Budget Reactions : Corporate
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Dr. Rahul Mirchandani , Executive Director , Aries Agro

This is by far an extremely farmer friendly budget. The following proposals will positively impact the agricultural inputs sector (specifically the plant nutrition segment): 1. Doubling of agricultural credit will improve purchasing power of farmers to purchase agricultural inputs. 2. Increased allocations to the National Horticulture Mission, Food Security Mission and the National Policy for farmers would certainly contribute positively to the sector. 3. Allocations to set up mobile soil testing labs is a welcome move. This will help in accurate soil health assessment and identification of nutrient deficiencies, including micronutrients and secondary nutrients, in addition to primary NPK fertilizers. This will form the basis of a balanced nutrition programme. 4. Record yields of Rice, Maize, Soyabean and Cotton are encouraging and show the signs of a renewal in the growth prospects of this sector. However, productivity concerns are still very real and very worrying. Nutrient Management programmes to increase yield per unit of land area to world standards is absolutely essential. 5. Crop insurance schemes being extended to include plantation crops like tea, ginger, rubber, cardamom, tobacco, etc. is a welcome move to insulate farmers against highly volatile commodity prices. It will also provide the required assurance to spend as required on nutrient and other agricultural inputs. 6. Targeting 4,00,000 hectares in addition to the 5,48,000 hectares already under drip and sprinkler irrigation will have a direct positive impact on the specialty plant nutrition industry. These micro-irrigation systems will reduce rain dependence and reduce the need for water and scarce, expensive agricultural labour, lowering cost of production while simultaneously increasing farming efficiency. Specifically for Aries, these drip irrigation systems are incompatible with traditional, non water soluble fertilizers and farmers necessarily have to shift to water soluble, specialty crop nutrients that are ideally suited to these irrigation systems. The specialty nutrients are required in much smaller quantities, reducing the usage of chemicals on the farm and also provide a cost benefit advantage. 7. Lowering of customs duty on sulphur, which is a secondary nutrient and is highly deficient in Indian soils, will lower costs of this essential element to the farming community. Sulphur prices worldwide are also at an all-time high and this reduction will help to a certain extent to cushion the rising price of this nutrient. 8. Permitting fiscal incentives on Research and Development in the agricultural inputs sector will be a great motivation to invest in innovation and new product development in line with rapidly changing and evolving agricultural trends. 9. Reduction of excise duties from 16% to 14% would be beneficial to reduce prices of farm inputs. Reduction in these duties on two wheelers and three wheelers would also be a significant saving to farmers who are major consumers of such vehicles. What is missing in the Budget proposals? 1. Debt waivers are great news to farmers. However, there are no specific incentives to companies who invest in extension services, rural knowledge dissemination and awareness building programmes. Unless awareness is grown systematically, productivity levels will remain abysmally low and farmers will again get caught in a debt trap. 2. No incentives have been provided for the promotion of organic farming and for the spread of environmentally safe agricultural inputs, like Chelates which are inert, cost effective, organo-metallic complexes. Several other environmentally safe technologies could have been provided with tax breaks or concessions. 3. No major outlays specifically to promote Agricultural Research, Agri Universities and related lab-to-land programmes. 4. Bringing commodities trading under the transaction tax net could lead to a higher cost of trading agricultural output on the commodities exchanges.

Rating : Not Rated

S Mahalingam , CFO and ED , TCS

The Budget has highlighted the big opportunity for IT in the domestic market with the decision to allocate additional funds towards the state wide area networks, common service centers, data centers as well as smart cards for benefits management like PDS scheme at the state level and initiatives like the central plan monitoring system for outlays and outcome measurement for the Planning Commission. For domestic customized software market, there have been small changes with the sector being brought under the service tax net. This will increase the cost of technology for users and push up the cost of automation, not just in the private sector but also in public sector and government departments. Another factor that could push up costs for deploying technology is that customs duty for importing packaged software has been increased from 8% to 12%. This would increase the input cost across industries, not just the IT industry. The good news for IT and the people-intensive industries is the incentives to education with 20% more outlay. Announcement of three new IITs, IIScs and 6000 high caliber schools and shows commitment to quality education which augurs well for our supply chain and human capital. The Rs. 85 crore scholarship scheme for students pursuing science education is good news for IT and especially for TCS, which has been tapping into the science streams through our own from science to software transformation program for students. The Rs 14,000 crore Rural Infrastructure Development Fund, emphasis on rural roads,etc, would strengthen the much needed tertiary backbone of the economy and create greater confidence in global business that looks forward to partnering India. It would also go a long way in ensuring inclusive growth to spread the benefits of prosperity to wider sections of the society. What also bodes well for the export-oriented IT industry is the focus on the speed of the currency’s appreciation in the light of continuing foreign exchange inflows. The impact of capital inflows, has been identified as a key threat in the coming year and the FM has put in place various mechanisms including more than a two-fold increase in the market stabilization fund to help the RBI manage forex inflows in a calibrated manner.

