Budget 2016

A Comprehensive Sector Specific Analysis

March 2016

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Agriculture

Key Budget Proposals

Crop Insurance: Under the Pradhan Mantri Fasal Bima Yojana (Prime Minister Crop

Insurance Scheme), the premium rates to be paid by the farmers have been brought down
substantially so as to enable more farmers avail insurance cover against crop loss on account of
natural calamities. The scheme will come into effect from the upcoming kharif season. Under the new
scheme, farmers will have to pay a uniform premium of two per cent for all kharif crops and 1.5 per
cent for all rabi crops. For annual commercial and horticultural crops, farmers will have to pay a
premium of 5 per cent. The remaining share of the premium, as in previous schemes, will continue to
be borne equally by the Centre and the respective state governments. With farmers having been
required to pay a premium share of as high as 15 per cent in several areas in the country, there has
been a long-standing discussion on the need to bring down these rates. The Centres move to bring
down and cap these interest rates is being viewed as a major government policy outreach towards the
farmers.
Allocation: INR 55 bn

Fertilizer Subsidy: Total fertilizer subsidy allocated is INR 700 bn (incl. INR 510 bn for

urea + INR 190 bn for complex fertilizers). The allocated budget is above the requirement of INR
550 bn and thus will help the urea companies.

Irrigation Initiatives: Noting only 46 percent of the 141 million hectares of net cultivated
area in the country is covered by irrigation, he said the Pradhan Mantri Krishi Sinchai Yojana will be
implemented in a mission mode with an aim to irrigate 28.5 lakh hectares, while 89 languishing
projects under Accelerated Irrigation Benefits Programme (AIBP) will be fast-tracked to help 80.6 lakh
hectares. To address the widespread rural distress caused by two successive monsoon failures, INR 170
bn are allocated for an AIBP to complete 23 stalled projects in 2016-17, making for a total of 89 such

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projects to be completed in five years. A dedicated Long Term Irrigation Fund has also been
announced under National Bank for Agriculture and Rural Development (NABARD) with an initial
corpus of about INR 200 bn.

Soil Health Card Scheme: Due to overuse of fertilizers, soil health has deteriorated in the
recent times. With this view in mind, government launched a Soil Health Card scheme, under which
the Centre plans to target over 14 crore farmers in the next three years to check the excess use of
fertilizers. The card, which will carry crop-wise recommendation of fertilizers required for farm lands,
will help farmers identify health of soil and judiciously use soil nutrients. The scheme will be
implemented in all states to promote soil testing services, issue of soil health cards and development of
nutrient management practices.
Allocation: INR 3.7bn

Double income of farmers by 2020: Allocation of INR 359 bn related to Agriculture

water reservoirs, irrigation, soil fertility, balanced use of fertilizers.

Organic Farming Initiatives: The Union budget proposed to convert five lakh hectares in

the country under organic farming and develop value chains in the Northeastern region.
Allocation: INR 1.15 bn

Pulses Production Initiatives: The Union Budget has provided for INR 5 bn under the

National Food Security Mission for increasing the productivity and production of pulses. The budget
has also proposed to increase the provision for the Price Stabilisation Fund to INR 9 bn, which will go
for creating buffer stock of pulses.

Unified agricultural marketing scheme: The finance minister announced a unified

marketing e-platform for farmers. The platform aims at creating a wholesale market online to ensure
fair remunerative prices for the farmers. This unified e-platform aims to connect up to 250 Agri
mandis by September 2016, and up to 585 mandis by March 2018. State governments will be urged to
launch the e-market platform to unify mandis in the state, thereby allowing farmers to sell their
produce in any mandi of their choice.

Agriculture credit: Agri credit target has been increased to INR 9000 bn compared to INR

8500 bn last year.

Interest subvention: Provision of INR 150 bn towards interest subvention for farmers. Will
reduce the burden of loan repayment on farmers.

