3 per cent education cess in 2014-15
2) International prices are average LME cash prices; LME aluminium prices includes premium
3) Domestic prices are average prices for February 2015
Source: CRISIL Research
40
Impact
Impact factors
A,B
A,B
A,B
GAIL
Impact factors
A.
The government's estimate of oil subsidies in 2014-15 and 2015-16 will wipe out the subsidy rollover of Rs 90-100
billion from 2014-15, reducing working capital requirements of oil marketing companies (OMCs). With the
government contributing Rs 300 billion towards fuel subsidies (including rollover), upstream oil companies will see a
5% decline in their contribution to under-recoveries in 2015-16.
B.
Increase in road cess on petrol and diesel has been completely offset by decline in basic excise duty and removal of
education cess. Hence, there will be no impact.
41
Prices
Landed costs
(per cent)
(January 2015)
(Rs/tonne)
Custom s
Excise
2014-15 2015-16
2014-15
2.6
2.6
8.2
8.2
8.2
Naphtha
5.2
5.2
- Industrial use
5.2
Rs 17.46/ltr Rs 17.46/ltr
PrePostBudget Budget
($/tonne)
79,595
457
30,032
30,032
8.2
65,041
815
56,691
56,691
14.4
14.4
26,609
428
29,207
29,207
5.2
14.4
14.4
44,839
500
34,039
34,039
0.0
0.0
18,610
500
32,372
32,372
Rs 10.26/ltr Rs 10.26/ltr
57,569
468
30,674
30,674
0.0
0.0
High-speed diesel
(HSD)
2.6
2.6
Fuel oil
5.2
5.2
14.4
14.4
27,261
280
19,347
19,347
Liquefied petroleum
gas (LPG)
5.2
5.2
8.2
8.2
59,479
452
32,184
32,184
Bitumen
5.2
5.2
14.4
14.4
31,130
280
20,682
20,682
Crude oil 1
0.0
0.0
0.0
0.0
n.a.
353
LNG
5.0
5.0
713
46,588
46,588
CNG
14.0
14.0
43,450
43,450
Cess on crude oil (in lieu of excise) is Rs 4,500 per tonne , National Calamity Contingent Duty (NCCD) of Rs 50/mt levied on
imports of crude oil
2
Notes
1) International prices are FoB Arab Gulf prices.
2) Domestic price of petroleum products are ex-storage point prices.
3) Priority sectors for natural gas include pow er and fertiliser.
4) Domestic natural gas prices represent landfall prices for each category.
5) Customs duty and excise duty on naphtha used for fertiliser is nil.
6) Customs duty and excise duty on fuel oil used in fertiliser is nil.
7) Additional customs duty of Rs 2/litre is levied on Motor spirit and HSD
Source: CRISIL Research
42
Paper
Continued budgetory allocation for education to maintain demand for W&P paper
Company
Impact
Impact factors
A, B, C
A, B, C
A, B, C
A, B, C
A, B, C
A, B, C
Impact factors
A.
Budgetary allocation of Rs 689 billion to the education sector to translate into steady demand for creamwove and
maplitho paper (that together comprise about 25% of total paper consumption), which are used primarily as
education stationery.
B.
Doubling of the energy cess will drive up power costs (that form about 15 per cent of total costs) and consequently
pull down profitability by 30 basis points, given the muted demand growth.
C.
The governments push to the Digital India programme would affect demand, especially for writing and printing
paper, in the long term.
Paper: Tariffs
Tariff (per cent)
(per cent)
Custom s
Excise
Dom estic
(Rs/tonne)
($/tonne)
0.0
0.0
0.0
0.0
35,000
561
34,594
34,594
Maplitho
10.3*
10.3*
6.2
6.2
51,000
n.a.
Duplex board
10.3*
10.3*
6.2
6.2
33,000
n.a.
Art board
10.3*
10.3*
6.2
6.2
56,000
n.a.
