The other groundbreaking steps included reduction in withholding tax on interest payments, encouraging PPP in road construction by permitting ECBs for infra funding and capital expenditure on the operation and maintenance of toll roads highways and expanding the ambit of the list of viability gap funding and pushing the road building targets to 8,800kms are expected to place the economy on the higher growth trajectory.
Roads & Highways
Housing & Construction
In addition, the finance minister also proposed the setting up of a Credit Guarantee Trust Fund ensuring better flow of institutional credit for housing loans and has created an enhanced provision under Rural Housing Fund from Rs.3,000 crore to Rs.4,000 crore. Under the Indira Awas Yojana, which is primarily meant to provide housing for BPL families, has been allocated Rs.11,075cr under the rural housing scheme in the budget. Each BPL family gets Rs.45,000 as assistance in plains and Rs.48,500 in hilly areas. In addition, the Finance Minister has also raised the allocation for the National Social Assistance Programme by 37% to Rs.8,447 crore. The budgetary measures like relief on personal income tax and tax free interest on savings bank account up to Rs.10,000 per annum and relief to those in the tax bracket of 20 to 30% will increase the disposable income of the salary class further increasing the demand for housing.
Rail & Metro
That apart, the sum worth Rs.7.35 lakh crore that has been earmarked for the modernization of the Indian railways in the 12th Plan will also prove a business booster for the construction sector. Since it is a four-fold increase as compared to the previous Plan periods, companies engaged in the construction of tunnels, tracks, bridges and rail terminals will reap rich dividends.
In addition, it will also invest on new facilities to upgrade coaches and introduce new wagons with higher axle and payloads to improve productivity with increased focus on safety. It also plans to manufacture crash-worthy coaches with proven anti-climb features of not toppling during accidents.
Players engaged in the container train operations space including Concor, Gateway Distriparks and Arshiya Rail are heading for rosy days ahead as Railway Minister, has assured them of policy interventions to extend incentives to container movement on trains. But the extent of exact benefit will be clear only after the exact interventions are spelt out. Container train operators contribute about Rs.4,000 crore annually to railways freight revenues.
Likewise, the Budget has also injected a booster worth Rs.2, 216.07 crore for the Delhi Metro Rail Corporation (DMRC) which is a record increase as against to Rs.580 crore in the last fiscal. The sanctioned funds will include Rs.100 crore for the extension of the Faridabad line and Rs.1,112.6 crore sanctioned for the Metro's on-going expansion. It is on record that for Phase III, Rs.1,112.6 crore is the Centre's equity, which would equally be matched by the state government. The ratio of funding for Phase III is 21.27% each from the Centre and the Delhi government withthe rest will be met largely by a loan from the Japan International Cooperation Agency (JICA), along with property development, funds from the Delhi Development Authority (DDA) and other avenues. The total cost for the third phase network is approximately Rs.35,242 crore.
Coal & Power
Port & Airport
In totality, investment worth Rs.1.2 lakh crore is expected in the port and airport sectors in the 12th Plan period during which port sector will attract over 80% of the funds. Whereas traffic at the airports and ports is seen growing at 11% and 6.7 percent respectively. The allocation of funds in the form of tax free infrastructure bonds and the facility to generate funding resources through external commercial borrowing window will be a booster for sectors. The Budget has also allowed airline companies to use ECBs for one year, subject to a ceiling of $1 billion.
Steel & Cement
On the other hand, the iron ore export tax staying at the same position and some relief given to the value addition process, the industry focus would remain on the domestic market as the Budget did not impose any export duty on iron ore pellets. The proposals would save project costs commented, P. Madhusudan, Director -Finance of RINL, adding that Budget proposal would reduce the project cost by around 5 percent.
Likewise, for the cement industry, the proposal to increase the ad valorem component of exciseduty is likely to increase the effective excise duty by 1 to 1.5 percentfor most cement companies. The proposal to exempt imported non-coking coal from basic customs duty is expected to increase operating profitby 1.5 percent at the industry level. Cement manufacturers in the country have lost no time in announcing price hike between Rs.7 to Rs.10 for a50 kg bag on the plea that this is due to altering of methodology to levy exciseplus increase in base exciseduty ratesfrom 10 to 12%, necessitating the increase.