Fertilizer DBT: Government announced to introduce direct benefit transfer (DBT) of

fertilizer subsidy to farmers on pilot basis in few districts of the country. Calling for sweeping reforms
in the fertilizer sector, the Economic Survey had also pitched for the DBT of fertilizer subsidy to the
farmers.

Initiatives for Ground Water resources: Sustainable management of ground water

resources within an estimated cost of INR 60 bn will be implemented through multilateral funding.

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Impact Analysis

Urea companies will be benefited from the decision of allocation of higher fertilizer subsidy.

Crop Insurance is positive for farmers. Premium amount has been brought down substantially
and is nominal now.

Lack of proper irrigation infrastructure has been a big problem for the sector. Irrigation of
more land would be positive for farming community.

Setting up of dedicated irrigation fund under the NABARD would be positive for farming
community.

Soil health card scheme will be positive for farming community as now health of soil can be
maintained and fertilizers can also be used efficiently with the help of this scheme.

It is not clear how much impact will the dream of Double income of farmers by 2020 have
on the sector. But clear and focused thinking like this is a positive and can be seen as a long term goal.

Allocation of INR 5 bn towards increasing indigenous production is a positive.

Unified Agricultural Marketing Scheme will benefit farmers as it will help them get the
maximum price for their crops. But the decision to adopt this scheme has been left upon discretion of
the state governments so it is yet to be seen how many states actually adopt this scheme.

Higher agri credit will benefit farmers.

Interest subvention of INR 150 bn will benefit farmers.

Fertilizer DBT will reduce subsidy burden of fertilizer companies and is a positive. But it is
very difficult to implement in a country like India. So, the impact can only be assessed only once
implementation starts.

Impact on Sector: POSITIVE

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Auto & Auto Ancillaries

Key Budget Proposals

Infra Cess: There will be a levy of one per cent infrastructure cess on petrol/LPG/CNG-

driven motor vehicles of length not exceeding 4 metres and engine capacity not exceeding 1200cc; 2.5
per cent cess on diesel-driven motor vehicles of length not exceeding 4 metres and engine capacity not
exceeding 1500cc; and four per cent for other big sedans and SUVs.

Luxury Tax: Government proposed to impose a 1% tax at source on luxury goods exceeding
INR 2 lakh and car purchases exceeding INR 10 lakh.

Reduction of the weighted deduction on R&D: Government proposed the reduction of

the weighted deduction from 200% to 150% from the financial year 2017-18 to financial year 2019-20
and from the financial year 2020-21 onwards the deduction will be restricted to 100%. The Central
government provides a weighted tax deduction of 200% for any capital and revenue expenditure
incurred on in-house R&D by a company, excluding expenditure on land and buildings.

Amendment in the Motor Vehicles Act: The Motor Vehicles Act, 1988 (MVA) is going to

be amended to include the private sector in the passenger vehicle segment of road transport.
Government is also getting rid of the permit law in public transport, which currently requires bus
operators to get yearly permits to operate them, including a single district permit, permits for other
districts and an all India permit. The government will provide an ecosystem in which states can adopt
a revised legal framework to boost road transport, including buses.

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Impact Analysis

Opening up of passenger road transportation segment for private sector will be positive for

bus manufacturing companies.

Levy of infra cess and luxury tax is negative surprise to the auto industry and will increase the
vehicle prices and will also further increase the price gap between petrol and diesel vehicles which will
favour petrol vehicles. Luxury Tax on cars costing more than INR 10 lakhs is another negative for the
sector.

Thrust on farm productivity and increase in farm credit allocation will aid in improving farm
equipment's demand.

Thrust on infrastructure spends will be positive for commercial vehicle and tractor segment.

Impact: NEGATIVE (Passenger Cars)

Vehicles)

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Aviation

Key Proposals

Action plan to revive airports and airstrips: The government is drawing up an action

plan for revival of unserved and underserved airports. Under the plan, there are about 160 airports
and air strips with State Governments which can be revived at an indicative cost of INR 500 mn to
INR 1 bn each and 10 of the 25 non-functional air strips with the Airport Authority of India will also
be developed.