Rating : Not Rated

Monisha Adwani , MD , EmmayHR

This is an out-and-out Congress Budget. It has election prep written all over it. It also demonstrates economic prudence and caution. By focusing on relief and development to the agriculture sector, a clear message is being sent that the year of the farmer is back. Also, if a cross section of the Budget were to be analyzed, the clear beneficiary is the common man. It is interesting to see pharmaceutical and healthcare receive impetus in the form of excise duty relief and incentive to research. Overall, I am personally pleased to see a Budget assuming accountability towards the manufacturing sector. We have spent a decade bolstering the service sector and rightly so. It has yielded rich dividends in contributing to the GDP and increasing employment opportunities. However, the manufacturing sector is the foundation of our economy, as much as agriculture. It deserves to get renewed incentive to grow to competitive levels. While I expect the suggested subsidies to increase employment, I would have expected the education Budget to be aimed towards cultivating talent for this sector to be more vocalized, than is the case. Creation of jobs needs to be balanced with development of talent. On income tax, there is no path-breaking change. On indirect and corporate tax, I am relieved that there hasn’t been incremental ambitions. On fringe-benefits, I maintain that the Finance Minister needs to reflect on what tools he equips employers to retain workforces, which will aid medium and long-term value and wealth creation for the economy. FBT is a contrary action that deters employers for disbursing traditionally lock-in benefits for fear of impact.

Rating : Not Rated

Jeh Wadia , Managing Director , GoAir

As an airline operator, I am quite disappointed as we have not been given any tax breaks. The sales tax on ATF at 29% on average still remains the same for airlines using large aircrafts. All the low cost airlines in India use large aircrafts to service the common man. However, the ATF for smaller aircraft has remained a declared goods at 4%. It should be noted that these smaller aircrafts are used to service the upper class passengers by full service airlines. Moreover, custom duties and excise tax still remains prevalent on ATF. Withholding tax on leases remains between 11-92% while witholding tax on interest remains between 5-20%. Fringe Benefit Tax on hotel expenses, transportation, uniforms, travel and meals for the staff of airlines remains high at 6.80% while service tax on loading, navigation and other airport charges have been retained at 12.36%. On the brighter side, the proposed increased spending on agriculture and rural areas will help low cost airlines in India gain a larger customer base. This is primarily because as disposable income at grassroots level increases, the population will follow the general trend of upgrading their travel habits from bus to rail to air. As working population grows to 950 million, the potential size of the customer base for the low cost airlines in India will multiply substantially from current levels. However, we feel that all of us in the Indian aviation sector need to continue our efforts to make the government realize the urgent need to bring the cost of operations in the Indian aviation sector at par with international standards. The biggest enabler to achieve this is the reductions in taxes.

Rating : Not Rated

S Dilliraj , CFO , SKS Microfinance

At a macro economy level, the general fiscal discipline evidenced in containing fiscal deficit and revenue deficit lends stability to the 'India growth story' and benefits all its constituents. At the sector level, the impetus given to the 'rural economy' is a positive development. By implementing some of the recommendations of the Rangarajan Committee report will ensure opening of more bank accounts in rural branches. The additional funds to SIDBI and NABARD will ensure additional fund flow into the sector. By increasing the corpus of rural Infrastructure Fund to Rs 14,000 crore, rural infrastructure will improve reducing our operational costs. The huge waiver of agricultural loans will improve money supply in rural pockets. The corpus to subsidise LIC cover for SHG-women with permanent disability is also welcome. The Budget has, however, not addressed the MFI sector's demands for withdrawal of service tax on all micro finance & micro insurance products and Dr.Rangarajan Panel recommendation for 40% exemption of the taxable profits of MFI-NBFCs. We reiterate the demands. The biggest benefit for companies like SKS Microfinance is the withdrawal of 'Banking Cash Transaction Tax'. This will greatly reduce 'transaction costs'. The budget also augments credit flow to companies like SKS which can access the additional funds allocated to SIDBI. The increase in agriculture credit target to Rs 2,80,000 cr will also encourage banks to leverage SKS' 'credit delivery skills' in the rural areas. This sort of Pooling of Resources (i.e. amalgam of the 'funding capability' of PSBs and the 'credit delivery skills' of SKS) results in optimal use of national resources. Following the huge waiver of agriculture loans, PSBs may also choose to reduce direct lending and use units like SKS to funnel down credit to ensure better recovery.

Rating : Not Rated

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