union budget analysis 2012-13

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UNION BUDGET 2012-13 An Analysis

16 March 2012

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Contents

Chapter Title Page No.

1 Key Features of the Union Budget 2012-13 1-12

2 Macroeconomic Perspectives 13-18

3 Direct Taxes 19-21

4 Indirect Taxes – Sector & Industry Specific Analysis 23-51

5 Annexure – 1 : Budget at a Glance 53

6 Annexure – 2 : Key Indicators (2006-07 to 2011-12) 54

7 Annexure – 3 : Fiscal Situation 55-65

© Confederation of Indian Industry 1

Chapter 1 Key Features of the

Union Budget 2012-13


Chapter 1

Key Features of Union Budget 2012-13 Approach to the Budget

• For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.

• GDP is estimated to grow by 6.9% in 2011-12, after having grown at 8.4% in preceding two years.

• India however remains front runner in economic growth in any cross-country comparison.

• Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure.

• Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.

• Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery.

• At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.

• Twelfth Five Year Plan to be launched with the aim of “faster, sustainable and more inclusive growth”. Five objectives identified to be addressed effectively in ensuing fiscal year.

• If India can build on its economic strength, it can be a source of stability for world economy and a safe destination for restless global capital.

Overview of the Economy

• GDP growth estimated at 6.9% in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth.

• Headline inflation expected to moderate further in next few months and remain stable thereafter.

• Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation.


• Developments in India’s external trade in the first half of current year have been encouraging. Diversification in export and import market achieved.

• Current account deficit at 3.6% of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate.

• India’s GDP growth in 2012-13 expected to be 7.6% +/- 0.25%.

• Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.

FRBM Act

• Introduction of amendments to the FRBM Act as part of Finance Bill, 2012.

• Concept of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are two important features of amendment to FRBM Act in the direction of expenditure reforms.

• Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending.

• “Medium-term Expenditure Framework” statement will set forth a three-year rolling target for expenditure indicators.

• Recommendations of the Expert Committees to streamline and reduce the number of centrally sponsored schemes and to address plan and non-plan classification to be kept in view while implementing Twelfth Plan.

• Central Plan Scheme Monitoring System to be expanded for better tracking and utilisation of funds.

Subsidies

• Some subsidies, while being inevitable, may become undesirable if they compromise the macroeconomic fundamentals of economy.

• Subsidies related to administering the Food Security Act will be fully provided for.

• Endeavour to keep central subsidies under 2 % of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75 % of GDP.

• Based on recommendation of task force headed by Shri Nandan Nilekani, a mobile-based Fertilizer Management System has been designed to provide end-to-end information on movement of fertilisers and subsidies. Nation-wide rollout during 2012.

• All three public sector Oil Marketing Companies have launched LPG transparency portals to improve customer service and reduce leakage.

• Endeavour to scale up and roll out Aadhaar enabled payments for various government schemes in atleast 50 districts within next 6 months.

Tax Reforms

• DTC Bill to be enacted at the earliest after expeditious examination of the report of the Parliamentary Standing Committee.

• Drafting of model legislation for the Centre and State GST in concert with States is under progress.

• GST network to be set up as a National Information Utility and to become operational by August 2012.


Disinvestment Policy • Government has further evolved its approach to divestment of Central Public Sector

Enterprises by allowing them a level playing field vis-à-vis the private sector in respect of practices like buy backs and listing at stock exchanges.

• For 2012-13, Rs.30,000 crore to be raised through disinvestment. At least 51% ownership and management control to remain with Government.

Strengthening Investment Environment

Foreign Direct Investment

• Efforts to arrive at a broadbased consensus in consultation with the State Governments in respect of decision to allow FDI in multi-brand retail upto 51%.

Advance Pricing Agreement

• Provision regarding implementation of Advance Pricing Agreement to be introduced in Finance Bill, 2012.

Financial Sector

• Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50% to new retail investors, who invest upto Rs.50,000 directly in equities and whose annual income is below Rs.10 lakh to be introduced. The scheme will havea lock-in period of 3 years.

Capital Market

• Various steps proposed to be taken for deepening the reforms in the Capital markets, including simplifying process of IPOs, allowing QFIs to access Indian Bond Market etc.

Legislative Reforms

• Official amendment to “The Pension Fund Regulatory and Development Authority Bill, 2011”, “The Banking Laws (Amendment) Bill, 2011” and “The Insurance Law (Amendment) Bill, 2008” to be moved in this session.

• Various Bills proposed to be moved in the Budget session of the Parliament to take forward the process of financial sector legislative reforms.

Capitalisation of Banks and Financial Holding Company

• To protect the financial health of Public Sector Banks and Financial Institutions, Rs.15,888 crore proposed to be provided for capitalisation. Possibility of creating a financial holding company to raise resources to meet the capital requirments of PSU Banks under examination.

• A central “Know Your Customer” depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep.

Priority Sector Lending

• Revised guidelines on priority sector lending to be issued after stakeholder consultation.


Financial Inclusion

• Out of 73,000 identified habitations that were to be covered under “Swabhimaan” campaign by March, 2012, about 70,000 habitations have been covered. Rest likely to be covered by March 31, 2012.

• As a next step, Ultra Small Branches are being set up at these habitations.

• In 2012-13, “Swabhimaan” campaign to be extended to more habitations.

Regional Rural Banks

• Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions and have also joined the National Electronic Fund Transfer system.

• Proposal to extend the scheme of capitalisation of weak RRBs by another 2 years to enable States to contribute their share.

Infrastructure and Industrial Development

• During Twelfth Plan period, investment in infrastructure to go up to Rs.50 lakh crore with half of this, expected from private sector.

• More sectors added as eligible sectors for Viability Gap Funding under the scheme “Support to PPP in infrastructure”.

• Government has approved guidelines for establishing joint venture companies by defence PSUs in PPP mode.

• First Infrastructure Debt Fund with an initial size of Rs.8,000 crore launched earlier this month.

• Tax free bonds of Rs.60,000 crore to be allowed for financing infrastructure projects in 2012-13.

• A harmonised master list of infrastructure sector approved by the Government.

• IIFCL has put in place a structure for credit enhancement and take-out finance for easing access of credit to infrastructure projects.

National Manufacturing Policy

• National Manufacturing Policy announced with the objective of raising, within a decade, the share of manufacturing in GDP to 25 % and creating of 10 crore jobs.

Power and Coal

• Coal India Limited advised to sign fuel supply agreements with power plants, having long-term PPAs with DISCOMs and getting commissioned on or before March 31, 2015.

• External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects.

Transport: Roads and Civil Aviation

• Target of covering a length of 8,800 kilometre under NHDP next year.

• Allocation of the Road Transport and Highways Ministry enhanced by 14% to Rs.25,360 crore.

• ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project.


• Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users.

• ECB to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion.

• Proposal to allow foreign airlines to participate upto 49 % in the equity of an air transport undertaking under active consideration of the government.

Delhi Mumbai Industrial Corridor

• In September 2011 central assistance of Rs.18,500 crore spread over 5 years approved. US $ 4.5 billion as Japanese participation in the project.

Housing Sector

• Various proposals to address the shortage of housing for low income groups in major cities and towns including allowing ECB for low cost housing projects and setting up of a credit guarantee trust fund etc.

Fertilisers

• Government has taken steps to finalise pricing and investment policies for urea to reduce India’s import dependence in urea.

Textiles

• Government has announced a financial package of Rs.3,884 crore for waiver of loans of handloom weavers and their cooperative societies.

• Two more mega handloom clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand to be set up.

• Three Weaver’s Service Centres one each in Mizoram, Nagaland and Jharkhand to be set up for providing technical support to poor handloom weavers.

• Rs.500 crore pilot scheme announced for promotion and application of Geo-textiles in the North Eastern Region.

• A powerloom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget allocation of Rs.70 crore.

Micro, Small and Medium Enterprises

• Rs.5,000 crore India Opportunities Venture Fund to be set up with SIDBI.

• To enable greater access to finance by Small and Medium Enterprises (SME), two SME exchanges launched in Mumbai recently.

• Policy requiring Ministries and CPSEs to make a minimum of 20 % of their annual purchases from MSEs approved. Of this, 4 % earmarked for procurement from MSEs owned by SC/ST entrepreneurs.

Agriculture

• Plan Outlay for Department of Agriculture and Co-operation increased by 18%.

• Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to Rs.9,217 crore in 2012-13.

• Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in increased production and productivity of paddy. Allocation for the scheme increased to Rs.1,000 crore in 2012-13 from Rs.400 crore in 2011-12.


• Rs.300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY.

• Remaining activities to be merged into following missions in Twelfth Plan: � National Food Security Mission � National Mission on Sustainable Agriculture including Micro Irrigation � National Mission on Oilseeds and Oil Palm � National Mission on Agricultural Extension and Technology � National Horticultural Mission

National Mission for Protein Supplement

• Rs.2,242 crore project launched with World Bank assistance to improve productivity in the dairy sector. Rs.500 crore provided to broaden scope of production of fish to coastal aquaculture.

Agriculture Credit

• Target for agricultural credit raised by Rs.1,00,000 crore to Rs.5,75,000 crore in 2012-13.

• Interest subvention scheme for providing short term crop loans to farmers at 7 % interest per annum to be continued in 2012-13. Additional subvention of 3 % available for prompt paying farmers.

• Short term RRB credit refinance fund being set up to enhance the capacity of RRBs to disburse short term crop loans to small and marginal farmers.

• Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card which could be used at ATMs.

Agricultural Research

• A sum of Rs.200 crore set aside for incentivising research with rewards.

Irrigation

• Structural changes in Accelerated Irrigation Benefit Programme (AIBP) being made to maximise flow of benefit from investments in irrigation projects.

• Allocation for AIBP in 2012-13 stepped up by 13 % to Rs.14,242 crore.

• Irrigation and Water Resource Finance Company being operationalised to mobilize large resources to fund irrigation projects.

• A flood management project approved by Ganga Flood Control Commission at a cost of Rs.439 crore for Kandi sub-division of Murshidabad District.

National Mission on Food Processing

• A new centrally sponsored scheme titled “National Mission on Food Processing” to be started in 2012-13 in co-operation with State Governments.

• Steps taken to create additional food grain storage capacity in the country.

Inclusion Scheduled Castes and Tribal Sub Plans

• Allocation for Scheduled Castes Sub Plan at Rs.37,113 crore in BE 2012-13 represents an increase of 18 % over BE 2011-12.

• Allocation for Tribal Sub Plan at Rs.21,710 crore in BE 2012-13 represents an increase of 17.6 %.


Food Security

• National Food Security Bill, 2011 is before Parliamentary Standing Committee.

• A national information utility for computerisation of PDS is being created. To become operational by December, 2012.

Multi-sectoral Nutrition Augmentation Programme

• A multi-sectoral programme to address maternal and child malnutrition in selected 200 high burden districts is being rolled out during 2012-13.

• Allocation of Rs.15,850 crore made for Integrated Child Development Service (ICDS) scheme, representing an increase of 58 % over BE 2011-12.

• Rs.11,937 crore allocated for National Programme of Mid Day Meals in schools.

• An allocation of Rs.750 crore proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, SABLA.

Rural Development and Panchayati Raj

• Budgetary allocation for rural drinking water and sanitation increased from Rs.11,000 crore to Rs.14,000 crore representing an increase of over 27 %.

• Allocation for PMGSY increased by 20 % to Rs.24,000 crore to improve connectivity.

• Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat Sashaktikaran Abhiyan.

• Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced allocation of Rs.12,040 crore in 2012-13, representing an increase of 22 % over the BE 2011-12.

Rural Infrastructure Development Fund (RIDF)

• Allocation under RIDF enhanced to Rs.20,000 crore. Rs.5,000 crore earmarked exclusively for creating warehousing facilities.

Education

• For 2012-13, Rs.25,555 crore provided for RTE-SSA representing an increase of 21.7 % over 2011-12.

• 6,000 schools proposed to be set up at block level as model schools in Twelfth Plan.

• Rs.3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an increase of 29 % over BE 2011-12.

• To ensure better flow of credit to students, a Credit Guarantee Fund proposed to be set up. Health

• No new case of polio reported in last one year.

• Existing vaccine units to be modernised and new integrated vaccine unit to be set up in Chennai.

• Scope of ‘Accredited Social Health Activist’ – ‘ASHA’ is being enlarged. This will also enhance their remuneration.

• Allocation for NRHM proposed to be increased from Rs.18,115 crore in 2011-12 to Rs.20,822 crore in 2012-13.

• National Urban Health Mission is being launched.

• Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more Government medical colleges.


Employment and Skill Development • MGNREGS has had a positive impact on livelihood security.

• Need to bring about greater synergy between MGNREGA and agriculture and allied rural livelihoods.

• Allocation of Rs.3915 crore made for National Rural Livelihood Mission representing an increase of 34 %.

• To ease access to bank credit, corpus for ‘Women’s SHG’s Development Fund’ enlarged.

• Proposal to establish Bharat Livelihoods Foundation of India through Aajeevika scheme.

• Allocation for Prime Minister’s Employment Generation Programme increased by 23 % to Rs.1,276 crore in 2012-13.

Skill Development

• Projects approved by National Skill Development Corporation expected to train 6.2 crore persons at the end of 10 years.

• Rs.1,000 crore allocated for National Skill Development Fund in 2012-13.

• To improve the flow of institutional credit for skill development, a separate Credit Guarantee Fund to be set up.

• “Himayat” scheme introduced in J&K to provide skill training to 1 lakh youth in next 5 years. Entire cost to be borne by Centre.

Social Security and the needs of weaker Sections

• Allocation under NSAP raised by 37 % to Rs.8,447 crore in 2012-13.

• In the ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme for BPL beneficiaries, pension amount to be raised from Rs.200 to Rs.300 per month.

• Lump sum grant on the death of primary breadwinner of a BPL family, in the age group 18-64 years, doubled to Rs.20,000.

• To enhance access under SWAVALAMBAN scheme, LIC appointed as an Aggregator and all Public Sector Banks appointed as Points of Presence (PoP) and Aggregators.

• Special grant provided to various universities and academic instiutions.

Security

• A provision of Rs.1,93,407 crore made for Defence services including Rs.79,579 crore for capital expenditure. Any further requirement to be met.

• Rs.1,185 crore proposed to be allocated for construction of nearly 4,000 residential quarters for Central Armed Police Forces.

• Rs.3,280 crore proposed to be allocated for construction of office building of Central Armed Police Forces.

• Scheme to create National Population Register likely to be completed within next 2 years. Governance UID-Aadhaar

• Enrolment of 20 crore persons completed under UID mission. Adequate funds to be allocated to complete enrolment of another 40 crore persons.


Black Money

• Proposal to lay a White Paper on Black Money in current session of Parliament.

Public Procurement Legislation

• Bill regarding Public Procurement Legislation to be introduced in the Budget Session of the Parliament.

• Legislative measures for strengthening anti-corruption framework are at various stages of enactment.

Budget Estimates 2012-13

• Gross Tax Receipts estimated at Rs.10,77,612 crore.

• Net Tax to Centre estimated at Rs.7,71,071 crore.

• Non-tax Revenue Receipts estimated at Rs.1,64,614 crore.

• Non-debt Capital Receipts estimated at Rs.41,650 crore.

• Temporary arrangement to use disinvestment proceeds for capital expenditure in social sector schemes extended for one more year.

• Total expenditure for 2012-13 budgeted at Rs.14,90,925 crore.

• Plan expenditure for 2012-13 at Rs.5,21,025 crore is 18 % higher than BE 2011-12. This is higher than 15 % projected in Approach to the Twelfth Plan.

• 99 % of the total plan outlay met in the Eleventh Plan.

• Non-plan expenditure estimated at Rs.9,69,900 crore.

• Rs.3,65,216 crore estimated to be transferred to States including direct transfers to States and district level implementing agencies.

• Entire amount of subsidy is given in cash and not as bonds in lieu of subsidies.

• Fiscal deficit at 5.9 % of GDP in RE 2011-12.

• Fiscal deficit at 5.1 % of GDP in BE 2012-13.

• Net market borrowing required to finance the deficit to be Rs.4.79 lakh crore in 2012-13.

• Central Government debt at 45.5 % of GDP in 2012-13 as compared to Thirteenth Finance Commission target of 50.5 %.

• Effective Revenue Deficit to be 1.8 % of GDP in 2012-13. Tax Proposals Direct Taxes

• Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST.

• DTC rates proposed to be introduced for personal income tax.

• Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs.1,80,000 to Rs.2,00,000 giving tax relief of Rs.2,000.

• Upper limit of 20 % tax slab proposed to be raised from Rs.8 lakh to Rs.10 lakh.


• Proposal to allow individual tax payers, a deduction of upto Rs.10,000 for interest from savings bank accounts.

• Proposal to allow deduction of upto Rs.5,000 for preventive health check up.

• Senior citizens not having income from business proposed to be exempted from payment of advance tax.

• To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 % to 5 % for 3 years for certain sectors.

• Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.

• Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 % upto 31.3.2013.

• Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 %.

• New sectors to be added for the purposes of investment linked deduction.

• Proposal to extend weighted deduction of 200 % for R&D expenditure in an inhouse facility for a further period of 5 years beyond March 31, 2012.

• Proposal to provide weighted deduction of 150 % on expenditure incurred for agri-extension services.

• Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 % deduction of profits for 10 years.

• Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from Rs.60 lakhs to Rs.1 crore.

• Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.

• Proposal to provide weighted deduction at 150 % of expenditure incurred on skill development in manufacturing sector.

• Reduction in securities transaction tax by 20 % on cash delivery transactions.

• Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions.

• Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.

• Measures proposed to deter the generation and use of unaccounted money.

• A net revenue loss of Rs.4,500 crore estimated as a result of Direct Tax proposals. Indirect Taxes Service Tax

• Sevice tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST.

• Overwhelming response to the new concept of taxing services based on negative list.

• Proposal to tax all services except those in the negative list comprising of 17 heads.

• Exemption from service tax is proposed for some sectors.

• Service tax law to be shorter by nearly 40 %.


• Number of alignment made to harmonise Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction.

• Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.

• Utilization of input tax credit permitted in number of services to reduce cascading of taxes.

• Place of Supply Rules for determining the location of service to be put in public domain for stakeholders’ comments.

• Study team to examine the possibility of common tax code for Central Excise and Service Tax.

• New scheme announced for simplification of refunds.

• Rules pertaining to point of taxation are being rationalised.

• To maintain a healthy fiscal situation proposal to raise service tax rate from 10 % to 12 %, with corresponding changes in rates for individual services.

• Proposals from service tax expected to yield additional revenue of Rs.18,660 crore. Other proposals for Indirect Taxes

• Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 % to 12 %, merit rate from 5 % to 6 % and the lower merit rate from 1 % to 2 % with few exemptions.

• Excise duty on large cars also proposed to be enhanced.

• No change proposed in the peak rate of customs duty of 10 % on nonagricultural goods.

• To stimulate investment relief proposals for specific sectors - especially those under stress.

Agriculture and Related Sectors

• Basic customs duty reduced for certain agricultural equipment and their parts;

• Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto March 31, 2015.

Infrastructure

• Proposal for full exemption from basic customs duty and a concessional CVD of 1 % to steam coal till 31st March, 2014.

• Full exemption from basic duty provided to certain fuels for power generation.

Mining

• Full exemption from basic customs duty to coal mining project imports.

• Basic custom duty proposed to be reduced for machinery and instruments needed for surveying and prospecting for minerals.

Railways

• Basic custom duty proposed to be reduced for equipments required for installation of train protection and warning system and upgradation of track structure for high speed trains.

Roads

• Full exemption from import duty on certain categories of specified equipment needed for road construction, tunnel boring machines and parts of their assembly.


Civil Aviation

• Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft.

Manufacturing

• Relief proposed to be extended to sectors such as steel, textiles, branded readymade garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanised units.

Health and Nutrition

• Proposal to extend concessional basic customs duty of 5 % with full exemption from excise duty/CVD to 6 specified life saving drugs/vaccines.

• Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children.

• Basic customs duty and excise duty reduced on Iodine.

• Basic customs duty reduced on Probiotics.

Environment

• Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects.

• Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles.

• Proposal to increase basic customs duty on imports of gold and other precious metals. Additional resource mobilisation

• Proposals to increase excise duty on ‘demerit’ goods such as certain cigarettes, hand-rolled bidis, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco.

• Cess on crude petroleum oil produced in India revised to Rs.4,500 per metric tonne.

• Basic customs duty proposed to be enhanced for certain categories of completely built units of large cars/MUVs/SUVs.

Rationalization measures

• Excise duty rationalised for packaged cement, whether manufactured by mini-cement plants or others.

• Levy of excise duty of 1 % on branded precious metal jewellery to be extended to include unbranded jewellery. Operations simplified and measures taken to minimise impact on small artisans and goldsmiths.

• Branded Silver jewellery exempted from excise duty.

• Chassis for building of commercial vehicle bodies to be charged excise duty at an ad valorem rate instead of mixed rate.

• Import of foreign-going vessels to be exempted from CVD of 5 % retrospectively.

• Duty-free allowances increased for eligible passengers and for children of upto 10 years.

• Proposals relating to Customs and Central excise to result in net revenue gain of Rs.27,280 crore.

• Indirect taxes estimated to result in net revenue gain of Rs.45,940 crore.

• Net gain of Rs.41,440 crore in the Budget due to various taxation proposals.