5.2*
5.2*
2.1
2.1
NT
630
41,674
41,674
5.2*
5.2*
2.1
2.1
NT
560
37,044
37,044
12*
12*
6.2
6.2
12,200
250
18,326
18,326
* Custom duty values are 0 for ASEAN countries after the FTA in December 2013
n.a. - Not available
NT: Not traded
Prices are delivered prices excluding VAT (delivered: basic+excise+octroi+avg freight prices)
Source: CRISIL Research
43
Petrochemical
Duty cuts to support profitability of most petrochemical players
Company
Impact
Impact factors
A, B
GAIL
Note: The impact specified is only for the petrochemicals business of the companies listed above.
Source: CRISIL Research
Impact factors
A.
Excise duty on non-industrial polyethylene sacks and bags increased to 15% from 12% to have very limited impact,
as non-industrial bags segment constitutes a small portion of demand, and even after increase in duties the product
would still be cost-effective as compared to other available substitutes.
B.
Basic customs duty on raw materials like ethylene dichloride (EDC), vinyl chloride monomer (VCM) and styrene
monomer (SM) reduced to 2% from 2.5%. Also, special additional duty (SAD) on EDC, VCM, naphtha and SM
lowered to 2% from 4%. Consequently, raw material cost would reduce for all naphtha-based petrochemical
producers which would be passed on. However, reductions in customs duty and SAD for feedstock would lower
costs for manufacturers of polyvinyl chloride (PVC) and downstream styrene products and support their profitability
as landed cost of raw materials would fall by around 2.4%.
44
45
Pharmaceuticals
No major impact on industry revenues and profitability
Company
Impact
Impact factors
A,B
Cipla Ltd
A,B
A,B
A,B
Biocon Ltd
A,B
Impact factors
A.
The basic excise duty has been increased from 12.36% to 12.5% but we expect the impact on margins for large
pharmaceutical companies to be less than 10 bps as over 60% of their revenues comes from exports.
B.
The increase in service tax rate to 14% is unlikely to impact profitability of most players as majority of their R&D
expenditure is in-house. However, for Biocons subsidiaries - Syngene and Clinigene - which operate in the clinical
trials space, the increase in service tax could have a marginally negative impact.
C.
The government has also proposed to set up three new National Institutes of Pharmaceutical Education and
Research (one each in Maharashtra, Rajasthan, and Chhattisgarh) to help create a talent pool in the longer term.
Pharmaceuticals: Tariffs
(Per cent)
Customs
2014-15
2015-16
2014-15
2015-16
7.7
7.7
12.4
12.5
12.4
12.4
6.2
6.2
Bulk drugs
Formulations
Source: CRISIL Research
46
Excise
Ports
Improved connectivity and funding to offset impact of higher service tax
Company
Impact
Impact factors
A,D
Impact factors
A.
Service tax exemption on construction, erection, commissioning/installation of original works pertaining to a port has
been withdrawn. This will drive up port operators costs, bulk of which will get passed on through tariff hikes.
B.
Government-run major ports will be encouraged to corporatise. The move will allow major ports to access private
capital markets and provide them greater financial autonomy.
C.
Funding availability to be improved through the establishment of National Investment and Infrastructure Fund (NIIF)
and rationalisation of taxes for Infrastructure Investment Trusts.
D.
In the Railway Budget 2015-16, Rs 20 billion was allocated for a Coastal Connectivity Programme wherein ports in
Nargol, Chharra, Dighi, Rewas and Tuna will get rail connectivity. This will help improve coastal traffic at these ports.
47
Power
Higher funding availability through NIIF and gross budgetary support
Company
National Thermal Power Corporation Ltd
Power Grid Corporation of India
Reliance Power Ltd
Impact
Impact factors
A,B,C,D
C,E
A,B,C,D,E
A,B,C,E
A,B,C,E
A,B,C,E
Lanco Infratech
A,B,C,D,E
BHEL
B,D,E
BGR
D,E
ABB
B,D,E
Thermax
Crompton Greaves
D,E
B,D,E
Impact factors
A.
