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Carrot to industry, stick to market

CII lauds ‘dream
Budget’

New Delhi, July 8
The industry today welcomed the Budget terming it as a “dream Budget” saying steps for rural development, agriculture and employment generation would boost the sentiments for all around economic growth, but the stock market reacted strongly against the imposition of turnover tax.
Turnover tax pulls
down sensex

Mumbai, July 8
Finance Minister Palaniappan Chidambaram’s Budget has drawn mixed reactions from the industry despite the markets giving his proposals a thumbs down. The BSE Sensitive Index swung like a yoyo, breaching the 5,000 barrier in intra-day trade before plunging by 112 points after the news of 0.15 per cent turnover tax.
Members of the CII Naresh Trehan, Sunil Kant Munjal, R Seshasyee, Sunil B Mittal and Phiroz Adi Vandrewala discuss the Budget in New Delhi In video
(28k, 56k)

Members of the CII
(from left to right) Naresh Trehan, Sunil Kant Munjal, R Seshasyee, Sunil B Mittal and Phiroz Adi Vandrewala discuss the Budget in New Delhi on Thursday.
— PTI photo






EARLIER STORIES

 

Steel prices to go up by Rs 1,000 per tonne
New Delhi, July 8
There is bad news for the cycle manufacturers and machine tool industry of Punjab and auto parts industry of Haryana and other steel consumers. The price of steel is all set to increase by at least Rs 1000 per tonne after increase in excise duty on steel from 8 per cent to 12 per cent.

Rs 14,194 cr for PSUs proposed
Sell-off target reduced
New Delhi, July 8
Finance Minister P Chidambaram today proposed to provide equity support of Rs 14,194 crore and loans of Rs 2,132 crore to the central Public Sector Enterprises including the Railways in the current financial year.

Liberal duty regime for textiles
Cenvat duty likely to go
New Delhi, July 8
Finance Minister P Chidambaram today announced a slew of measures to make the country’s textile sector more efficient to enable it to be internationally competitive.

Debt fund ceiling for FIIs raised
New Delhi, July 8
Finance Minister P Chidambaram today announced a host of measures to deepen the capital markets as well as to strengthen the regulatory regime. He has proposed to make the procedures for the registration and operations simpler and quicker for foreign institutional investors.

FDI cap in telecom, insurance hiked
New Delhi, July 8
In a bid to improve the flow of funds, the government today decided to raise the sectoral cap of FDI in telecommunications from 49 per cent to 74 per cent, in civil aviation from 40 to 49 per cent and insurance from 26 per cent to 49 per cent.

FDI limit in civil aviation hiked to 49 pc
New Delhi, July 8
Asserting that airports and tourism would be the focus of growth in the infrastructure sector, the Central Government today proposed to raise the cap on foreign direct investment in the civil aviation sector from 40 to 49 per cent.

100-day job guarantee proposed
New Delhi, July 8
The industry and trade associations may have hailed the government’s “dream Budget,” but much-touted “employment guarantee programme for 100 days to all unemployed youth” and village road project to connect 1.6 lakh villages by 2007 have not got adequate funds in the Budget.

Fiscal deficit pegged at 4.4 pc
New Delhi, July 8
Reaffirming his commitment to fiscal consolidation, Finance Minister P. Chidambaram today pegged the fiscal deficit at 4.4 per cent of the GDP. The fiscal deficit is estimated at Rs 1,37,407 crore while the revenue deficit is estimated at Rs 76,171 crore which is equivalent to 2.5 per cent of the GDP.


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IT giant Hewlett Packard to expand operations in India.
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Carrot to industry, stick to market
CII lauds ‘dream Budget’
Tribune News Service

New Delhi, July 8
The industry today welcomed the Budget terming it as a “dream Budget” saying steps for rural development, agriculture and employment generation would boost the sentiments for all around economic growth, but the stock market reacted strongly against the imposition of the turnover tax.

The BSE index plunged by 112 points after the news of 0.15 per cent turnover tax. “This is a dampener for the stock market,” said CII president Sunil Kant Munjal.

“Finance Minister P Chidambaram had presented a dream Budget in 1997. This again is a dream Budget but with a difference. It focuses on overall growth of the industry,” CII Director General N. Srinivisan said in his reaction.

Mr Munjal gave a thumbs up to the Budget and said it was a “directional Budget” touching all sectors of the National Common Minimum Programme along with providing a “human face” to the entire exercise that laid great emphasis on social spending.