Chapter 2 Macroeconomic Perspectives


Chapter 2

Macroeconomic Perspectives Prelude The Union Budget 2012-13 has been announced against the backdrop of an economic slowdown which could be largely attributed to declining investments on the one hand and increasing costs due to high inflation on the other. It is in this context that there have been hopes and expectations that the Union Budget 2012-13 would provide the required impetus to business confidence and rekindle expectations of achieving higher GDP growth. The current macro economic scenario has been a cause for concern. The monetary tightening measures, to ease inflationary pressures, have shrunk investment growth over the last few quarters, which have led to lower GDP growth. Against the forecast of 9 per cent growth for the current fiscal assumed in last year’s budget, there has been deterioration in macro-economic situation in each quarter of the current fiscal and expectations now are of a 6.9 percent growth in the current fiscal. In addition to investment growth, final consumption expenditure, both by the government and the private sector is down indicating slackening of demand. Gross domestic product has slowed down from 7.7 in the first quarter to 6.1 per cent in the third quarter. The scenario of diminishing growth calls for demand inducing measures which would rev up the economy and create opportunities for growth. However, the burgeoning fiscal deficit evidenced during he current fiscal makes it difficult to mobilize the resources required for making crucial investments to spur demand. Among the reasons for high fiscal deficit in the current financial year is the runaway growth in food, fuel and fertilizers subsidy, dwindling tax collections and non-realisation of disinvestment targets. The fiscal deficit as a percentage of GDP has breached the target of 4.6% to reach 5.9% for the current fiscal and is an area of concern. Another number causing disquiet is the surge in current account deficit accruing from a surge in imports, especially of oil and commodities like gold, and decline in exports due to fall in overseas demand has resulted in a trade deficit of US$166.8 billion during April-February 2011-12. Going forward, the prices of oil are expected to rise further owing to geopolitical tensions, an upturn in the US economy and growing demand from emerging economies of India and China. This would have


deleterious consequences for our current account deficit which has already touched 3.6 per cent of GDP. The recent depreciation of the rupee, which has gone down by 12.4 per cent from Rs. 44.97 per US dollar in March 2011 to Rs.51.34 per dollar in January 2012, could further aggravate the problem. Our short term debt has gone up from 12.9 per cent of forex reserves in 2006 to 21.2 per cent in 2011. Furthermore, the latest figure of headline WPI based inflation, which has edged up to 6.95 per cent in February 2012 shows that prices continue to remain a cause for concern. At a time when industry is already reeling under the impact of an investment led slowdown caused by tightening monetary policy of the RBI and with manufacturing sector growing at a modest 4.4 per cent during April- January 2011-12, the upturn in inflation spells bad news for industry. The Union Budget proposal for the year 2012-13 has many growth oriented measures and has also made serious efforts towards fiscal consolidation. The Budget identifies the following five objectives; Focus on domestic demand driven growth recovery

Create conditions for rapid revival of high growth in private investment

Address supply bottlenecks

Intervene decisively to address the problem of malnutrition especially in 200 high burden districts

Expedite coordinated implementation of decisions on improving delivery systems, governance, and transparency.

Fiscal Measures The attempt at reversing the fiscal slippage of the current year by introducing amendments to the FRBM Act is welcome and a step in the right direction. Successful fiscal consolidation will be contingent upon widening of the tax base and better targeting of subsidies. The commitments to contain subsidy at 1.75% of GDP and eliminate the effective revenue deficit in three years are critical targets introduced in this Budget. While the revenue and expenditure targets set for 2012-13 seem realistic and the fiscal deficit of 5.1% of GDP looks achievable, the borrowing level required to finance this deficit is still high and is expected to keep up the pressure on interest rates. Measures to take forward the implementation of the Goods and Services Tax (GST) included the announcement of a negative list of services and the move to harmonise the Central Excise and Service Tax. In particular, the introduction of a one-page common simplified registration form for filing returns and other steps for reducing transaction cost of exporters are welcome measures of taxation reforms. However, an area of concern for industry is the increase in excise duty and service tax from 10% to 12%. At a time when industry is already facing huge increases in input cost, this will further add to the burden. It is possible that this may not yield the revenue that the Minister is looking for and instead result in further slowdown in growth while adding to inflationary pressure. Agriculture India’s agricultural sector has performed reasonably well over the last few years, backed by favorable monsoons. For the current fiscal year, agriculture is expected to grow at 2.5 per cent compared to 7 per cent in the previous year. The agriculture sector has been a major beneficiary in this budget that saw the deepening of older schemes and the announcement of new ones. For a fast track growth of agriculture, this year the Budget has proposed an increase in the outlays under various schemes and activities under specific missions to address the supply-side constraints, strengthening and building agri-infrastructure, timely accessibility and availability of agriculture credit, strengthening agriculture research and extension and addressing productivity requirements in agriculture. Some of the key initiatives announced are:


• The total plan outlay for agriculture and cooperation has been increased by 18 per cent from Rs 17,123 crore in 2011-12 to Rs 20,208 crore in 2012-13.

• Agriculture credit is being enhanced by as much as Rs 100,000 crores which would help in the timely access to affordable credit for farmers

• Additional interest rate subventions are being given to incentivize farmers for repaying post-harvest loans on time.

• Agri research has been given priority. Incentives of Rs 200 crores are being offered for research and 7 agri research institutes are being allocated Rs 50-100 crores each.

• Irrigation under the Accelerated Irrigation Benefit Program would receive additional funds and a Irrigation and Water Resource Finance Company is being instituted.

• Steps have been taken for incentivizing cold storage, warehousing, etc. as well. A National Mission on Food Processing is being started. Warehouse capacity is being expanded. Under RIDF, Rs 5000 will be allotted for creating warehousing facilities.

• Investment linked deduction of capital expenditure at the rate of 150% is extended to cold chain facilities, warehouses for food grains and sugar, fertilizers, and beekeeping.

• Agri-extension services will also be allowed 150% weighted deduction.

• Viability Gap Funding eligibility has been extended to irrigation, terminal markets, infrastructure for agricultural markets, soil testing laboratories, and capital investment in fertilizers.

• A range of customs duty measures have been taken for agri machinery, horticulture and floriculture, fertilizer projects, etc.

• Modification of Kisan Credit Card (KCC) to make the KCC smart card to be used at ATMs.

• A national mission on food processing has been announced. However, food processing has not been exempted from excise duty as requested by CII.

Infrastructure and Industrial Development The government has made infrastructure development a priority in this year’s budget. Taking cognizance of the falling numbers of Gross Fixed Capital Formation (GFCF) and keeping in view the investment requirement of the 12th five year plan (Rs 50 lakh crore, half of which is expected from the private sector) the Budget has emphasized on infrastructure development and financing.

Infrastructure Financing It has been proposed to double the tax free bonds for financing infrastructure projects to Rs 60,000 crore from the Rs 30,000 crore announced in 2012-13. This would provide tremendous impetus to all sectors which broadly come under infrastructure sector. These bonds will be issued by various Government undertakings in the year 2012-13. If such sums are raised efficiently and projects conceptualized, then they will not only add much needed capacity in core infrastructure, but also generate demand for private sector construction and infrastructure related services which in turn would have a multiplier effect on the economy. Lack of adequate infrastructure is a major constraint on our growth. Following the strategy of using a mix of public investment and public private partnerships (PPP) to stimulate public investment in infrastructure, the sectors like irrigation (including dams, channels and embankments), terminal markets, common infrastructure in agriculture markets, soil testing laboratories and capital investment in fertilizer sector have been made eligible for viability gap funding (VGF) under the Scheme for support to PPP in infrastructure. Oil and gas/LNG storage facilities and oil and gas pipelines, fixed network for telecommunication and telecommunication towers have also been proposed to be made eligible sectors for VGF.


Housing To address the shortage of housing for low income groups in major cities and towns the budget has proposed measures like:

• Allowing ECB for low cost affordable housing projects;

• Set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans;

• Enhance provisions under Rural Housing Fund from Rs 3000 crore to Rs 4000 crore;

• Extend the scheme of interest subvention of 1 per cent on housing loan up to Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh for another year; and

• Enhance the limit of indirect finance under priority sector from Rs 5 lakh to Rs 10 lakh.

• ECB for low cost housing projects and setting up of a Credit Guarantee Trust Fund. These proposals would help boost construction activity and trigger a chain of backward and forward linkages with other sectors of the economy further supporting the growth recovery. Micro Small and Medium Enterprises

• India Opportunities Venture Fund with a corpus of Rs. 5000 crore set up with SIDBI to enhance availability of equity to micro, small and medium enterprises and enable greater access to finance.

• The proposal to exempt accruals from sale of residential property from capital gains tax if invested in equity of a manufacturing SMEs is a very welcome initiative, which is also in line with the proposals announced earlier as part of the National Manufacturing Policy.

Power and Coal Against the backdrop of severe fuel shortage as well as funding issues hurting the power sector, that has impacted infrastructure and industrial activity in the past months, the following has been proposed

• Coal India Limited (CIL) has been advised to sign fuel supply agreements, with power plants that have entered into long-term Power Purchase Agreements with DISCOMs and would get commissioned on or before March 31, 2015

• Allow External Commercial Borrowings (ECB) to part finance rupee debt of existing power projects.

• Full exemption from basic customs duty and a concessional CVD of one per cent to steam coal for a period of two years till March 31, 2014

• Full basic duty exemptions would be extended to power plant fuels such as natural gas and Liquified Natural Gas (LNG), uranium concentrate, sintered uranium dioxide in natural and pellet form.

• Rs 10,000 crore tax free infrastructure bonds for Power

• Withholding tax on ECB would be cut to five per cent from 20 per cent for three years.

• Additional depreciation of 20 per cent in the initial year is proposed to be extended to new assets acquired by power generation companies.

This would help ease the fuel supply constraints and the fund issues affecting the production prospects in power sector which is expected to see a capacity addition of over 80,000 MW in the 12th Five-Year Plan (2012-17). Mining


• The announcement stating full exemption from basic customs duty to coal mining projects and proposal to reduce basic custom duty for machinery and instruments needed for surveying and prospecting for minerals augurs well for the mining sector.

Steel

• The proposal to reduce basic customs duty on plant and machinery imported for setting up or substantial expansion of iron ore pellet plants or iron ore beneficiation plants from 7.5 per cent to 2.5 per cent will help enhancement of low-grade iron ore of which India has huge reserves.

• The proposals to reduce basic customs duty on coating material for manufacture of electrical steel from 7.5 per cent to 5 per cent, nickel ore and concentrate and nickel oxide/ hydroxide from 2.5 per cent or 7.5 per cent to nil is a positive development for the steel sector.

• Similarly the move to enhance export duty on chromium ore from Rs.3000 per tonne to 30 per cent ad valorem and enhancement of basic customs duty on non-alloy, flat-rolled steel from 5 per cent to 7.5 per cent is also a welcome move.

Extension of the incentive for R&D To promote investment in research and development, it is proposed in the Budget to extend the weighted deduction of 200 per cent for R&D expenditure in an in-house facility beyond March 31, 2012 for a further period of five years. This is in line with the government focus on IP creation in the ICTE sector and encouraging manufacture of Value Added products. FINANCIAL SECTOR Capital Market

During the year 2011-12, a series of steps were taken to deepen the capital market and encourage investment in infrastructure sector .The current Budget has proposed next steps to further deepen the reforms in Capital market.

• Investment into newly launched Rajiv Gandhi Equity savings scheme to the extent of Rs50000/- (for an investor with annual income of Rs10 lacs) will increase flow of money into equity market and thus increase liquidity. This scheme along with Increase of duty on Gold will help in ploughing household savings into the capital market. The proposed lock-in period of 3 years in the above stated scheme will bring long term investment into the equity market

• Allowing QFI to access Indian Corporate Bond Market will bring in market participants, liquidity and increase depth in the corporate debt market

• Proposal to make it mandatory for companies to issue IPOs of Rs 10 crores and above in electronic form through nationwide broker network of stock exchanges will help in increasing reach of Capital Market particularly the equity market. Provision of Electronic voting facilities will incentivise people to invest in market, particularly from rural, tier 2 and Tier 3 cities and towns as they will get an opportunity to participate in important decisions of the companies which would be made mandatory initially for top listed companies

• Two way fungibility in IDR will benefit companies who have IDR in the market as they will be in a position to attract foreign capital.

• Reduction of STT to 0.1% from current 0.125% is a great step but in order to attract more investors into the market with a long term investment perspective, STT must be abolished.

• Removal of cascading effect of DDT will help in creating value for the investors thus bringing in more investors in the market as Companies will increase dividend pay-out.

Banking

• Government proposal for capitalisation of PSBs, RRBs and other financial institutions to the tune of Rs15888 crores will help the banks to write-off certain amount of NPAs from Balance sheet of banks


• To bring banking payment structure at par with global standards, a comprehensive action plan has been prepared for implementation in 2012-13. A central Know Your Customer (KYC) depository will be developed in 2012-13 to avoid multiplicity of registration and data upkeep.