Clean energy cess levied on coal has been doubled to Rs 200 per tonne, while rail freight on coal has been hiked by
6.3%. This is expected to increase power generation costs by Rs 0.09 per unit. However, this will not have an impact
on fixed return projects as these costs will be allowed as a pass-through. Also, a large part of competitively bid
projects, which have quoted fuel and transportation charges as escalable components, will remain unaffected to the
extent of their bid.
B.
Budget allocation to the transmission and distribution segment has risen by 22% to Rs 62 billion as compared to
levels in 2014-15. This will help lower T&D losses and improve power supply in rural areas.
C.
Setting up of a National Investment and Infrastructure Fund (NIIF), with a corpus of Rs 200 billion to infrastructure
finance companies, will improve funding availability to the power sector. Additionally, rationalisation of the tax regime
for Infrastructure Investment Trusts will help monetise capital locked in completed projects.
D.
Additional depreciation of 20% granted to new projects is a positive as it will allow companies to set-off higher
depreciation against overall profits. This will benefit capacities of around 15 GW expected to commission in 2015-16.
E.
Setting up of 5 UMPPs of 4,000 MW, with pre-awarded clearances and fuel linkages each, will benefit the power
generation segment, given that projects have witnessed significant time and cost overuns on these counts.
48
Real Estate
Developers with significant commercial real estate assets will benefit
Company
Impact
Impact factors
DLF Ltd
Unitech Ltd
A.B
A
A,B
Impact factors
A.
New home sales declined by 5-6% across most of the top 10 Indian cities* in 2014 given weak
macroeconomic conditions and high capital values. The hike in the service tax rate to 14% from 12.36% will
marginally drive up the cost of under-construction residential properties.
Similarly, a slowdown in corporate expansions over the past few years has dragged down demand for commercial
real estate space and an increase in service tax on under construction and rental commercial properties will have a
marginally negative impact on the sector.
B.
Commercial lease rentals have been stagnant since 2009 owing to significant weak demand and an oversupply
situation. Rationalisation of capital gains tax for sponsors** exiting at the time of listing of a real estate investment
trusts (REIT) is a positive for developers who have a significant exposure to rent-yielding real estate assets. The
move will eventually boost cash flows of these developers in the medium term.
Notes:
* Cities - Ahmedabad, Bengaluru, Chandigarh Tricity, Chennai, Hyderabad, Kolkata, Mumbai MMR, NCR, Pune, Kochi
**As per the Securities Exchange Board of India, sponsorhas been defined as any person(s) who set(s) up the REIT
and designated as such at thetime of application made to the Board
49
Roads
Government spending to boost road investments
Company
Impact
Impact factors
A,B
A,B
IVRCL Ltd.
A,B
A,B
A,B
A,B
ITNL
A,B
Impact factors
A.
Rs 85,607 crore. A major portion of this rise will be funded by a Rs 4 per litre increase in road cess on petrol and
diesel. With private participation being muted as of now, the increase in public funding has the potential to boost
execution of national highway projects by about 5,800 km annually and create a robust construction opportunity for
engineering, procurement & construction (EPC) companies in the sector.
B.
Tax-free bonds for road projects and setting up of the National Investment and Infrastructure Fund will provide an
additional means of financing. Rationalising the tax regime for Infrastructure Investment Trust may help free up
private capital currently locked in completed projects.
C.
The governments intent to table the Public Contracts Resolution of Disputes Bill will aid speedy redressal of
disputes in large public projects and create a conducive environment for PPP projects.
50
Steel
Limited impact
Company
Impact
Impact factors
A, B, D, E
A, B, D, E
A, B, D, E
A, B, D, E
A, B, C, D, E
A, B, C, D, E
Important factor
A.
Education cess and secondary & higher education cess (of 3%) levied on excisable goods has been subsumed in
basic excise duty. Consequently, standard basic excise duty has increased to 12.5% from 12%. As a result, landed
cost and domestic prices of steel are likely to rise by a marginal Rs 40-50 per tonne.