Ficci President Y. K. Modi hailed the fiscal incentives to the industry, particularly for agri-growth for rural employment generation and Special Economic Zones (SEZs). He, however, expressed concern over breaking up tax structure for the textile sector and Cenvat.

Complimenting the Finance Minister, Dr S.M. Dewan, Director General, Standing Conference of Public Enterprises (SCOPE), said, “We appreciate the FM’s announcement to provide financial support for restructuring of Hindustan Antibiotics and rescue package of Rs 508 crore for ITI Ltd.”

Mr Ravi Wig, President, PHDCCI, said, “we welcome reduction and exemption of excise duties on various articles and also in customs duty on non-alloy steel from 15 to 10 per cent. However, the increase in excise duty from 8 to 12 per cent will partially negate the impact of reduction in customs duty.”

In his reaction to the Budget, President of Assocham M.K. Sanghi, said, “not much has been done for the export and manufacturing sectors to spur future growth.”
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Turnover tax pulls down sensex
Tribune News Service

Stock brokers in Mumbai react to the Budget implications
Stock brokers in Mumbai react to the Budget implications on Thursday. — PTI photo

Mumbai, July 8
Finance Minister Palaniappan Chidambaram’s Budget has drawn mixed reactions from the industry despite the markets giving his proposals a thumbs down.

The BSE Sensitive Index swung like a yoyo, breaching the 5,000 barrier in intra-day trade before plunging by 112 points after the news of 0.15 per cent turnover tax.

The markets opened 16 points higher at 4972 on expectations of further sops from the Finance Minister. The indices crossed the 5,000-mark when Mr Chidambaram, in his earlier part of the speech, granted sops to investors and the market players. However the Sensex dropped to a low of 4,809 as the minister’s proposals did not live up to the expectations of the market.

As the government proposed an increase in excise duty in items like steel, despondent punters sold furiously fearing a slow down in industrial growth. Even the Nifty was down 49 points at 1,518.

Among the major losers were HLL which fell 3.6 per cent to Rs 124 while Reliance fell 1 per cent at Rs 432. Riding on incentives to the agri-sector ITC ended a per cent higher at Rs 977.

Infosys and Wipro were down 3 per cent each at Rs 1,351 and Rs 501 while Satyam remained unchanged at Rs 306.

With the Finance Minister reducing the PSU sell-off target, the state-owned scrips came under some bear hammering. ONGC fell 7.3 per cent to Rs 648 while HPCL dropped 5.4 per cent to Rs 307. MTNL was down 5 per cent at Rs 130 and SBI was down 4 per cent.

Referring to the fall in the markets Ruchir Sharma, MD, Morgan Stanley said “Stock markets react to India’s sustainable growth and have in the past followed global trends since there was nothing dramatic in policies.

Growth remained rather stable and there was no big step up. Thus, it is too much to think that one budget speech will change the landscape of Indian markets. It only helps in calming global fears pertaining to a change in India’s vision. For a more concrete change, Institutional reforms need to be carried out”.
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Steel prices to go up by Rs 1,000 per tonne
Tribune News Service

New Delhi, July 8
There is bad news for the cycle manufacturers and machine tool industry of Punjab and auto parts industry of Haryana and other steel consumers. The price of steel is all set to increase by at least Rs 1000 per tonne after increase in excise duty on steel from 8 per cent to 12 per cent.

“The Budget has made steel costlier by increasing the excise duty from 8 per cent to 12 per cent, which will result in an increase in price by approximately Rs 1000,” Indian Steel Alliance (ISA) said.

The alliance has claimed that an immediate impact of the Union Budget for 2004-05 will be a steep Rs 1000 a tonne rise in steel prices as steel producers intend to pass on the increased excise duty on to consumers even as prices of steel scrips nosedived.

Lamenting over the hike in excise duty, the steel producers said: “We have already been finding it difficult to keep the price under control after recent increase in coal prices by over 16 per cent.”

Addressing a press conference last week, Union Steel Minister, Ram Vilas Paswan had said: “The public sector steel units had been advised to take care of the interests of domestic industry. They have so far not passed the increased costs due to hike in coal prices.” It remains to be seen whether they can absorb the increase in excise duty as well.

In the face of spurting steel prices and strong protest from the consumer industry the NDA Government had cut down the excise duty from 16 per cent to 8 per cent only in February with the diktat that the producers should pass on the relief to the user industry.