Excise Duty Hike on ATF: The Union budget proposed to increase excise duty on jet fuel,
other than for supply to Scheduled Commuter Airlines (SCA) from the Regional Connectivity Scheme
Airports, to 14% from 8%. ATF for supply to aircraft under the Regional Connectivity Scheme will
continue to attract 8% excise duty.

Exemption of excise duty on tools and tool kits: Exemption from excise duty to tools
and tool kits when procured by MROs for maintenance, repair, and overhauling (MRO) of aircraft.

Service Tax Revision: Additional 0.5% Krishi Kalyan Cess proposed to be levied on all
taxable services to finance and promote initiatives to improve agriculture with effect from 01 June
2016.

Impact Analysis

Development of regional airports will increase the domestic passenger demand. But the

action plan is yet to be finalised and thus we will have to wait till the implementation of this plan is
started to assess the impact. If implemented efficiently the scheme to enhance regional airstrips and
airports will impact the domestic carriers positively.
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Excise duty on ATF over airports other than regional connectivity scheme airports will be

increased to 14% from 8%. This will have a negative impact on the aviation industry as the price
increase may slow down the demand.

Proposed increase in service tax will hike air fare; however, it will not impact passenger
volume number as the increase will be very small.

Impact: MARGINALLY NEGATIVE

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Capital Goods and

Infrastructure

Key Budget Proposals

Focus on manufacturing and infrastructure: Government has maintained its focus on

investments in roads, railways and power distribution sector this budget too. Government has tweaked
the duty structures of various items to promote its "Make in India" initiative which will be beneficial
for domestic manufacturers.

Increased spending in road sector: Total expected spending of INR 970 bn in FY17
(21.25% higher than INR 800 bn in FY16). Central budget allocation of INR 550 bn for roads and
highways. NHAI to raise INR 150 bn through market borrowing. Pradhan Manni Gram Sadak
Yojana increased allocation of INR 190 bn.

23% jump in Railways Capital Expenditure: Railways capital expenditure increased to

INR 1,210 bn from INR 984 bn in FY16. Increased spending on electrification, new lines, doubling
and gauge conversion.

Flat Defence capital expenditure: Defence capital expenditure budget grew by only 3%
YOY to Rs 875 bn in FYI7.

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Reduction in Accelerated depreciation benefit for wind energy: Accelerated
depreciation for wind energy to be reduced to 40% from 80% by April 2017. Negative for wind
turbine manufacturers.

Reduction in benefit on R&D expenditure: Benefit of deductions for research to be

limited to 150% from 01 April 2017 and 100% from 01 April 2020. This would be negative for some
capital goods companies having higher proportion of R&D expenditure as % of revenue.

Steps to revitalize PPPs: A few steps have been taken in the direction of revitalizing PPPs.
This is a positive for the infrastructure sector as it will result in reduction in stalled projects. Public
Utility (Resolution of Disputes) Bill will be introduced during 2016-17. New credit rating system for
infrastructure projects will be introduced.

No Dividend Distribution Tax on InvITs: InvITs would not be subject to dividend

distribution tax which is a big positive for the infra companies.

Impact Analysis

Focus on Make in India and change in the duty structure is a big positive for the domestic

manufacturing companies.

A few steps have been taken to revitalize the PPP model but nothing can be said about their
impact until the implementation.

Reduction in Benefit of deductions for R&D is bad news for innovative companies.

Increase in Road and Rail Capital Expenditure is a big positive for the industry.

No DDT on InvITs is good news for financing of the infra sector.

Impact: POSITIVE

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Cement and Building

Products

Key Proposals

Housing for All: Under AMRUT Mahotsav - year 2022, Government intends to spend on

"housing for all" scheme (20 mn houses in urban areas and 40 mn houses in rural areas to be made).
Allocation of INR 73 bn for AMRUT and 100 smart cities development. Deduction for additional
interest of 50,000 per annum for loans up to INR 3.5 mn sanctioned in 2016-17 for first time home
buyers, where house cost does not exceed INR 5 mn. 100% deduction for profits to an undertaking in
housing project for flats up to 30 sq mtrs in four metro cities and 60 sq mtrs in other cities approved
during June 2016 to March 2019 and completed in three years.