Special additional duty (SAD) on iron and steel scrap reduced to 2% from 4%.
F.
Reduction in SAD addresses issue of CENVAT credit accumulation emanating from existing differential between
central sales tax (CST) of 2% and SAD of 4%. In existing structure, players were eligible for refund (CENVAT credit)
of only 2% on SAD levy of 4% on imported scrap. With rates equalised for both CST and SAD, players will benefit as
they will be able to get SAD fully refunded.
G. Increase in effective rate of clean energy cess on coal to Rs 200 per tonne from Rs 100 per tonne is expected to
have a mild impact on Indian sponge iron industry. The industry is grappling with high input costs (especially thermal
coal) and subdued domestic demand. Moreover, sharp decline in international scrap prices (substitute to sponge
iron) is exerting pressure on sponge iron realisations. Resultantly, players are unable to pass on the rise in cost.
H. Owing to rising imports, steel and mines ministry had sought a hike in import duty on finished steel to 10% from the
current 5.0-7.5%. While there was no change in existing effective rates of basic customs duty, tariff rates have been
hiked to 15% from 10%, giving the government buffer to raise import duty up to a maximum of 15% (instead of 10%
earlier) if pace of imports continue.
I.
The budget proposed increased allocation towards infrastructure by about 53% to Rs 2.8 trillion. Higher public
investments in infrastructure (accounts for about 21% of overall Indian steel demand) such as urban rural
development, power, railway, shipping, roads and aviation will propel domestic steel industry.
51
Steel: Tariffs
Tariff (per cent) 1
Custom s
Prices
Excise
Pre-budget
Post-budget
513
41,376
41,428
41,500
495
39,965
40,016
12.5
37,250
415
33,697
33,739
12.5
36,250
419
33,184
33,226
12.4
12.5
5.2
12.4
12.5
36,150
373
29,667
29,704
5.2
2014-15
2015-16
2014-15
2015-16
(Rs/tonne)
($/tonne)
GP/GC
7.7
7.7
12.4
12.5
46,500
CR coils
7.7
7.7
12.4
12.5
HR coils
7.7
7.7
12.4
5.2
5.2
12.4
Alloy steel
5.2
5.2
Billets/slabs
5.2
Pig iron
12.4
12.5
22,500
298
23,933
23,963
HBI/sponge iron
12.4
12.5
18,650
Ferro alloys
5.2
12.4
12.5
5.2
5.2
12.4
12.5
28,667
210
18,348
18,371
Iron ore
2.6
2.6
12.4
12.5
Coking coal*
2.6
2.6
2.1
2.1
Metallurgical coke
2.6
5.2
12.4
12.5
Non-coking coal*
2.1
2.1
2.1
2.1
5.2
Notes
1) HBI: Hot Briquetted Iron
2) International prices are on FOB (CIS Black Sea) basis for Feb 2015
3) Domestic prices are average prices for Feb 2015
4) * For coking and non-coking coal, excise represents the countervailing duty (CVD) on these products.
Source: Metal Bulletin, CRISIL Research
52
Sugar
No proposals for the sugar sector
Company
Impact
There was no specific proposal for the sugar industry in the Union Budget 2015-16.
Custom s
Excise
(per cent)
2014-15 2015-16
2014-15 2015-16
Landed cost
(Rs/tonne)
($/tonne)
2,755
n.a.
980
Pre-
Post-
budget budget
Domestically
n.a.
n.a.
980
produced sugar
n.a.
n.a.
25.0
25.0
n.a.
n.a.
398
24,440
24,440
25.0
25.0
n.a.
n.a.
338
21,040
21,040
Molasses
10.3
10.3
1,000
1,000
- -
- -
n.a.
n.a.
53
Telecom
Mobile bills and smartphone prices set to rise
Company
Impact
Impact factors
Bharti Airtel
B, C
Bharti Infratel
Idea Cellular
B, C
Reliance Communications
B, C
Tata Communications
Impact factors
A.