Financial Inclusion

• Allocation of Rs10000 crores to NABARD to refinance Regional rural banks to disburse short term crop loans will help the small and marginal farmers to get access to funds which will be very critical during sowing season and will also help to increase production of food grains etc..

• Allowing kisan credit cards to be used as ATM cards will lead to financial inclusion

The key announcement in the Budget is the proposal to expand pilot projects leveraging Aadhar. Aadhar will be extended to 40 crore and delivery of certain services is being envisaged for 50 districts within 6 months. Further, PDS may also be placed on this platform. Delivery of fertliser subsidy will be conducted through mobiles for direct transfer. Health CII had called for creation of medical education infrastructure, and formation of a nodal agency for PPP in healthcare as well as expanding the scope of the Rashtriya Swasthya Bima Yojana. A model for a 200-bed hospital had been submitted to the Health Ministry. The Budget stressed malnutrition as a major objective. A multisectoral program is being instituted for women and children in 200 districts and the Integrated Child Development Service allocation is increased by 58%. Besides protein supplement production is being targeted in the agricultural plans. The Budget took a limited number of steps in health.

• Allocation under National Rural Health Mission is being enhanced from Rs 18,115 crores to Rs 20,822 crores in 2012-13.

• National Urban Health Mission will be launched • 7 more health education institutes will be set up. • Customs duty reduction were announced for drugs, iodised salt, and probiotics • Education and skill development • Education and skill development are a high priority as public expenditure on the sector needs

to be scaled up substantially. Skill Development Development of Skilled manpower cannot be handled alone by the government. The industry needs to be drawn in through suitable incentives. In this context providing for weighted deduction at the rate of 150 per cent of expenditure incurred on skill development in manufacturing sector (in accordance with specified guidelines) in the Budget would help harnessing the capacity and capability with the industry.

Chapter 3 Direct Taxes


Chapter 3

Direct Taxes The Union Budget 2012-13 proposals on taxation reforms were aimed at fiscal consolidation particularly in the backdrop of slippage in direct tax revenue and increased subsidies. The Finance Minister echoes CII views that the uncertainty in the global economic environment makes it necessary to strike a balance between fiscal consolidation and strengthening macroeconomic fundamentals to create adequate headroom to deal with future shocks.

The high fiscal deficit also needed attention on fiscal consolidation especially to make any repo rate cuts in future by RBI to effectively bring down the interest rates. Hence it was very important to augment revenues on the one hand and focus on expenditure rationalisation on the other. One of the major reforms in taxation has been the Direct Tax Code 2010 which was introduced in the parliament in August 2010. The Finance Minister’s assurance that steps for the enactment of DTC at the earliest would be undertaken is a welcome move. In fact, on personal income tax front the Finance Minister introduced the DTC rates for personal income tax. The following sections provide a brief impact of the various direct tax proposals.

Key Direct Taxes Proposals

Personal Income Tax • Union Budget 2012 has continued to extend relief to individual tax payers by revising the tax

slabs. The tax slabs are revised as under :

Present slabs • Proposed Slabs

0 - 1.80 Lakhs • Nil • 0 – 2 Lakhs • Nil

1.80 - 5 Lakhs • 10% • 2 - 5 Lakhs • 10%

5 - 8 Lakhs • 20% • 5 – 10 Lakhs • 20%

Above 8 Lakhs • 30% • Above 10 Lakhs • 30%


• No withholding on savings bank interest up to Rs. 10,000. This would result in reduced tax burden for small individual assessees.

• No obligation to file Return of income where savings bank interest up to Rs. 10,000 and salary

income up to Rs. 5 lakhs, thereby providing relief from the regulatory compliances to a major portion of the society.

• Proposal to allow deduction of Rs. 5,000 for preventive health check up. This is an additional tax

benefit. • For Senior citizens not having income from business, it has been proposed to exempt them from

advance tax payment. This measure would relieve a majority of the senior citizens from taking care of the tax compliance throughout the year.

Corporate /International Tax

• Turnover limit on compulsory tax audit for SMEs rose from Rs. 60 lakhs to Rs. 1 crore. As a result, very small businesses would be relieved of the audit requirements.

• Advanced Pricing Agreements have been proposed to be implemented, thereby reducing tax

litigation which is estimated to be to the tune of about Rs 3,00,000 crore. • Proposal to remove cascading effect of Dividend Distribution Tax (DDT) in a multi -tier

corporate structure. Where a holding company receives dividend from subsidiary which has already suffered DDT, dividend distributed by the holding company in the same year, to that extent shall not be liable to DDT. It would help in curbing the menace of double taxation to a considerable extent.

• Continue to allow repatriation of dividends from foreign subsidiaries of Indian Companies to

India at a lower rate of 15% as against 30% for one more year, thereby relieving such companies.

• STT proposed to be reduced by 20% from 0.125% to 0.1 % in order to reduce the delivery

transaction costs.

• Relief from long term capital gain on transfer of residential property if invested in a manufacturing small or medium enterprise. This would aid the development of MSMEs in the economy.

• Levy of Alternate Minimum Tax proposed to be extended in addition to companies on all

persons except those claiming profit linked deduction. This would increase tax burden to the society.

• TDS scope enhanced to include :

o Immoveable property sale in excess of Rs. 50 lakhs in urban areas @ 1% and in excess of Rs. 20 lakhs for other areas;

o Remuneration to Directors @ 10% As a result, almost all MSMEs will have to go through elaborate TDS compliances.

• Tax collection at source scope enhanced to include: o Cash sale of bullion and jewellery @ 1% where value exceeds 2 lakhs, thereby

burdening the domestic consumers. o Sale of minerals like coal, lignite and iron ore.

• Share premium in excess of fair market value to be treated as income. This would, in most

cases, result in increased tax burden to the compliant assessees.


• Tax Residency certificate to be submitted for claiming benefit of a DTAA, thereby further

increasing the compliance requirements. • Wealth tax exemption of residential house allotted to an employee of a company. This

measure will encourage employee welfare in corporate sector.

• While most of the direct tax proposals have been positive in terms of its desired impact, a few of them would prove to be counterproductive. One such measure is GAAR.

• Proposal to introduce GAAR in order to counter aggressive tax avoidance by enabling a

review of GAAR panel. • Anti avoidance measures :

o Compulsory reporting of overseas assets including financial interest in any entity ; o Reopening of cases up to 16 years where the income in relation to any asset located

outside India has escaped assessment These measures will adversely affect honest taxpayers as well as proposals such as indirect transfer of assets in India, taxable retrospectively from 1962. This would, to a large extent affect the investors’ confidence in Indian economy.

Sectoral Tax Incentives and Measures • Rate of withholding interest payments on ECBs proposed to be reduced to 5% from 20% for

certain sectors to provide low cost funds. These sectors are power, airlines, roads and bridges, ports, shipyards, affordable housing, fertilizer and dams.

• Rate of investment linked deduction for capital expenditure proposed to be enhanced to 150

percent. New sectors to be introduced. This would result in increased capital investment. • Proposal to provide investment linked deduction of capital expenditure incurred in the

businesses of cold chain facility, warehouses for storage of food grains, hospitals, fertilizers and affordable housing at the enhanced rate of 150% as against the current 100%. Also, new sectors proposed to be introduced are bee keeping and production of honey and beeswax, container freight station and inland container depots and warehousing for storage of sugar. These measures would bring about development of the agriculture based ventures.

• Weighed deduction of 150% for skill development in manufacturing sector. This would bring

about a rise in the skilled population. • Tax holiday for power sector extended up to 2013. Also, additional depreciation for power

sector introduced, thereby bringing about development therein. • Restriction on Venture Capital funds to invest only in 9 specified sectors removed. This would

help such funds diversify their operations. • Weighted deduction on in house research available @ 200% extended to another 5 years.

Such deduction would help by encouraging R&D expenditure and the resultant development in the economy.

• Proposal to introduce weighted deduction @150% of the expenditure incurred on agricultural

extension, thereby promoting agriculture, obviously a priority sector in the country.

Chapter 4 Indirect Taxes

Sector and Industry Specific Analysis


Chapter 4 Indirect Taxes

Sector and Industry Specific Analysis

Air-conditioning & Refrigeration

Industry Issues Parts of air-conditioners falling under tariff heading 8415 90 00 attract customs duty of 10%. This needs to be brought down to 7.5%.

Excise duty is exempted on 22 specified equipment mentioned in list 4 of central excise notification 6/2006 – Sl. No. 5 when used for installation of cold storage, cold room or refrigerated vehicles for preservation, storage or transport of agricultural produce etc. This list needs to be expanded to include insulated composite panels and cold store door.

The practice of annual maintenance contract (AMC) for air-conditioning and refrigeration equipment is widely prevalent. As per service tax notification 12/2003 dated 20th June 2003, service tax is exempted on the value of goods and materials supplied by the service provider subject to documentary proof. There is practical difficulty in keeping separate records for materials utilized in case of comprehensive annual maintenance contracts and therefore, there is need to simplify the procedure.

What CII Wanted • Reduce customs duty from 10% to 7.5% on parts of air-conditioners.

• Extend excise exemption to insulated compositive panels and cold store door.


• Necessary provision may be made to charge service tax on specified percentage of the value of contract in case of comprehensive annual maintenance contracts.

What the Government Gave

Excise Duty (%) Customs Duty (%) Item

2011-12 What CII wanted

Budget 2012-13

2011-12 What CII wanted

Budget 2012-13

Window / wall type self contained or split air-conditioners (8415 10)

10 10 12 10 10 10

Household refrigerators (8418 21 00, 8418 29 00)

10 10 12 10 10 10

Inputs

Compressors (8414 30 00, 8414 80 11)

10 10 12 7.5 7.5 7.5

Thermostats (9032 10 10) Electronic Controls (8537 10 10) Copper/copper alloys tubes and fittings (7411, 7412)

10 10

12 7.5 7.5 7.5

Parts of air-conditioners (8415 90 00) 10 10 12 10 7.5 10

Parts of refrigerators (8418 99 00) 10 10 12 7.5 7.5 7.5

Impact of Budget 2012-13 • Excise duty on air-conditioning and refrigeration equipment as well as their inputs has been

increased from 10% to 12%.


Alkalies Industry Issues The major user industries of caustic soda are pulp & paper, textile processing, aluminium smelting, soaps & detergents and plastic polymers. At present about 95% of the installed capacity of 32 lakhs MT is based on the more efficient membrane cell technology.

Customs duty on mono or bipolar membrane electrolysers and its parts as well as membranes for replacement and parts thereof is 5%. However, spare parts, other than membranes and parts thereof, required for the existing membrane cell plants attract customs duty of 7.5%. The concessional duty rate of 5% needs to be extended to such spare parts also.

Electric power is the major input required for manufacture of caustic soda and accounts for almost 60% of the total cost of production. Many caustic soda manufacturers have set up their own captive power plants and most of these are based on coal. Reduction in customs duty on steam coal from 5% to NIL would give some relief to the plants using coal.

What CII Wanted • Allow import of spares (other than membranes and parts thereof) for existing membrane cell

caustic soda / caustic potash plants at 5% customs duty.

• Reduce customs duty from 5% to NIL on steam coal.