Mining & Metals
Warehousing & Rural Infra
Making sufficient funds available in the rural heartland of the country, the Regional Rural Banks have been given a short term credit refinancing fund extension of capitalisation for two more years. The process of capitalisation of 40 financially weak RRBs has been initiated across states. In this connection, a short-term RRB Credit Refinance Fund is being set up to enhance the capacity of these banks to disburse short-term crop loans to small and marginal farmers. The Budget has allocated Rs.10,000 crore to National Bank for Agriculture and Rural Development for refinancing RRBs through this fund. Of the 82 RRBs in the country, 81 are already under the core-banking network.
Oil & Gas
Expanding VGF Ambit
Industry Captains Speak on Budget
"My initial reaction is that initiatives like liberalizing the External Commercial Borrowing (ECB) rules and boost to investment particularly in infrastructure sector, Relief in indirect taxes to sectors under stress; viz. infrastructure, manufac- turing, mining, roads,…get duty relief are a few positive signals. Also the outlay for Infrastructure of Rs.50 lakh crore in 12th Plan, is another step towards growth with encouragement to the private sector." However, the excise-related proposals would push up prices thereby putting further pressure on an already difficult demand position.
The Union Budget 2012-13 has turned out well overall for the infrastructure industry. The Honourable Finance Minister has proposed good steps bringing cheer to the infrastructure and equipment manufacturer segment.
The government's plan to invest Rs.50,000 crores in infrastructure will encourage more projects on PPP model for massive infrastructure development. The signs for the road construction segment are very promising considering the government's plan to invest Rs.10,000 crores and introduce external commercial borrowing. It has planned 8800 kms of road construction, which will provide more avenues for projects.
The implementation of the GST model will be watched carefully. With the government still in consultation with different states, we hope to see a practical road map for GST by August. This will be a huge boost for equipment manufacturers as it will reduce taxes on sales of equipment between states.
The mining sector has also seen some very bright spots with the exemption of customs duty on coal. I believe this is one of the high points of the budget since mining companies will look at venturing into newer projects. Another key point which will have a positive impact on equipment companies is the reduction of tax on iron ore equipment from 7.5% to 2.5%.
Overall the budget resonates well with the verticals we cater to. In the coming year, I hope to see positive developments in the equipment manufacturers industry.
"To a large extent our (Sandvik) market area is heavily dependent on market sentiments. The present Union Budget is a reform-oriented budget. I think Mr. Mukherjee's budget provides room to encourage investments and increase consumption which is a plus point for a growing economy like ours. Furthermore, the announcement related to infrastructure projects and duty exemption provided to various equipment used in such projects is a welcome sign and will provide the right impetus to organisations like us."
"The increase in service tax and excise duty from 10% to 12% was expected and didn't come as a surprise. There are a lot of positive points to boost the infrastructure industry like ECB on low cost housing, irrigation and dam projects. The increase in Infrastructure debt funds to 60,000 crores. The announcement of the Delhi–Bombay freight corridor with the Japanese investment of 4.5 billion $is a good boost for theinfrastructure industry. The implementation of 8,800km of National Highways willbe an advantage to the industry. Many sops have beengiven for the development of power sector. These are some of thepositive indicators towards the thrust on infrastructure development. The most important is to implement them on time. Many projects have been identified and are waiting forbureaucratic clearance or land acquisitions. Clear policies and reforms should be made for faster implementation of these infrastructure projects. The infrastructure industry and construction equipmentmanufacturers are looking at the big chunk coming out of the 1trillion $ investment on infrastructure proposed in the 12th5 yearplan. 50% out of this has to come through Public Private Partnership projects as against 30% in the 11th 5 year plan. We have not achievedthe PPP target of the 11th Five year plan, therefore, if the governmentwants to attract the private investors for the PPP projects, thenecessary reforms and policy changes should be brought in immediately."
"The Budget this year gives a good road map for the infrastructure sector. Ramky Group welcomes the government's initiatives and commitment to build road infrastructure to the tune of 8,800 kms and double the tax free bonds to the tune of Rs.60,000 crore for financing infrastructure projects. Ramky also appreciates government's stand on containing fiscal deficit to 5.1% by FY13 and we are positive that the government would be able to achieve the same."