Focus on Infra will boost demand: Proposed investment for infrastructure and rural
development of 2.2 trn (road sector, including PMGSY allocation would be INR 970 bn) and 878 bn,
respectively, for FYI7.

Clean environment cess on coal increased: The clean environment cess levied on coal
has been increased from INR 200/tonne to INR 400/tonne.

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Excise Duty exemption for RMC: Excise duty has been exempted (earlier excise duty of

12.5%) for Ready Mix Concrete (RMC) manufacturers at the site of construction for use in
construction work at such site.

Impact Analysis

Higher allocation of funds for rural development, increased spending on infrastructure

projects through various schemes (Roads, Affordable Housing, Swachh Bharat Abhiyan, etc.) and
implementation for housing for all projects would provide incremental demand for cement and
building products.

Higher clean energy cess would increase the cost of the coal. But this negligible cost increase
(on coal) can be easily passed on by the cement manufacturers.

RMC manufacturers would get marginal benefit out of excise duty exemption to the extent of
captive usage of material.

Impact: POSITIVE

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Chemicals

Key Proposals

Lowering of Custom Duties on some raw materials: All acyclic hydrocarbons and all

cyclic hydrocarbons [other than para-xylene which attracts Nil Basic Customs Duty (BCD) and
styrene which attracts 2% BCD] from 5% to 2.5%. Denatured ethyl alcohol (Ethanol) customs duty
reduced from 5% to 2.5%. Orthoxylene for the manufacture of phthalic anhydride Special Additional
Duty (SAD) reduced from 4% to 2%. Electrolysers, membranes and their parts required by caustic
soda/potash unit using membrane cell technology customs duty reduced from 2.5% to Nil.

Impact Analysis

Marginal positive for chemical companies as these are the basic ingredients for raw materials.

Most of the companies are dependent on imports for raw material requirement. Imports for most of
the companies ranges from 35-45% of raw materials. Therefore, the cut is expected to lower the raw
material costs.

Impact: MARGINALLY POSITIVE

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FMCG

Key Proposals

Excise duty on Cigarettes: Excise duty increase for FY17 across the lengths of cigarettes is

being averaged out at 10%.

Retail trade: Retail shops will be given the option to remain open 7 days a week. The
government will introduce Model Shops and Establishment bill which can be adopted by the
concerned regulatory bodies to enable shops to remain open 7 days a week.

Impact Analysis

Average excise duty increase for ITC's cigarette portfolio is 10% which is on the higher side

and thus will lead to increase in cigarette prices.

Government focus on rural, agricultural income should help boost consumption spends in the
rural sector, aiding the rural recovery.

Impact: NEUTRAL

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Healthcare

Key Budget Proposals

Weighted average deduction for R&D: The benefit of deductions for research would be
lowered to 150% from 200% currently from FYI8 onwards and would be further reduced to 100%
from FY21.

Start of National Dialysis Services Programme: To provide dialysis services in all

district hospitals. To reduce the cost, exempt certain parts of dialysis equipment from basic customs
duty, excise/CVD and SAD.

Health insurance: The Government will launch a new health protection scheme for poor

and economically weak families which will provide health cover up to INR 0.1 mn per family. For
senior citizens of age 60 years and above belonging to this category, an additional top-up package up
to INR 30,000 will be provided.

New SEZ: The benefit of section 1OAA to new SEZ units will be available to those units
which commence activity before March 2020.

Special patent regime tax: Tax rate of 10% will be levied on income from worldwide

exploitation of patents developed and registered in India.

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Impact Analysis

Exemption in custom duty will reduce cost for dialysis equipment.

Curb in deduction for R&D is negative for the sector. However, the actual impact will be

minimal on a net basis as large part of R&D expense comprises of ANDA filings and trials which are
conducted outside India besides other outsourced studies which are not eligible for weighted
deduction.