What the Government Gave Excise Duty (%) Customs Duty (%)

Item 2011-12 What CII

wanted Budget 2012-

13 2011-12 What CII

wanted Budget 2012-

13

Caustic Soda (Sodium Hydroxide) (2815 11 & 2815 12)

10 10 12 7.5 7.5 7.5

Soda Ash (Disodium Carbonate) (2836 20) 10 10 12 7.5 7.5 7.5

Spare parts for caustic soda and caustic potash Membranes and parts thereof for replacement of worn out membranes (85 or any other chapter)

10 10 12 5 5 5

Other spare parts falling under chapter 84,85 or 90 10 10 12 7.5 5 7.5

Inputs for captive Power Plants - Steam coal (2701 19 20)

5/1* 5/1* 6/1* 5 NIL NIL

- Furnace oil, LSHS (2710 19 50) 14 14 14 5 5

5

*without CENVAT credit

Impact of Budget 2012-13 • Excise duty on Aluminium and most of its inputs has been increased from 10% to 12%.

• Customs duty on steam coal (2701 19 20) has been reduced from 5% to NIL and CVD has been reduced from 5% to 1% upto 31.03.2014.


Aluminium

Industry Issues In the manufacturing process of aluminium, aluminium ore (bauxite) is first converted into calcined aluminia and then to primary aluminum. Calcined petroleum coke, coal tar pitch, aluminium fluoride and caustic soda are used for producing aluminium.

Primary aluminium in various forms attract customs duty of 5% where as some of the inputs attract higher rate of customs duty.

Coal tar pitch is one such input which attracts customs duty of 10% which is two times the 5% duty on aluminuium.

What CII Wanted • Reduce customs duty from 10% to 5% on coal tar pitch.



wanted Budget 2012-

13 2011-12 What CII

wanted Budget 2012-

13

Aluminium in various forms (7601 to 7607) 10 10 12 5 5 5

Aluminium products (7610 to 7616) 10 10 12 10 10 10

Inputs

Aluminium ore (bauxite) (2606) NIL NIL NIl 2.5 2.5 2.5

Calcined petroleum coke (2713 12 00) 14 14 14 2.5 2.5 2.5

Calcined alumina (2818 20 10) 10 10 12 5 5 5

Aluminium fluoride (2826 12 00) 10 10 12 7.5 7.5 7.5

Caustic soda (2815 11 10, 2815 12 00) 10 10 12 7.5 7.5 7.5

Coal tar pitch (2708 10 10) 14 14 14 10 5 10

Impact of Budget 2012-13 • Excise duty on aluminium and most of its inputs has been increased from 10% to 12%.

• The process of cutting, sliting and printing of aluminium foils shall amount to manufacture.

• Description of aluminium scrap (7602 00 10) has been aligned with revised ISRI Code.


Auto Components Industry Issues The Automotive Mission Plan (AMP) 2016 envisions that the auto-component industry will need huge investments to augment capacity. In this sector, especially the SMEs require upgradation of technology and modernization of manufacturing process. This requires creation of Auto Component Technology and Modernization Development Fund by the Government that could be used to finance and support companies as they modernize/upgrade technology.

Catalytic converters are pollution control devices and attract customs duty of 5% as per Sl. No. 265 of customs notification 21/2002. Parts of catalytic converts also attract customs duty of 5% as per sl no 238(a) of customs notification 21/2002. In order to encourage indigenous manufacture of catalytic converters and their parts, 9 inputs are allowed for import at concessional customs duty of 5% as per sl. no. 238 (b) of customs notification 21/2002. With the development of new technology, new raw materials are now being used by industry for manufacture of catalytic converters and their parts. Customs duty on such new materials viz SS wirecloth stripe (7314 14 10) and washcoat (3824 90 90) needs to be reduced from 10% and 7.5% respectively to 5%.

What CII Wanted • Create Auto Component Technology & Upgradation Development Fund.

• Reduce customs duty from 10% to 5% on SS wirecloth stripe and from 7.5% to 5% on washcoat used for manufacture of catalytic converters and their parts


Item 2011-12 What CII wanted Budget 2012-13 2011-12 What CII wanted Budget 2012-13

Engine for vehicles (8407 31, 8407 32, 8407 33, 8407 34, 8408 20)

10 10 12 7.5 7.5 7.5

Parts suitable for use principally with vehicle engines (8409 91 and 8409 99)

10 10 12 7.5 7.5 7.5

Catalytic converter (8421) 10 10 12 5 5 5

9 specified inputs for manufacture of catalytic converters and their parts (84 or any other chapter)

10 10 12 5 5 5

SS wirecloth stripe (7314 14 10) 10 10 12 10 5 10

Washcoat (3824 90 90) 10 10 12 7.5 5 7.5

Impact of Budget 2012-13 • Excise duty has been increased from 10% to 12%.

• Concessional excise duty of 6% has been prescribed for batteries supplied to manufacturers of electrically operated vehicles, including 2 and 3 wheel electric motor vehicles. This benefit would be available to manufacturers registered with Indian Renewable Energy Development Agency or any State Nodal Agency notified for the purpose by the Ministry of New and Renewable Energy for Central Financial Assistance.

• Basic customs duty reduced from 10% to NIL, CVD from 10% to 6% and SAD from 4% to NIL on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to hybrid/electric vehicles.


Automobiles Industry Issues Multi-utility vehicles (MUVs) provide mass transportation and around 70% of MUVs are used in rural areas. These attract excise duty of 22% which needs to be brought down to CENVAT rate of 10%.

Cars (other than small cars) and multi-utility vehicles (MUVs) attract a very high rate of excise duty of 22% plus specific duty of ` 15,000. The specific excise duty needs to be withdrawn.

Presently fully built commercial vehicles falling under HS Code 8702 and 8704 attract excise duty of 10% while chassis of such vehicles under tariff heading 8706 00 29 and 8706 00 42 have excise duty of excise duty of 10% plus ` 10,000 per chassis. There are instances where the value addition done at by the body builder is very low resulting in accumulation of credit. Therefore, specific duty of ` 10,000 on chassis needs to be dispensed with.

What CII Wanted • Reduce excise duty from 22% to 10% on MUVs.

• Withdraw specific excise duty element of ` 15,000 on passenger cars (other than small cars) and MUVs.

• Withdraw specific element of excise duty of ` 10,000 on chassis fitted with engine.

What the Government Gave Excise Duty (%) Customs Duty (%) Item

2011-12 What CII

wanted Budget 2012-

13 2011-12 What CII

wanted Budget 2012-

13

2-wheelers (8711), 3-wheelers (8703) 10 10 12 60 60 60

Petrol, LPG or CNG driven small cars up to 1200 cc and length up to 4000 mm (8702, 8703) Diesel driven small cars up to 1500 cc and length up to 4000 mm (8702, 8703)

10 10 12 60 60 60

Multi utility vehicles (MUVs) (8702, 8703) 22 10 24 60/10 60/10 60/10

Motor vehicles (8702, 8703) of engine capacity exceeding 1500 cc

22% plus ` 15,000

22 27 As applicable As applicable As applicable

Automobile chassis of commercial vehicles 10% plus ` 10,000

10 15 10 10 10

Impact of Budget 2012-13 • Excise duty on cars and MUVs of various categories increased from 10% to 12% , 22% to 24% and

22% plus ` 15,000/- to 27%.

• Excise duty on chassis has been increased from composite rates of 10% plus ` 10,000 and 22% plus ` 10,000 to ad-valorem rate of 15% and 25% respectively.

• Lithium Ion battery packs will attract 6% excise duty when supplied to manufacturers of hybrid or electric vehicles.

• Customs duty on CBUs of cars (8703) with FOB value more than US $ 40,000 and engine capacity more than 3000 cc in case of petrol and more than 2500 cc in case of diesel run vehicles has been increased from 60% to 75%.

• Customs duty on flat-rolled products of non-alloy steel whether or not clad, plated or coated (7208 to 7212) has been increased from 5% - 7.5%.


Bearings Industry Issues Special type of slewing bearings used in wind operated electricity generators are now manufactured in India. Import of such bearings is allowed at 5% customs duty as per S. No. 224 of customs notification 21/2002 when imported for the manufacture or the maintenance of wind operated electricity generators. CVD is also exempted on such bearings as per Sl. No. 130 of list 5 attached to excise notification 6/2006-Sl. No. 84.

Bearings for wind mills are custom made and designed to take very heavy load. The diameter of such bearings ranges from 1 meter to 3.5 meter.

The main input for these bearings is forged steel rings falling under tariff heading 7326 90 99 and accounts for 70% of the total material cost. Customs duty on such forged steel rings is 10% plus 10% CVD compared to 5% plus NIL CVD on the bearings. It creates imbalance and makes difficult for the indigenous manufacturer to compete with the imported bearings. This anomaly in customs duty structure needs to be corrected.

What CII Wanted • Reduce customs duty form 10% to 5% and CVD from 10% to NIL on forged steel rings when

imported for manufacture of bearings of wind operated electricity generators.


2011-12 What CII

wanted Budget 2012-

13 2011-12 What CII

wanted Budget 2012-

13

Ball and roller bearings (8482) 10 10 12 7.5 7.5 7.5

Special bearings for wind operated electricity generated upto 30 KW (8482)

NIL NIL NIL 5 5 5

Input for Special Bearings

Forged rings (7326 90 99) 10 NIL 12 10 5 10

Impact of Budget 2012-13 • Excise duty has been increased from 10% to 12%.

• There is no change in customs duty rates.


Capital Goods / Projects Imports Industry Issues Mega power projects, nuclear power projects, specified goods for coal bed methane operations and goods required for petroleum exploration licences / leases and petroleum operations under specified contracts under NELP and LNG attract zero customs duties. Such duty concessions puts the domestic industry at a cost disadvantage particularly in cases where full deemed export benefits are not allowed.

Exemption of 4% special CVD includes various types of projects and certain capital goods. This exemption erodes competitiveness of the domestic industry.

In industrial boilers (8402), the major inputs are boiler quality steel pipes and tubes and pipes of non alloy / alloy steel. Customs duty on tubes and pipes (7304) is 10% as compared to 7.5%% on boilers. This anomalous customs duty structure needs to be corrected. What CII Wanted • Import of capital goods under 0% category for project imports and others should be removed.

• Impose 4% SAD on all types of projects and others which involve import of capital goods.

• Reduce customs duty from 10% to 7.5% on tubes and pipes used in industrial boilers.

What the Government Gave Excise Duty (%) Customs Duty +CVD +Spl. CVD (%) Item

2011-12 What CII wanted Budget 2012-13 2011-12 What CII wanted Budget 2012-13

Mega Power Projects (9801) NIL NIL NIL NIL+NIL+NIL 5+NIL+4 NIL+NIL+NIL

General machinery and equipment (84, 85, 90)

10 10 12 7.5+10+4 7.5+10+4 7.5+10+4

Inputs

Tubes & pipes for industrial boilers 10 10 12 10+10+4 7.5+10+4 7.5+12+4

Impact of Budget 2012-13 • CII recommendation has been accepted and customs duty on tubes and pipes for manufacture of

boilers has been reduced from 10% to 7.5%. Anomaly has thus been removed.

• Basic customs duty has been reduced form 5% to NIL on fertilizer projects for a period of 3 years i.e upto 31.3.2015.

• Basic duty has been exempted on coal mining projects.

• Customs duty has been reduced to 2.5% on capital goods/equipments required for setting up or substantial expansion of iron ore pellet plants and beneficiation plants under project imports.

• Customs duty on flat-rolled products of non-alloy steel whether or not clad, plated or coated (7208 to 7212) increased from 5% - 7.5%.

• Basic customs duty on marine seawater pumps has been reduced form 10% to 5%.