ISA, comprising steel majors like Steel Authority of India Ltd, Tata Steel, Essar Steel, Ispat and Bhushan Steel, said: “The combination of reduction in customs duty and increase in excise duty will dampen the enthusiasm of entrepreneurs to invest in the industry in the long run.”

Terming as “passable” the hike in excise duty, the largest steel producer SAIL expressed confidence that the Budget proposals would not affect the bottomline of the steel companies.

In this regard, SAIL Chairman V.S. Jain said: “The user industry can neutralise the impact of hiked excise duty on steel by availing MODVAT benefits,” and dismissed as “not significant” the impact of other proposals including lowering customs duty.
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Rs 14,194 cr for PSUs proposed
Sell-off target reduced
Tribune News Service

New Delhi, July 8
Finance Minister P Chidambaram today proposed to provide equity support of Rs 14,194 crore and loans of Rs 2,132 crore to the central Public Sector Enterprises including the Railways in the current financial year. Mr Chidambaram said major investments will be made in the PSUs falling in the sectors of power, telecommunications, railways, roads, petroleum, coal and civil aviation.

At the same time, the government has set a disinvestments target of Rs 4,000 crore during 2004-05. The government’s holding in power utility NTPC will be marginally diluted after the IPO and Mr Chidambaram said that the “government intends to piggy-back on the public issue of NTPC and disinvest approximately five per cent of its holding”.

“This and some other cases which are under examination are expected to yield a sum of Rs 4,000 crore in the current year”, he said.

Mr Chidambaram also announced financial support for the restructuring of Hindustan Antibiotics Limited and a rescue package of Rs 508 crore for Indian Telephone Industries (ITI) will be given for keeping it out of BIFR.

Mr Chidambaram assured that disinvestment revenues will be a part of the Consolidated Fund of India (CFI). “I shall, while presenting the Budget for 2005-06, report to the House the manner in which the said revenues have been or will be applied for specified social sector schemes”, he said.

Emphasising the need to address the other problems of the public sector, the Finance Minister proposed to set up a Board of Reconstruction of Public Sector Enterprises (BRPSE). The Board will advise the government on the measures to be taken to restructure PSUs including cases where disinvestments or closure or sale is justified.

He said that the common minimum programme (CMP) contains clear policy guidelines and as long as the government retains controls over the PSU, and its public character is not affected, the government may dilute its equity and raise resources to meet the social needs of the people.
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Liberal duty regime for textiles
Cenvat duty likely to go
Tribune News Service

New Delhi, July 8
Finance Minister P Chidambaram today announced a slew of measures to make the country’s textile sector more efficient to enable it to be internationally competitive.

Responding to an almost “universal” demand to free the handloom and powerloom sectors from the Cenvat regime introduced last year, the Finance Minister announced a proposal to withdraw the mandatory Cenvat duty in his Budget speech in the Lok Sabha.

Under new tax regime, he has proposed a uniform rate of four per cent for pure cotton yarn, fabrics, garments and made-ups while in blended texile sector and pure non-cotton sector there would be a uniform rate of eight per cent.

Apart from abolishing the Cenvat regime, the new tax structure will have no mandatory excise duty on pure cotton, wool and silk whether it is fibre yarn or garment.

The Budget has, however, kept duty on man-made staple fibres at 16 per cent, polyester filament yarn and polyester textured yarn will continue to attract the duty of 24 per cent while excise duty on other synthetic and artificial filament yarns has been increased to 16 per cent.

The Budget has given the option to composite mills and handloom and powerloom sector to either go for an exemption route or stick to Cenvat route.

Under the exemption route no excise duty will be payable at any stage except on man-made fibre and filament yarn.Under the Cenvat route credit can be taken on the entire excise duty paid at earlier stages.

The minister, however, said it is possible that some manufacturers of handlooms and powerlooms will take advantage of the low uniform rates of duty and opt for the Cenvat route.

The waste of man-made fibres, other than those arising during the course of manufacture of manmade fibres or filament yarn attracting mandatory duty, has been exempted.

Other textile goods like spun yarns, grey or processed fabrics, garments, made-ups and textile articles have been exempted from excise duty provided no credit under Cenvat Credit Rules 2002 is taken.

Apart from the changed tax structure, Mr Chidambram reduced customs duty on specified textile and garment making machinery to five per cent from 20 per cent. These items, however, will be subjected to countervailing duty.

Parts imported for the manufacture of textile machinery will also attract five per cent customs duty subject to end-use condition.