.‘The budget has provided overall a big thrust to infrastructure and Reality sector by addressing the vital need of mobilising more funds for these sectors.
Measures such as doubling tax free infrastructure bonds from Rs.30000 Cr to 60000 Cr; allowing External commercial borrowing for operation and maintenance of Highways, developing low cost housing and part financing rupee debt of existing power projects; wide basing Viability Gap funding to cover more sectors such as irrigation are bold steps for augmenting resource mobilisation for Highways, Railways, Power and Housing sectors. Also, Budget has announced coverage target of 8800 kms of highways in the new fiscal as well as reaffirmed investment of Rs.50 lac Crores in infrastructure sector in 12th plan with an emphasised participation through PPP. Therefore, with all these provisions, it is a budget which is aimed at renewing focus on much needed infrastructure development.
It is true that increased rates of excise duty and service tax will add difficulties for manufacturers and customers of construction equipment, who are already reeling under the impact of higher input costs and interest rates, and it may have an adverse impact on demand in the short term. However increased excise and service tax in tandem should be seen as a positive step towards the implementation of GST which one can really hope to happen by April 2013. Overall, the provisions on mobilising resources will fuel the growth in infrastructure and construction sector in a medium and long terms which is a good news for the equipment suppliers.'
"We see it as a status quo budget. We were looking for more concrete initiatives that could quickly propel India's growth and more specifically, increase manufacturing from 16 to 25% of GDP. We hope the Government can progress on the implementation towards GST and early enactment of DTC to make this a truly favorable budget. The amendment to section 9 (transfer of shares) is a cause of concern for Eaton and other MNCs doing business in India."
"Allowing of borrowing from overseas institutions for affordable housing projects is a welcome step. It will increase the fund flow which will help ease out the real estate sector and there can be increase in the affordable housing projects. The extension of the 1% interest subvention scheme for affordable housing will definitely help buyers and it will come as big relief for them. But our long pending demand to give industry status to real estate sector once again has been not addressed."
Real estate sector has once again been deprived of the "industry status" which would further deprive the sector of the natural benefits, which it could have availed if given the "industry" status. No doubt the ultimate beneficiary in that case would have been the end users/customers. Proposed Budget 2012-13 has allowed FDI in affordable housing sector which is likely to increase the fund flow in this area and ease out the real estate sector. Extension of subvention scheme for another one year is definitely a support for the real estate; however increase in loan limits was expected and should have been given by the honorable finance minister to give a respite to the real estate sector. It is also notable that the finance minister has increased the service tax and also the excise duty which would directly make an impact on various inputs of real estate which ultimately is likely to make an impact on the price of the properties.
"The overall budget for the real estate sector is not a very welcoming one. There are some positives but it again has not addressed some of the long pending demands of this sector. The Proposed Budget 2012-13 has allowed borrowing from overseas for affordable housing projects is a welcome step. It will definitely bring fund flow and can also boost the affordable housing segment.The extension of interest subsidy of 1% on housing loans of up to 15 lakh is a positive step but an increase on housing loans of up to 25 Lakh will further boost the demand for low-cost housing and will help buyers at large. The increase of service tax and the excise duty would directly make an impact on real estate sector which ultimately have an impact on the price of the properties and will affect the customers. Also our long pending demand to give industry status to real estate sector once again has not been addressed."
"Tata Power welcomes the Hon'ble Finance Minister's recommendations for economic recovery, spurring growth, removing bottlenecks and promoting Public Private Partnerships. The extended tax incentives, the decision to allow ECBs, and reinforcement of intention to introduce DTC and GST in the near future should create a positive investment climate. In line with Tata Power's focus and investment plans in the renewable energy space, we welcome the government's continued interest in giving a boost to solar energy projects. The waiver for thermal power companies will be beneficial for upcoming projects. The removal of customs duty on imported coal, natural gas, LNG, and the incentives for the mining sector will marginally improve coal supply, but is still a far cry from achieving adequate fuel security. However, other measures including the Fuel Supply Agreements with CIL should provide some relief. However, we expect stronger sustained steps to be taken beyond the Budget, to address the core issues faced by the power sector."