• Customs duty on specified agricultural machinery and their parts as well as components have been reduced from 7.5% to 2.5%.


Cement Industry Issues Customs duty on cement was reduced from 12.5% to NIL on 22nd January 2007 and continues at the same rate. NIL customs duty on cement compared to 2.5% to 5% customs duty on its inputs amounts to inverted duty structure. Therefore, customs duty of 5% should be levied on cement.

Coal is the main fuel for manufacture of cement and 40% of the requirement is met through linkage. The balance requirement is met either from open market e-auction or by import of coal. There is a customs duty of 5% on coal, which needs to be reduced to NIL.

Though cement is the most essential infrastructure input, the excise duty on cement is the highest among the items required for building infrastructure. Therefore, the specific component of excise duty over and above 10% normal rate needs to be removed to simply the tax structure and provide benefit to the users. What CII Wanted • Increase customs duty from NIL to 5% on cement.

• Reduce customs duty from 5% to NIL on non-coking coal.

• Rationalize and simply excise duty on cement and cement clinkers to 10% ad-valorem by removing element of specific duty.


Excise Duty Customs Duty% Item


Cement of RSP not exceeding ` 190 per 50 Kg bag (2523 29)

10%+`80 per tonne 10% 12%+`120 per tonne NIL 5 NIL

Cement of RSP exceeding ` 190 per 50 Kg bag (2523 29)

10%+`160 per tonne 10% 12%+`120 per tonne NIL 5 NIL

Cement clinkers (2523 10 00) 10%+`200 per tonne 10% 12% 10 10 10

Inputs

Steam coal (2701 19 20) 5/1* 5/1* 6/1* 5 NIL NIL

Petroleum coke (2713 11 00) 14 14 14 2.5 2.5 2.5


Impact of Budget 2012-13 • Excise duty on cement in bags has been revised to 12% ad-valorem plus ` 120 per tonne.

• Packaged Portland cement has been brought under RSP base assessment with abatement of 30%.

• Excise duty on cement clinkers has been changed to 12% ad-valorem.

• Customs duty on steam coal (2701 19 20) has been reduced from 5% to NIL and CVD has been reduced from 5% to 1% upto 31.03.2014.


Cigarettes Industry Issues The current system of length based specific excise duty for cigarettes introduced in 1987 has avoided valuation disputes and resulted in growth in revenue collection. It needs to be continued at the current level of taxation in excise except cigarettes of smaller length.

The new segment of filter cigarettes, length not exceeding 60 mm, with excise duty of ` 689 per thousand cigarettes introduced in the budget 2010, was expected to provide an opportunity to the legitimate cigarette industry to offer cigarettes at competitive price. Consequently, the organized industry launched filter cigarettes of 59 mm at cheaper price of ` 15 for a pack of 10 cigarettes but it has not helped as illegal filter cigarettes are sold to consumers at ` 1 per stick. There is need to increase the length from 60mm to 65mm and reduce the excise duty further for filter cigarettes in this segment.

The high excise duty rates on domestic cigarettes offer a lucrative tax arbitrage opportunity, resulting in the widespread availability of smuggled cigarettes and revenue loss to exchequer. This adversely affects domestic industry also. What CII Wanted • Continue with the specific excise duty structure for cigarettes at current level of taxation.

• Amend the existing excise slab of filter cigarettes of not exceeding 60mm to a slab of length not exceeding 65mm with a levy of excise duty of ` 200 per 1000 cigarettes.

• Increase surveillance and stricter implementation of anti-smuggling measures. What the Government Gave

Excise +NCCD+Health Cess ` Per 1000 Cigarettes

Customs Duty (%) Item


Cigarettes non-filter (<=60mm) (2402 20 10) 669 200

Cigarettes non-filter (>60-70mm) (2402 20 20) 1473 1473

Cigarettes filter (<=60mm) (2402 20 30) 669 200

Cigarettes filter (61-70mm) (2402 20 40) 969 969



Cigarettes other (2402 20 90) 2363 2363

Cigarettes of tobacco substitute 1408 1408

Changes given below

30 30 30

Impact of Budget 2012-13 • Modification has been made in the size of lengthwise slabs for filter and non filter cigarettes and

consequently the lower slab of length not exceeding 60 mm has been revised to length not exceeding 65mm with specific basic excise duty of ` 509 per thousand sticks.

• For all slabs above the length of 65mm, an ad-valorem component of 10% has been added to the existing specific rate. Ad-valorem component of duty would be applicable on retail sale price less abatement of 50%.


Copper & Copper Scrap

Industry Issues In India, the secondary producers of copper can be divided into two categories viz. the organized sector and unorganized sector. Unorganized sector procure copper scrap from Kabaris and mostly conduct their business without paying any taxes. The organized sector find itself in a disadvantageous position due to the following:

- Customs duty on scrap of copper is 5% which is at par with customs duty on copper.

- Unable to utilize the CENVAT credit of 10% CVD and 4% SAD paid on imported scrap due to low value addition in conversion of scrap into metal form.

Many of industrialized nations like China, USA, EU, Russia and Japan do no impose any duties on the import of copper scrap. Infact, China has emerged as the biggest importer and processor of copper scrap. On the other hand, India is among a handful of countries imposing duties on copper scrap.

The Customs duty structure on copper scrap has put India in a disadvantageous position. Therefore, there is a need to encourage recycling of copper by reducing basic customs duty and SAD on scrap of copper to NIL. What CII Wanted • Reduction of customs duty from 5% to NIL on copper scrap.

• Exemption of 4% Special Addition Duty on copper scrap.



wanted Budget 2012-13 2011-12 What CII wanted Budget 2012-13

Copper rods, copper wire-bars (7403) 10 10 12 5 5 5

Inputs

Copper ores and concentrates (2603) NIL NIL NIL 2.5 2.5 2.5

Copper scrap (7404) 10 10 12 5 NIL 5

Impact of Budget 2012-13 • Excise duty has been increased on copper and its products from 10% to 12%.

• Brass scrap (7404 00 29) has been exempted from 4% SAD.

• Description of copper scrap (7404 00 12) and brass scrap (7404 00 22) has been aligned with revised ISRI Code.


Drugs & Pharmaceuticals Industry Issues In the budget 2010, basic customs duty on medical equipment falling under chapter 90 was reduced from 7.5% to 5% and Sl. No. 363 of customs notification 21/2002 and Sl. No. 61 of excise notification 6/2006 were omitted. Angiography contrast agents fall under HS Code 3004 90 99 and due to these changes, customs duties on these have increased from 5% plus NIL CVD to 10% plus 5% CVD.

Navelbine is a new medicine and is being imported for use in the therapy of treating Non-Small-Cell Lung Cancer (NSCLC). This needs to be included as a life saving drug in list 4 of customs notification 21/2002-Sl. No. 83.

Radioisotope TI-201 and Technitium-99M are tracer molecules used in medical imaging appear at sl no. 92 and 111 of customs list 4 and attract NIL customs duty as per sl no. 83 of customs notification 21/2002. Similar customs duty concession needs to be extended to Radioisotope-FDG 18 mainly used as medical imaging modality Positron Emission Tomography.

In list 3, “Interferon alpha-2b/alpha-2a/interferon alpha-2a/Interferon NL (LNS)” appears at Sl. No. 37 and attracts customs duty of 5%. Likewise, “Interferon beta-1b” is a newly developed life saving drug akin to the medicine and should be given the same concession.

List 3, also includes cancer drugs “Pegulated Liposomal Doxorubicin Hydrochloride injection” and “Doxorubicin” at Sl. No. 89 and 128 respectively. Likewise, “Doxorubicin Hydrochloride Liposomal injection” is a medicine meant for treatment of cancer and needs to be included in the list. What CII Wanted • Reduce customs duty from 10% to 5% and excise duty from 5% to NIL on angiography contrast agents.

• Include Navelbine as life savings drug for cancer in list 4 of customs notification 21/2002 to bring down customs duty to NIL.

• Allow import of interferon beta-1b and doxorubicin Hydrochloride Liposomal injection at concessional customs duty of 5% by including these in list 3 of customs notification 21/2002.




Drug formulations (3001, 3003, 3004, 3005, 3006) 5 5 6 10 10 10

126 specified life saving drugs / medicines including their salts and esters and diagnostic kits – list 4 of customs (28,29,30,38)

NIL NIL NIL NIL NIL NIL

175 specified drugs, medicines, diagnostic kits or equipment – list 3 of customs (28,29,30) NIL NIL NIL 5 5 5

Angiography Contrast agents (3004 90 99) 5 NIL 6 10 5 10

Impact of Budget 2012-13 • Excise duty on drugs formulations has been increased from 5% to 6%.

• Concessional rate of 5% customs duty have been extended to 6 more life saving drugs/vaccines and the bulk drugs used for their manufacture.

• Customs duty has been reduced from 10% to 5% on probiotics classified under 3002 90 30.


Earth Moving & Construction Equipment

Industry Issues 21 specified equipment used for construction of roads are allowed for import at NIL basic customs duty, NIL CVD and NIL additional duty of customs (SAD) as per customs notification 21/2002-Sl. No. 230 and customs notification 20/2006-Sl. No. 1. There is no corresponding provision for allowing import of inputs of these equipment by indigenous manufacturers at concessional rate of customs duties.

The Budget 2011 levied MRP based excise duty on packaging activity of parts, components and assemblies of earthmoving machinery with retrospective effect from 29 April 2010. Excise duty for the retrospective period was not recovered by the industry from the buyers of spare parts and its payment has put strain on the industry. Further, the industry is also being made liable for payment of interest on delayed payment of excise duty for the retrospective period which needs to be exempted. What CII Wanted • Allow import of inputs such as hydraulic components / aggregates (not manufactured in India) by

indigenous manufacturers at NIL customs duties for manufacture of 21 specified road construction equipment mentioned in list 18 of customs notification 21/2002.

• Make specific provision for non-applicability of interest on delayed payment of excise duty based on MRP for the retrospective period of levy.




Complete equipment such as excavators/dozers/ shovel loaders / mechanical shovels etc. (8429, 8430)

10 10 12 7.5 7.5 7.5

Complete Off-Highway dumpers (8704 10) 10 10 12 10 10 10

21 specified equipment for construction of roads – list 18 of customs (84 or any other chapter)

10 10 12 NIL NIL NIL

Impact of Budget 2012-13 • Excise duty increased from 10% to 12%.

• The benefit of NIL customs duty on 21 specified road construction equipment has been extended to projects awarded by Metropolitan Development Authority.


Ferro Alloys Industry Issues Noble ferro-alloys are high valued and domestic capacity is available in small and medium size units which produce ferro-molybdenum, ferro-titanium and ferro-vanadium. The inputs used for production of ferro-vanadium are, vanadium pentoxide, vanadium sludge and ammonium metavanadate. In the budget 2011, customs duty on vanadium pentoxide and vanadium sludge was reduced from 7.5% to 2.5% by inserting Sl. No. 552A in customs notification 21/2002. However, customs duty on ammonium metavanadate contiunues at 7.5% which needs to be reduced to 2.5% to remove the anomaly in duty structure.

What CII Wanted • Reduce customs duty from 7.5% to 2.5% on ammonium metavanadate.