SEZ sunset clause extended till 2020 This is positive given that many pharma companies
such as Divi's, Ajanta, Glenmark and Torrent are in expansion mode and would benefit from such
schemes.

Start of new health protection scheme is positive for sector and would lead to increase in
patient volumes in sector.

No material impact for healthcare services companies, however, they will benefit from increase
in patient volume on account of new health protection scheme.

Impact: MARGINALLY POSTIVE

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Information Technology

Key Proposals

Digitization to boost IT demand:

a)
Financial Data Management Centre under the aegis of the Financial Stability Development
Council (FSDC) Twill be set up to facilitate integrated data aggregation and analysis in the financial
sector.
b)
Proposal to change the procedure to provide for a shift from physical control to record based
control for customs bonded warehouses, supported by sophisticated IT systems.

Skill Development Mission: To set up 1,500 Multi Skill Training Institutes across the
country by setting aside an amount of INR 17 ,000 mn. Entrepreneurship Education and Training
will be provided in 2,200 colleges, 300 schools, 500 Government ITIs and 50 Vocational Training
Centres through Massive Open Online Courses.

Promotion of startups: 100% deduction of profits for 3 out of 5 years for startups set up
during April 2016 to March 2019. MAT will apply in such cases.

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Impact Analysis

Proposal for financial Data Management Centre set up will be positive for IT data center

providers.

Propose to change the procedure to provide for a shift from physical control to record based
control for customs bonded warehouses, supported by sophisticated IT systems is a positive for the IT
sector.

Extension of Skill Development Mission will be positive for companies NIIT and MT
Educare.

Impact: NEUTRAL

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Logistics

Key Proposals

Service Tax on State Carriers: Negative list entry that covers 'service of transportation of

passengers, with or without accompanied belongings, by a state carriage' being omitted and tax
proposed to be levied on service of transportation of passengers by air conditioned state carriage, at
the abatement of 60% without input tax credit, with effect from 01.06.2016.

Opening up of the road transport sector in the passenger segment: Amendments to

be made in Motor Vehicles Act to open up the road transport sector in the passenger segment for the
private players.

Reduced abatement rate for services on transport of goods through rail: Credit of

input services on transport of goods in containers by rail at a reduced abatement rate of 60% being
allowed, with effect from 01.04.2016.

Impact Analysis

Currently, air conditioned state carriers used for transportation of passengers are exempt from

paying service taxes whereas private players are subject to service tax. According to the budget
proposal, all players would now pay service tax creating a level playing field which would be beneficial
for private players.

Re-introduction of abetment albeit at a reduced rate of 60% from 70% earlier (with input
service credit available) would help CONCOR reduce service tax costs.

Impact: MARGINALLY POSITIVE

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Media & Entertainment

Key Proposals

Increased Effective Service Tax: Krishi Kalyan Cess of 0.5% levied on services,

increasing effective service tax rate from 14.5% to 15%.

BCD on newsprint reduced: Basic customs duty on newsprint reduced from 5% to 0%.

Customs and Excise duty on STBs, modems and routers reduced: Customs and
excise duty on STBs, modems and routers has been reduced. The excise duty is reduced from 12.5%
to 4.0% (without input tax credit) and 12.5% with input tax credit). Excise duty (12.5%) and customs
duty (BCD, C VT), SAD) on components used in these instruments would be made NIL.

Right to use the radio-frequency spectrum to be treated as service: Assignment of

right to use the radio-frequency spectrum (by the government as well as subsequent transfers) will be
treated as service (and subject to service tax) rather than sale of intangible asset.

Impact Analysis

Cess would eat into the pricing power of media companies, but marks the relief considering

the expectation of higher increase in service tax. The impact would be limited due to small quantum
of Cess and ability to pass on some impact to the consumers. Especially, in case of advertisement
revenues, advertisers in service business would not mind bearing additional service tax, as the same
can be offset against their output tax.

