Industry captains analyse the Budget's implications on the CE sector.
According to Vipin Sondhi, Managing Director & CEO, JCB India, the Finance Minister has rolled out a well-balanced and realistic Budget. "He has taken steps which will help him deliver on his promise to contain the fiscal deficit to 4.8 per cent for 2013-14, though the math is still to be seen. Emphasis on infrastructure sector viz credit enhancement by IIFCL, PMGSY and award of 3,000 km road projects, building of new ports at Sagar and one in Tamil Nadu, focus on a Chennai-Bangalore and Mumbai-Bangalore industrial corridor, and introduction of investment allowance should help revive the investment cycle in the country which would definitely add to growth." Sondhi is quick to add that, "the key, however, lies in expediting the execution of infrastructure projects and we hope that the Cabinet Committee on Investment (CCI) would help achieve this objective."
Says AM Muralidharan, President, Volvo CE, "While the Budget has left much to be desired, the infrastructure sector has seen reasonable support during this crucial pre-election year. The signs for the road segment seem promising, considering the government's plan to begin work on the Delhi - Mumbai and Bangalore - Mumbai industrial corridors and infrastructure investment in terms of continuous focus on roads and PMGSY projects. It has planned to award 3, 000 kms of road projects in the first six months of FY 2013 - 14, which will provide an impetus to the sector. Further, the mining sector has seen some bright spots with the government encouraging PPP projects, hence reducing dependence on imported coal. I believe this is one of the high points of the Budget since mining companies will look at venturing into newer projects."
Says Anand Sundaresan, Vice Chairman and Managing Director, Schwing Stetter India, "Generally the Budget was as expected. There are no big surprises. The positive points which directly affect our industry are the push for the three freight corridor projects, Delhi-Mumbai, Chennai- Bangalore and Bangalore-Mumbai freight corridors, where government has committed to up investments, if necessary. The commitment to finalyse contracts for 3,000 km of road projects in the first six months of FY 2013-14, is a welcome decision."
"Actually, we had high hopes from this year's Budget. The construction industry is not doing very well and we expected that some significant measures would be announced. But there was no such significant announcement or policy announcement. In my opinion it was a normal Budget. It was a balanced Budget but we feel that it did not contain any special scheme for the CE sector," says Wilfried Theissen, Managing Director, Putzmeister Concrete Machines.
According to Rohit Punjabi, General Manager (Strategy Development), LiuGong India, the Union Budget 2013-14 turned out well overall for the infrastructure industry. He says, "The following will play major role in the growth of the industry: The sign of the road construction segment is very promising considering the government plans to award the 3,000 km of road project in the first six month of 2013-14; tax-free infrastructure bonds of Rs 50,000 crore has to be issued; this will ease the tight finance funding situation in the sector; gas handling terminal at Dabhol in Maharashtra will be fully operational during 2013-14; two new ports will be established in Sagar, West Bengal and Andhra Pradesh, to add a hundred million tonne of capacity. Overall, the Budget resonates well with the verticals we cater to. In the coming years, I hope to see positive developments in the equipment manufacturers industry."
What the industry was actually looking for was clear-cut policies on the implementation of GST and reduction of excise duty. Muralidharan had this to say, "The implementation of the GST model will be watched carefully as this is the first time that an amount of Rs 9,000 crore has been kept aside for it. We hope to see a practical road map for GST, in the next two years, with strong constitutional amendments. This will be a huge boost for equipment manufacturers as it will reduce taxes on sales of equipment between states. "
Says Sundaresan, "Concrete steps towards implementation of GST is an important decision. As long as the government meets these commitments, it will give boost to the economy. I would have been personally happy if the excise duty were to be reduced a little bit, to boost the capital equipment industry." According to Muralidharan the excise duty and sales tax in India are one of the highest in the world, at almost 20-22 per cent of the capital goods. A reduction would definitely have helped capital equipment suppliers and contractors to implement infrastructure projects at a lower cost. He also said, "Unfortunately, we have not seen much development in power projects in the past and we do not see any major projects in future as well. It is important to increase the availability of power as it's an important factor for the growth of the country."
As per the Budget, a company investing Rs 100 crore or more in plant and machinery during the period April 1, 2013 to March 31, 2015 will be entitled to deduct an investment allowance of 15 per cent of the investment. What will be the spillover benefits of this move especially to small and medium enterprises? Sundaresan says, "15 per cent exemption on investment on plant and machinery to boost investment in industry is a good move." But Sudhakar Waggh, Country Manager, Aquarius Engineers begs to differ. He says, "This benefit is available only if a company invests Rs one billion or more in new plant and machinery in the period of two years beginning 1 April 2013. Since the minimum limit is Rs one billion, it is of no benefit to SMEs like us. The government should have given this benefit without putting any limit on investments, which would have really benefited a large number of manufacturers." He further adds, "Overall, the spending plan of the government is expected to give a push to the CE sector but more important is that the government brings in long-pending reforms of direct tax code and GST. Faster clearance and availability of funds for the projects is more important at this point of time."
DK Vyas, CEO, Srei Equipment Finance, sums it up thus, "Overall, this year's Budget has several positives for the CE industry. The initiatives announced in the Budget and the measures taken outside it together will impact the demand for CE. Of course, the Union Budget should not be viewed in isolation. The government has, of late, taken several steps aimed at expediting infrastructure growth. The Cabinet Committee on Investment, which is a watered down version of the National Investment Board, deserves special mention as the intention is to clear regulatory hurdles for large-sized infrastructure projects. Intent is definitely good, especially when the economy is in the middle of a slowdown. RBI has cut policy rates by 50 basis points and the CRR by 25 basis points in 2013 so far, indicating that it is ready to complement the fiscal efforts to restart growth. From here on, the Finance Ministry and RBI are expected to work in tandem to take the economy to a higher growth trajectory while keeping a lid on inflation. Some of the factors that are becoming major stumbling blocks for infrastructure projects are land acquisition and clearances relating to environment. The government needs to address these fast."