Customs duty on specified machinery for silk industry has been reduced from 10 per cent to five per cent and these items will be subjected to countervailing duty.
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Debt fund ceiling for FIIs raised
Tribune News Service

New Delhi, July 8
Finance Minister P Chidambaram today announced a host of measures to deepen the capital markets as well as to strengthen the regulatory regime.

He has proposed to make the procedures for the registration and operations simpler and quicker for foreign institutional investors (FIIs). The government has also decided to raise the investment ceiling for the FIIs in debt funds from $ 1 billion to $1.75 billion dollar and has allowed banks with strong risk management systems a greater latitude in their exposure to the capital market.

In addition, an alternative trading platform is proposed to be created for the small and medium enterprises to raise the equity and debt from the capital market and steps will be initiated to integrate the commodities markets and securities markets.

The RBI and SEBI will announce the necessary measures in respect of these matters.

The Finance Minister also proposed to examine and implement the recommendations of an inter-ministerial committee for liberalisation of the FII limits in certain specified sectors in consultation with the ministries concerned.

He also announced that SEBI has been able to resolve the longstanding issue of brokers’ fees and decision in this regard would be announced shortly.
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FDI cap in telecom, insurance hiked
Tribune News Service

New Delhi, July 8
In a bid to improve the flow of funds, the government today decided to raise the sectoral cap of FDI in telecommunications from 49 per cent to 74 per cent, in civil aviation from 40 to 49 per cent and insurance from 26 per cent to 49 per cent.

Besides, an Investment Commission will be set up. The commission will have the broad authority of the government to engage, discuss with and invite domestic and foreign businesses in India.

The existing Foreign Investment Promotion Board (FIPB) could be converted into as one-stop service centre and facilitator. “The function of wooing domestic and foreign investors will be performed by the proposed commission”, Mr Chidambaram said.

The Finance Minister said the government also proposed to set up a National Manufacturing Competitiveness Council. “The council will be a continuing forum for policy dialogue to energise and sustain the growth of manufacturing industries”, he said.

The council would be asked to suggest measures for enhancing competitiveness in the manufacturing sector. The council might also recommend industry-specific or sector-specific policy initiatives to enhance competitiveness.
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FDI limit in civil aviation hiked to 49 pc
Tribune News Service

New Delhi, July 8
Asserting that airports and tourism would be the focus of growth in the infrastructure sector, the Central Government today proposed to raise the cap on foreign direct investment (FDI) in the civil aviation sector from 40 to 49 per cent.

Pegging the plan outlay for the sector at about Rs 1,621 crore — a hike of about Rs 135 crore from the revised estimate for the last fiscal, Finance Minister P. Chidambaram, while presenting the 2004-05 General Budget, said there was an “urgent need” for infusing huge amounts of capital in this sector besides telecom and insurance.

He also said the government would “selectively employ” the tools of disinvestment and privatisation but in line with the declared policy outlined by the Common Minimum Programme.
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100-day job guarantee proposed
Tribune News Service

New Delhi, July 8
The industry and trade associations may have hailed the government’s “dream Budget,” but much-touted “employment guarantee programme for 100 days to all unemployed youth” and village road project to connect 1.6 lakh villages by 2007 have not got adequate funds in the Budget.

The common minimum programme (CMP) of the government had committed to allocating adequate funds to ensure employment guarantee for at least 100 days to the unemployed youth and to connect about 1,60,000 villages by roads by the end of 10th plan (2002-07).

Finance Minister P. Chidambaram in his Budget speech, though talked of reviving traditional industries, emphasise water resources and development of handloom and powerloom sector, he failed to increase budgetary allocation for rural employment and village road projects.
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Fiscal deficit pegged at 4.4 pc
Tribune News Service

New Delhi, July 8
Reaffirming his commitment to fiscal consolidation, Finance Minister P. Chidambaram today pegged the fiscal deficit at 4.4 per cent of the GDP. The fiscal deficit is estimated at Rs 1,37,407 crore while the revenue deficit is estimated at Rs 76,171 crore which is equivalent to 2.5 per cent of the GDP.

The Finance Minister said growth would be sustained by increasing production and value addition in agriculture, a marked improvement in industrial production and continued buoyancy in the performance of the service sector.

The total expenditure for 2004-05 is estimated at Rs 4,77,829 crore of which Rs 1,45,590 crore is for Plan expenditure and Rs 3,32,239 crore for non-Plan expenditure.
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