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Reduction in basic customs duty on newsprint is a positive for print media companies.

Newsprint cost accounts for 40% of operating costs and 30% of revenue for print media companies.
This would help improving profit margins for the print media companies.

Reduction in customs and excise duty on STBs and routers is positive for cable and satellite

companies engaged in provision of digital TV and broadband services, as it will reduce subscriber
acquisition costs (these instruments are generally provided at subsidized costs to the consumers).

Treating assignment of right to use the radio-frequency spectrum as a service is negative for

radio broadcasters. But the impact would be limited as auctions and renewals of radio FM stations for
bigger cities are already behind; upcoming auctions would be for smaller cities.

Earlier fees paid toward acquisition of spectrum was allowed to be treated as an intangible
asset and depreciable on basis (at 25%). The budget proposal would lead to front ended tax payouts
for radio broadcasters.

Impact: NEUTRAL

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Metals and Mining

Key Budget Proposals

Clean Energy Cess on coal doubled: Clean Energy Cess on coal doubled to INR 400/

tonne versus INR 200/tonne last year.

Export duties on iron ore fines reduced: Export duties on iron ore fines having Fe
content of less than 58% has been reduced from 10% to Nil and for lump (Fe 58% or less) is reduced
from 30% to Nil.

BCD on aluminium increased: Basic Customs Duty (BCD) on primary aluminium

increased to 7.5% from 5.0% currently. The basic custom duty on other aluminium products has
increased by 2.5% to 10%.

BCD on zinc alloys increased: BCD on zinc alloys has increased to 7.5% from 5.0%.

Bauxite export duty reduced: Bauxite export duty has been reduced to 15% from existing
20%.

Export duty on chromium ore abolished: Export duty on chromium ore and
concentrate has been abolished from existing 30%.

Impact Analysis

Increase in customs duty on aluminium products by 2.5% would largely compensate for the

increase in coal cess for the aluminum producers.

Reduction in Bauxite export duty is a bit negative for non-ferrous players. Overall, no major
impact for the non-ferrous companies.

Abolition of export duty on low grade iron would be beneficial for iron ore miners.

Impact: NEGATIVE

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Oil & Gas

Key Budget Proposals

Cess on crude oil to be made ad-valorem: Cess on crude oil to be made ad-valorem at

20%, from current INR 4,500/ tonne.

Incentivising gas production from DW, UDW and high pressure discoveries. Provide
calibrated marketing freedom and pre-determined ceiling price based on alternate fuel.

Petroleum subsidy budget at INR 270 bn.

Infrastructure Cess on Petrol, LPG and CNG cars.

Excise on ATF from 8% to 14%.

Impact Analysis

The relief on Cess may be earnings accretive for upstream at current crude prices.

The possible market pricing for new gas discoveries is not a meaningful positive for upstream
as discoveries may not be viable at current market prices. Also, the pricing may not be applicable for
KG discoveries (ONGC and RIL) as they were discovered before the suggested dates.

The high provisioning of petroleum subsidy could be due to higher crude assumption by the
government. However, higher than expected provisioning would indicate no under-recovery share for
upstream and no outstandings for OMCs.

Impact: MARGINALLY POSITIVE

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Power

Key Budget Proposals

Increased allocation for DDUGJY and IPDS schemes: This is on expected lines as

Uday reform envisages reduction in AT&C losses. Combined allocation for DDUGJY and IPDS
schemes has been increased from INR 51 bn to INR 85 bn in FY 17.

Dispute Resolution bill: In this regard, government is planning to introduce Public Utility

(Resolution of Disputes) Bill in 2016-17. This aims to provide legal framework for dispute resolution
and re negotiations in PPP projects and public utility contracts.

Long-term plan for energy diversification: Government is planning for right mix of fuel
in energy consumption in India and is laying out a plan of 15-20 years. Budget has kept aside INR 30
bn for Nuclear.

24x7 power for all: Budget has clarified that India will achieve 24x7 power for all by 01
May 2018. It's in line with Modi government's initial target of FYI9.