The hike in excise duty for mobile phones (costing above Rs 2,000) from 6% (with CENVAT credit) to 12.5% is likely
to slow the pace of smartphone adoption.
B.
The service tax has been hiked to 14% from 12.36%. This is expected to lead to an increase in the bills of postpaid
subscribers, who constitute only about 5% of Indias wireless subscriber base. Prepaid subscribers may not be as
impacted since the recharge vouchers include the service tax component and, hence, get subsumed in the
subscribers total cost.
C.
Budgeted receipts from spectrum auctions, one-time spectrum charges and other levies have been estimated at
Rs 429 billion for 2015-16 vis-a-vis Rs 432 billion for 2014-15. This is an indicator that another round of spectrum
auctions could take place in 2015-16.
Telecom: Tariffs
(Per cent)
Excise
2014-15
2015-16
2014-15
2015-16
0.0
0.0
1.0
1.0
0.0
0.0
6.2
12.5
0.0
0.0
12.4
12.5
Base stations
0.0
0.0
12.4
12.5
0.0
0.0
0.0
0.0
HDSL*
0.0
0.0
12.4
12.5
54
Customs
Textiles
Allocation under TUFS to support capex
Company
Impact
Impact factors
A,B
Raymond Ltd
Impact factors
A.
Allocation under the Technology Upgradation Funds Scheme (TUFS) has been reduced to Rs 15.2 billion for 201516, from Rs 18.6 billion in 2014-15. However, this will not have a major impact, given the current demand supply
dynamics.
B.
Continuation of zero excise duty on garments will drive up domestic sales volumes for apparel by 6-8 per centin
2015-16.
Landed cost 4
Prices
(January 2015)
Custom s
Excise
2014-15 2015-16
Cotton yarn (40s)
1
Cotton
2014-15 2015-16
Pre-budget Post-budget
(Rs/tonne)
($/tonne)
(Rs/tonne)
(Rs/tonne)
10.3
10.3
6.2
6.2
176,570
3,500
242,641
242,641
0.0
0.0
0.0
0.0
86,300
1,485
93,324
93,324
Domestic price of S-6 variety and international cotton price of a comparable variety
FOB prices
55
Landed cost 2
Prices
(January 2015)
Custom s
Excise
2014-15 2015-16
2014-15
2015-16
(Rs/tonne)
($/tonne)
Pre-budget
Post-budget
(Rs/tonne)
(Rs/tonne)
PSF 1.5d
5.2
5.2
12.4
12.5
79,000
1,320
90,727
90,727
VSF 1.4d
5.2
5.2
12.4
12.5
128,000
1,862
127,980
127,980
POY 150d
5.2
5.2
12.4
12.5
82,000
1,350
92,789
92,789
VFY 150d
5.2
5.2
12.4
12.5
385,000
5,598
384,766
384,766
10.3
10.3
12.4
12.5
158,000
n.a.
n.a.
n.a.
PTA
5.2
5.2
12.4
12.5
46,450
607
41,721
41,721
MEG
5.2
5.2
12.4
12.5
52,100
737
50,656
50,656
Paraxylene
0.0
0.0
12.4
12.5
n.a.
785
51,313
51,313
PV 30s (70:30)
PSF: Polyester staple fibre; VSF: Viscose staple fibre; POY: Partially oriented yarn; VFY: Viscose filament yarn;
PV: Polyester viscose; PTA: Purified terephthalic acid; MEG: Mono-ethylene glycol
n.a.: Not available
1
FOB prices
Excise
2014-15
2015-16
2014-15
2015-16
Cotton-based apparels
10.3
10.3
12.4*
12.5*
Non-cotton-based apparels
10.3
10.3
12.4
12.5
10.3
10.3
6.2^
6.2^
10.3
10.3
12.4
12.5
10.3
10.3
6.2^
6.2^
10.3
10.3
12.4
12.5
Excise duty on readymade garments was made optional, thus effectively bringing it down to
zero in 2013-14
56
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