"Union Budget has made modest efforts to address the real estate sector with measures like offering 1% tax rebate for home loans of up to Rs.15 lakh on homes costing up to Rs.25 lakh and allowing External Commercial Borrowing (ECB) for affordable housing. Controlling the fiscal deficit will pave the way to lowering of interest rates which will revive real estate sales. Several positives steps taken to revive the ailing infrastructure would of course come as a boost to the economy."
- Specific measures announced by the Finance Minister to boost investment in infrastructure is welcome.
- Doubling of allocation for tax free infra bonds will help in creating access to funds for infra projects.
- The decision to boost road infra with 8000 kilometers of roads being added during the coming fiscal is noteworthy. But this will need additional reforms from the government to be completed on time and as per required norms.
- Import duty exemptions for road construction equipment will discourage indigenous manufacturing and technology flow-in will become slower
- It is good to see the focus on rural infrastructure development. The benefits announced on expenditure on R&D and skill Development are positive developments towards bridging the skill gap.
- Power plants will benefit significantly from access to ECBs, tax holiday for power plants that commence generation from 31 March 2013.
"The Union Budget 2012-13 throws up a mixed bag for the real estate sector. The Government's initiative to make affordable housing available to a larger section of the society has only been met partially. Initiatives such as External commercial borrowing for the affordable and low-cost housing segment will help the sector to tap long-term funds and help ease the liquidity in the sector. Extension of the 1% interest subvention scheme for affordable housing will help the buyers to avail a loan limit of Rs.25 lakh. Also the measures to increase funding for highways and other infrastructure will help put more territories on the real estate map. However, the demand of increase in the limit on tax deduction available on home loans interest from current Rs.1.5 lakh remains unanswered. The Union budget has no real measure for the real estate sector as most of the industry expectations have not been met. The most important demand across all real estate companies that of an industry status being assigned to the sector has been long pending as well."
"I congratulate the government for a balanced budget during the challenging times. It is positive, broad- based and an inclusive Budget that endeavours to address crucial reforms for development. Overall, the Budget is growth-oriented and aimed at sustaining the growth impetus seen in 2011, while giving main emphasis to sectors such as agriculture and industry. This, according to me is integral to support India's development ambitions in the long term."
Infrastructure sector is one of the few beneficiaries from the proposals of the Union Budget 2012-13, which has been hit on multiple fronts in the recent past such as land acquisition, policy paralysis, delays in environmental approvals, high interest costs, elongated working capital cycle, and weakened credit quality of State Utilities. The main prescription of the Budget for the sector is making funding easier for the sector participants through relaxation in ECB guidelines, doubling of limits for infrastructure bonds (Rs.60000 cr) and expanding the scope of sectors which are eligible for viability gap funding. From the sponsors' perspective, the Budget has also good news by doing away with the cascading impact of Dividend Distribution Tax (DDT) on multiple layered SPVs. As regards impact on the specific sectors, the proposals have sought to mitigate the inflationary impact on the fuel costs front for the power generators by exempting from customs duty on steam coal and LNG. Importantly, the sunset clause for tax holiday under Sec 80 IA has been extended by a year upto March 2013, which will benefit several developers facing delays in project commissioning. As regards the road sector, the Govt seems set to continue the momentum on project awards as seen by its decision to award around 8800 km of projects in FY13, an increase of 20% over FY 12. In the case of port sector, no material new announcements have been made save for doing away with the CVD on the employment of imported dredgers, which should lower the dredging costs for ports marginally. Overall, while the aforementioned proposals are positive for the growth of the sector, it will continue to face headwinds in the near term as other challenges will persist unless further reforms are undertaken.
"There has been good positive news for the infrastructure space and we hope to see some robust development activities in coming years. First, the investment in the 12th Plan period is expected to go up to 50 lakh crore, which is promising. With half of this investment expected from the private sector, the targets and challenges are set for large developers and other players. Secondly, a great boost will come from the proposal for tax-free bonds of Rs.60,000 cr. dedicated for funding infrastructure projects, which we expect will ease the financing pressures. Urban infrastructure would be a large beneficiary of the above bonds automatically, with some promise for developers in affordable housing projects and some reduction in withholding tax in the External Commercial Borrowings (ECBs). The Real estate sector has not received as much as desired in this year's budget however good demands stimulated by overall growth forecasts and emphasis on urban infrastructure projects, we hope will have a cascading effect."