Additional depreciation of 20% for transmission companies from FYI8: Assessee

engaged in the business of transmission of power shall be allowed additional depreciation at the rate
of 20% of actual cost of new machinery or plant acquired and installed in a previous year.

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Plan outlay for Coal and Power ministry up by 20% versus FY16 revised estimate:

For FYI7, power sector plan allocation is fixed at INR 798 bn and Coal is fixed at INR 166 bn.

Plan outlay for MNRE is up 150% versus FYI6 revised estimate: Outlay for Ministry
of New and Renewable is fixed at INR 142 bn.

Tax holiday to lapse: Current 10 years tax holiday for power plants is expiring in March

2017 and budget document has clarified for no extension of benefit to power sector.

Impact Analysis

Increase allocation for DDUGJY and IPDS scheme is Positive for the sector and allocation is

more skewed towards IPDS scheme (i.e. Urban Infra).

Dispute Resolution bill is positive for Utilities companies evolved in legal cases for tariff hike.

Additional depreciation of 20% for transmission companies from FY18 is aimed to give
impetus for transmission projects on completive bids.

Plan outlay for Coal and Power ministry is up by 20% versus FY16 revised estimate is Positive
for Central Power Sector Units.

Coal, Lignite cess increased to INR 400/tonne will increase power cost by 5-6% and is
neutral for companies for regulated companies and negative for companies selling power on merchant.

Lapse of Tax Holiday is negative for developer commissioning capacity beyond FY17.

Impact: POSITIVE

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Telecom

Key Budget Proposals

Total inflow from communication services has been pegged at INR 989.9 bn for FYI 7. This

includes proceeds from spectrum auction, licence fee and spectrum charges for FY 17. TRAI has
already recommended putting the entire 700 MHz band with all its seven blocks for auction, along
with other bands of 800, 900, 1800, 2100 MHz, 2300 MHz and 2500 MHz.

Basic customs duty (BCD) on specified telecommunication equipment being increased from
0% to 10% - Negative for mobile operators.

Basic customs duty on preform of silica for manufacture of telecom grade optical fibre/cables
being increased from 0% to 10%.

Impact Analysis

Increase in BCD on specified telecom equipment will be negative for mobile operators.

Increase in BCD on preform of silica for manufacture of OF and OFC will be negative for
optical fibre companies.

Impact: NEGATIVE

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Textiles

Key Budget Proposals

Excise duty on branded readymade garments and made up articles of textiles with a retail sale

price of INR 1,OOO and above from 'Nil without input tax credit or 6%/12.5% with input tax
credit' to '2% without input tax credit or 12.5% with input tax credit'. The Tariff value for excise/
CVD purposes on readymade garments and made up articles of textiles being changed from 30% of
retail sale price to 60% of retail sale price.

Basic Customs Duty on specified fibres and yarns being reduced from 5% to 2.5%.

Basic customs duty on import of specified fabrics [for manufacture of textile garments for
export] of value equivalent to 1% of FOB value of exports in the preceding financial year being
exempted subject to the specified conditions.

The duty drawback scheme has been widened and deepened to include more products and
countries. The Government will continue to take measures to support the export sector.

Impact Analysis

Increase in excise duty on branded garments and made-ups above INR 1,OOO will

necessitate the branded/retail players to take a marginal price hike.

Impact: NEUTRAL

By:
Himanshu Jhamb
Shagun Verma

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References

"FY17 Union Budget: A disappoin6ng eort"; Ambit Capital Pvt. Ltd.

"Union Budget 2016-17"; Batlivala & Karani Securi6es

hKp://www.livemint.com/

hKp://www.thehindubusinessline.com/

hKp://www.thehindu.com/

hKp://www.businesstoday.in/sectors

www.nccd.gov.in/PDF/KeyFeatures-Budget2016-17

hKp://telecomtalk.info/

hKp://www.business-standard.com

hKp://thewire.in/

hKp://www.cii.in/sectors.aspx

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