Ferro-manganese (7202 11 00, 7202 19 00) Ferro-silicon (7202 21 00, 7202 29 00) Ferro-chromium (7202 41 00, 7202 49 00) Ferro-molybdenum (7202 70 00)

10 10 12 5 5 5

Inputs Ores of manganese, chrome, molybdenum, vanadium etc (26)

NIL NIL NIL 2.5 2.5 2.5

Vanadium pentaoxide or vanadium sludge (2825)

10 10 12 2.5 2.5 2.5

Ammonium metavanadate (2841 90 00) 10 10 12 7.5 2.5 2.5

Impact of Budget 2012-13 • Excise duty on ferro alloys has been increased from 10% to 12%.

• CII recommendation has been accepted and customs duty on ammonium metavanadate reduced from 7.5% to 2.5%. Anomaly in customs duty has thus been removed.

• Customs duty on Nickel ore and concentrates has been reduced from 2.5% to NIL.

• Export duty on chromium ore and concentrates has been enhanced from specific rate of ` 3000 per tonne to 30% ad-valorem.


Fly Ash Bricks

Industry Issues In order to encourage use of fly ash, government gave excise concession in the past by reducing excise duty to 8% on fly ash bricks when the general excise duty rate was 16%. This was done by excise notification No. 5/2006- Sl. No. 9. Excise notification 5/2006 was amended vide notification 11/2010 and duty on fly ash bricks was increased from 8% to 10% which is at par with the general rate of excise duty. Usage of fly ash for manufacture of fly ash bricks and other products needs to be encouraged by reducing excise duty to half of the general rate.

What CII Wanted • Reduce excise duty from 10% to 5% on fly ash bricks and other goods covered by Sl. No. 9 of

excise notification 5/2006.



Fly ash bricks (6815 99 10)

10 5 12 10 10 10

Input

Fly ash (26 or any other chapter) 5/1* 5/1* 6/2* 5 5 5


Impact of Budget 2012-13 • Excise duty on fly ash bricks has been further increased from 10% to 12%.


Food Processing & Agro-Based Products Industry Issues Even though in the budget 2011, excise duty on number of food products was increased from Nil to 5%, option was given to pay 1% excise duty without availment of CENVAT credit. This facility needs to be continued.

The high rate of excise duty of 10% on packing materials used for processed food adds to the cost resulting in increase in prices. Therefore reduction of excise duty from 10% to 5% needs consideration.

Currently on packaged drinking water, excise duty of 10% is levied which needs to be brought down to 5%.

Though most of food products attract 5% excise duty, there are few items attracting excise duty of 10%. Such items are mainly those containing cocoa and instant coffee. This discrimination needs to be removed by reducing excise duty on all food products having 10% rate to 5%.

While most of the ready to serve beverages are subject to excise duty on MRP basis, iced tea falling under tariff heading 2101 20 90 is still assessed to 10% excise duty on transaction value.

What CII Wanted • Continue with the existing exemptions either in the form of NIL excise duty or 1% excise duty

without CENVAT credit.

• Reduce excise duty form 10% to 5% on packing materials used by the food processing industry.

• Reduce excise duty from 10% to 5% on packaged drinking water and processed food having excise duty of 10%.

• Include iced tea under section 4A of the Central Excise Act for the purpose of valuation with abatement. What the Government Gave



Sugar confectionery containing cocoa (1806 90 20) Chocolates & chocolate products (1806 90 10)

10 5 12 30 30 30

Malted food for other than infant use (1901 90) 10 5 12 30 30 30 Wafers having chocolate (1905 32 11) 10 5 12 30 30 30 Instant coffee (2101 11 10, 2101 11 20) 10 5 12 30 30 30 Mineral Water (2201, 2202) 10 5 12 30 30 30

Impact of Budget 2012-13 • Food products earlier having excise duty of 5% and 10% will now attract duty of 6% and 12% respectively.

• Optional excise duty of 1% on food products has been increased to 2% without CENVAT credit.

• Excise duty on processed food products of soya has been reduced from 10% to 6%.

• Customs duty has been reduced from 30% to 10% on soya protein concentrates falling under tariff heading 2106 10 00.

• Customs duty on commercial type coffee vending machine and brewing machine has been reduced form 10% - 5%.


Glycerine

Industry Issues Refined glycerine attracts customs duty of 7.5%. The main input for manufacture of refined glycerine is crude glycerine which attracts customs duty of 12.5%. Thus there is a gap of 5% between raw material and finished product duty structure. This is case of inverted duty structure which needs to be corrected. Due to lesser customs duty on refined glycerine, user prefer to import it. Reduction of customs duty on crude glycerine would give the opportunity to utilize the surplus installed glycerine refining capacity in the country. Therefore, customs duty on crude glycerine should be reduced from 12.5% to 7.5% to bring at par with the duty on refined glycerine.

What CII Wanted • Reduce customs duty on crude glycerine from 12.5% to 7.5%.



Refined Glycerine (Glycerol) (2905 45 00) 10 10 12 7.5 7.5 7.5

Refined Glycerine (Glycerol) from ASEAN Agreement Countries (2905 45 00)

10 10 12 6 6 6

Refined Glycerine (Glycerol) from Asia Pacific Trade Agreement countries (2905 45 00)

10 10 12 2.175 2.175 2.175

Inputs

Crude Glycerine (Glycerol) (1520 00 00) 10 10 12 12.5 7.5 12.5

Impact of Budget 2012-13 • Excise duty has been increased from 10% to 12% on crude as well as refined glycerine.

• There is no change in customs duty structure and consequently anomaly in customs duty rate between crude glycerine and refined glycerine continues.


Hydrocarbons

Industry Issues Government has given exemption from customs duties on goods specified in list 12 of customs notification 21/2002 when imported for petroleum operations in specified areas subject to fulfillment of specified conditions. However, payment of service tax is applicable on taxable services utilized for exploration and production of crude oil and natural gas which needs to be exempted. National Calamity Contingent Duty (NCCD) of ` 50 per tonne is payable on crude oil which was imposed vide Section 169 of the Finance Act 2003 and it was mentioned that it will be limited to one year only i.e upto 29.02.2004. Subsequently in the Finance Act 2005, NCCD was extended without any time limit. NCCD on crude oil needs to be withdrawn. Compressed Natural Gas (CNG) usage in vehicles helps in the reduction of carbon emission. CNG attract excise duty of 14% compared to the general rate of 10%. Reduction in excise duty on CNG would promote the conversion of vehicles from liquid fuels to CNG.

What CII Wanted • Exempt service tax on services used for exploration and production of crude oil and natural gas.

• Withdraw NCCD on crude oil.

• Reduce excise duty from 14% to 10% on CNG.

What the Government Gave Excise Duty Customs Duty (%) Item


Crude Oil (2709 00 00) Cess of ` 2500 per tonne

Cess of ` 2500 per tonne

Cess of ` 4500 per tonne

NIL NIL NIL

Natural Gas (2711 21 00) NIL NIL NIL 5 5 NIL/5

Liquefied Natural gas (LNG) (2711 11 00) NIL NIL NIL 5 5 NIL/5

Compressed Natural Gas (CNG) (2711 29 00) 14 10 14 10 10 10

Impact of Budget 2012-13 • Cess on crude petroleum under the Oil Industries Development Act has been increased from

` 2500 to ` 4500 per metric tonne.

• Customs duty on natural gas and liquefied natural gas has been reduced from 5% to NIL when imported for generation of electricity energy by a generating company. This benefit will not be available for captive generation of electricity and they have to pay customs duty of 5%.


Machine Tools

Industry Issues The manufacture of CNC machines require specialised components of high precision and are manufactured by a select few companies in the world. These components contribute around 30 percent of the input cost to the manufacture of CNC machines. The reduction of the customs duty on these critical parts for machine tools from the present rate of 7.5% to 2.5% would bring down the input costs and so the selling prices of these machines, thereby, spurring demand from the manufacturing sectors.

What CII Wanted • Reduce customs duty from 7.5% to 2.5% on component parts not manufactured in India and used

for manufacturer of CNC machine tools.



Machine Tools (8456 to 8465) 10 10 12 7.5 7.5 7.5

Inputs

CNC systems (8537 10 00)) 10 10 12 7.5 7.5 7.5

Imported Component Parts for CNC Systems

Servo drives/motors (8501) Precision spindles (8466 93) Ball screws (8483 40 00) Linear motion guide ways (8482 80 00) Precision bearings (8482) Precision gauging and balancing systems (9031 80 00)

10 10 12 7.5 2.5 7.5

Impact of Budget 2012-13 • There is increase in excise duty form 10% to 12% on machines tools and their inputs.


Medical Equipments Industry Issues Orthopedic implants are eligible for import at NIL basic customs duty, NIL CVD and NIL SAD. Four raw materials for manufacture of these implants are exempted for basic customs duty. But, attract 10% CVD and 4% SAD. However excise duty is exempted. Endovascular stents are exempted from basic customs duty but excise duty of 5% is applicable which needs to be exempted. Nasal reconstructive surgery use Polydioxanore (PDS) plate and attract basic customs duty of 10% which needs to be reduced to NIL. What CII Wanted • Exempt CVD and SAD on four main inputs for orthopedic implants. • Reduce excise duty from 5% to NIL on endovascular stents. • Reduce customs duty from 10% to NIL on PDS plates used for nasal reconstructive surgery. • Allow import of medical grade PVC sheeting for manufacture of continuous ambulatory peritoneal

dialysis system at concessional 5% basic customs duty, 5% CVD and NIL SAD.



Medical Equipment (9018, 9019, 9022) 5 5 6 5 5 5

Endovascular stents (90) 5 NIL 6 NIL NIL NIL

Orthopedic implants (9021 10) NIL NIL NIL NIL NIL NIL

Inputs

Special grade stailess steel, titanium alloys, cobalt – chrome alloys, high-density polyethylene for manufacture of orthopedic implants of sub-heading 9021 10 (39, 72 and 81)

10 NIL 12 NIL NIL NIL

Impact of Budget 2012-13 • Excise duty has been reduced to 6% on 3 specified raw materials for manufacture of syringe,

needle, catheters and and cannulae. • Excise duty has also been reduced to 6% on parts of blood pressure monitors and glucometers. • Excise duty has been made NIL on specified raw materials for manufacture of coronary

stents/coronary stent system and artificial heart valve. • Basic customs duty on Super Absorbent Polymer (SAP) classified under 3906 90 90 has been

reduced from 7.5% to 5% with NIL SAD. • New rates of customs duties on some of the equipments are as under:

– Specified inputs for manufacture of syringe, needle, catheters and cannulae – 2.5% basic + 6% CVD+NIL SAD.

– Specified raw materials for manufacture of coronary stents and artificial heart valve – NIL basic + NIL CVD + NIL SAD.

– Parts of blood pressure monitors and glucometers - 2.5% basic + 6% CVD+NIL SAD.


Molasses

Industry Issues Excise duty on molasses is ` 750 per metric tonne since 1 March 2006 which was fixed considering the general CENVAT rate of 16% and the prevailing market price of molasses at that time. The general rate of excise duty has been reduced from 16% to 10% but there has not been any reduction in the specific excise duty rate on molasses. On an average 1000 Kg of molasses is used to produce 225 liters of denatured ethyl alcohol. The manufacturer of denatured ethyl alcohol is not able to utilize the entire CENVAAT credit attributable to molasses, other inputs and services. Therefore, there is need to reduce the specific excise duty on molasses to bring at part with the 10% excise duty rate.

What CII Wanted • Reduce excise duty on molasses from ` 750 to ` 500 per MT.

What the Government Gave Excise Duty Customs Duty (%) Item


Cane molasses (1703 10 00) ` 750 per MT ` 500 per MT ` 750 per MT 10 10 10

Impact of Budget 2012-13 • There is no change in excise & customs duty rates of Molasses.


Paints

Industry Issues Titanium dioxide is the vital pigment used in paints. Rutile and anatase are the two grades of titanium dioxide and paint industry uses both the varieties. The value of titanium dioxide in decorative paints is around 20% of the cost.

Customs duty on titanium dioxide is 10% which is at par with that of paints. In chapter 28, titanium oxide is the only chemical attracting customs duty of 10% where as all other goods attract effective customs duty of 7.5% or less by notifications. Customs duty on titanium oxide needs to be reduced to 7.5%.

What CII Wanted • Reduce customs duty from 10% to 7.5% on titanium dioxide.



Paints (3208, 3209)

10 10 12 10 10 10

Inputs

Titanium dioxide (2823 00 10) 10 10 12 10 7.5 7.5

Zinc oxide (2817 00 10) 10 10 12 7.5 7.5 7.5

Ethylene glycol (2905 31 00) 10 10 12 7.5 7.5 7.5

Impact of Budget 2012-13 • CII recommendations has been accepted and customs duty on titanium oxide have been reduced

from 10% to 7.5%.


Paper & Paper Board

Industry Issues Paper and paperboard manufacturing is a continuous process industry and requires power and steam round the clock. Since the State Electricity Boards are not able to ensure uninterrupted power supply, the industry has set up captive power plants.

Coal is used in paper industry for producing steam and power. Bereft of ‘core sector’ status, this industry is not in a position to secure uninterrupted supply of coal from collieries. Consequently, the paper industry has no option but to import coal at a higher cost. Imported coal attracts 5% basic customs duty which needs to be reduced to NIL.

What CII Wanted • Reduce customs duty from 5% to NIL on coal.



Newsprint in specified form and size (4801) NIL NIL NIL NIL NIL NIL

Light weight coated paper (LWC) for printing of magazines (4810) NIL NIL NIL NIL NIL NIL

Coated paper and paper board other than LWC (4810) 5 5 6 10 10 10

Uncoated paper and paper board (4802) 5 5 6 10 10 10

Inputs Wood pulp (excluding rayon grade) for newsprint (47)

NIL NIL NIL NIL NIL NIL

Wood pulp for other paper (47) NIL NIL NIL 5 5 5

Waste and scrap of paper (4707) 5 5 6 2.5 2.5 NIL

Steam Coal (2701 19 20) 5/1* 6/1* 6/1* 5 NIL NIL


Impact of Budget 2012-13 • Customs duty on steam coal (2701 19 20) has been reduced from 5% to NIL and CVD has been

reduced from 5% to 1% upto 31.03.2014.

• Customs duty on waste paper (4707) has been reduced form 2.5% to NIL.


Soaps

Industry Issues Customs duty on soaps and soaps noodles is 10%. Various inputs for manufacture of soap and soap noodles attract higher rate of customs duty creating an anomalous situation.

Crude palm stearin (CPS) and crude palm kernel oil (CPKO) with Free Fatty Acid (FFA) of 20% or more, commonly known as industrial oils, are used in the manufacture of soaps, fatty acids and fatty alcohols. Crude palm stearin attract customs duty of 10%. Other industrial oils attract customs duty of 20%. However, customs duty payable is 12.5% for manufactures of soaps, industrial fatty acids and fatty alcohols having plant for splitting up such oils into fatty acids and glycerols as per Sl. No. 30 1(B) of customs notification 21/2002.

Palm fatty acid distillate (PFAD), industrial mono-carboxylic fatty acids and fatty alcohols falling under HS Code 3823 are also used for manufacture of soaps and customs duty on these continues at 15%, which is higher than the duty rate on soaps.

What CII Wanted • Reduce the customs duty from 12.5% - 20% to 10% on industrial oils with FFA of 20% or more

when imported for manufacture of soaps, industrial fatty acids and fatty alcohols.

• Reduce customs duty from 15% to 10% on palm fatty acid distillate (PFAD), industrial mono-carboxylic fatty acids and fatty alcohols.


2011-12 What CII

wanted Budget 2012-

13 2011-12 What CII wanted Budget

2012-13

Soaps and soaps noodles (3401 20 00) 10 10 12 10 10 10

Inputs

Oils (except crude palm oil and crude palm stearin) having a Free Fatty Acid (FFA) 20% or more imported for manufacture of soaps, industrial fatty acids and fatty alcohol by a manufacturer having plant for splitting up of such oils into fatty acids and glycerols (1507 to 1515)

NIL NIL NIL 12.5 10 12.5

Oils (except crude palm oil), having a Free fatty Acid (FFA) 20% or more for manufacture of soaps, industrial fatty acids and fatty alcohols (1507 to 1515)

NIL NIL NIL 20 10 20

Palm fatty acid distillate, industrial mono-carboxylic fatty acids and industrial fatty alcohols (3823 11 90, 3823 12 00, 3823 13 00, 3823 19 00, 3823 70)

10 10 NIL 15 10 15

Impact of Budget 2012-13 • Excise duty on soaps has been increased from 10% to 12%.

• There is no relief on customs duty on industrial oils and palm fatty acid distillate.


Steel

Industry Issues Steel plants based on COREX iron making technology use non-coking coal along with 5 – 6% coke. Sponge iron route of steel making also utilizes non-coking coal. Due to limited availability of indigenous coal, Coal India Ltd the balance requirement is met from imports at a higher cost. Reduction of customs duty on non-coking coal from 5% to NIL needs to be favourably considered.

Induction furnaces owners using imported melting scrap of steel pay CVD of 10% and SAD of 4%. Their product attract excise duty of 10%. Consequently they are unable to utilize the CENVAT credit of CVD and SAD due to lower value addition in conversion of scrap into steel which adds to the cost.

What CII Wanted • Reduce customs duty from 5% to NIL on non-coking coal.

• Exempt 4% additional duty of customs (SAD) on melting scrap of iron and steel imported by manufactures of steel.



Iron and non-alloy steel Ingots, billets, blooms, slabs, hot/cold rolled flat products, bars, rods, angles, shapes, sections, wires etc. (7206 to 7217)

10 10 12 5 5 5/7.5

Stainless steel and other alloy steel Ingots, billets, hot/cold rolled flat products, bars, rods, angles, shapes, sections, wires etc. (7218 to 7229)

10 10 12 5 5 5

Inputs

Melting Scrap of Iron or Steel (other than stainless steel) (7204)

10 10 12 NIL NIL NIL

Scrap of stainless steel for melting (7204 21) 10 10 12 NIL NIL NIL

Coal other than coking coal (2701 11 00, 2701 12 00, 2701 19 20)

5/1* 5/1* 6/1* 5 NIL NIL


Impact of Budget 2012-13 • Customs duty on flat rolled products of non-alloy steel whether or not clad, plated or coated (7208

12) increased form 5% to 7.5%.

• Prime quality CRGO silicon electrical steel sheets (7225 11 00, 7226 11 00) exempted from 4% SAD.

• Customs duty on steam coal (2701 19 20) has been reduced form 5% to NIL and CVD from 5% to 1% upto 31.03.2014.

• Customs duty on organic/inorganic coating material (3209 90 90) for manufacture of electrical steel has been reduced from 10% to 5%.

• The process of oiling and pickling of flat rolled products of non alloy steel (7208) shall amount to manufacture.


Synthetic Fibres and Yarns

Industry Issues Spin finish oil is a vital input in manufacture of synthetic fibres and attracts customs duty of 7.5%. With the reduction of customs duty on PSF/PSY to 5% with effect from 29th November 2007, customs duty on spin finish oil needs to be reduced to 5% to remove the existing anomaly.

All goods falling under Chapter 28 except titanium dioxide (2823 00 10) attract customs duty of 7.5% as per Sl. No. 552 of customs notification 21/2002. Titanium dioxides are of two types viz. Rutile and Anatase. Anatase grade titanium oxide is used by synthetic fibres and yarn industry as dulling agent and attracts customs duty of 10% which needs to be reduced to 7.5%.

Many manufacturers in this sector have set up captive power plants based on coal. Due to non-availability of adequate coal for this purpose, these manufacturers have to import coal which attracts customs duty of 5%. Customs duty on steam coal needs to be reduced from 5% to NIL.

What CII Wanted • Reduce customs duty from 10% to 7.5% on titanium dioxide anatase grade.

• Reduce customs duty from 7.5% to 5% on spin finish oil.

• Reduce customs duty from 5% to NIL on steam coal.



Fibres / Filaments

Polyester staple fibre (PSF) and tow (5501 20 00, 5503 20 00, 5506 20 00)

10 10 12 5 5 5

Yarns

Polyester filament yarn (PFY) (5402, 5406 00 16)

10 10 12 5 5 5

Nylon filament yarn (NFY) (5402,5406 10 00)

10 10 12 7.5 7.5 7.5

Nylon tyre yarn (5402 19 10) 10 10 12 7.5 7.5 7.5

Inputs Titanium dioxide anatase grade (2823 00 10) 10 10 12 10 7.5 7.5

Spin finish oil (3403 11 00) 10 10 12 7.5 5 5

Steam coal (2701 19 20) 5/1* 5/1* 6/1* 5 NIL NIL

*without CENVAT Credit

Impact of Budget 2012-13 • CII recommendation accepted and customs duty on titanium dioxide has been reduced from 10%

to 7.5%.

• Customs duty has been reduced on steam coal (2701 19 20) from 5% to NIL and CVD from 5% to 1%.


Textile Machinery

Industry Issues Customs duty on textile machines is 7.5% but certain specified machinery attract 5% customs duty. Accessories, parts and components of textile machinery fall under tariff heading 8448 and attract customs duty of 7.5% which needs to be reduced to 5%.

Shuttleless looms (air jet, water jet, rapier and projectile and narrow width high speed needle) are allowed for import at concessional customs duty of 5% as per Sl. No. 9 of list 31 attached to customs notification 21/2002-Sl. No. 251. Shuttleless looms (rapier, air jet, water jet), compact ring spinning machine and automatic cone winding machine are being manufactured by indigenous manufacturers and only few dedicated components, not manufactured in India, are imported. Reduction of customs duty on such components from 5% to NIL would help the indigenous manufacturers to be competitive.

What CII Wanted • Reduce customs duty from 7.5% to 5% on accessories, parts and components of textile machines

falling under tariff heading 8448.

• Reduce customs duty from 5% to NIL on 15 imported dedicated parts, components and accessories of shuttleless looms, compact ring spinning machine and cone winding machine.



Textile machinery (8444 to 8447, 8451 except 8451 21 00 and 8451 30 10)

10 10 12 7.5 7.5 7.5

Inputs

Auxiliary machinery, parts and components for textile machinery of headings 8444 to 8447 (8448)

10 10 12 7.5 5 5

15 dedicated parts, components and accessories of shuttles looms, compact ring spinning machine and cone winding machines

10 10 12 5 NIL 5

Impact of Budget 2012-13 • The existing concessional customs duty rate applicable to specified textile machinery has now

been restricted to new machinery only.

• NIL customs duty has been allowed on shuttleless looms and their part/components imported by manufacturers of textile machinery.


Tiles

Industry Issues Customs duty on ceramic tiles is 10% whereas inputs attract customs duty of 5%, 7.5%, and 10%.

China being member of Bangkok Agreement (now known as Asia-Pacific Trade Agreement), customs duty rate on ceramic tiles from China is 4.3%. During 2010-11, import of tiles from China was `61,646 lacs.

Import of ceramic and vitrified tiles from Sri Lanka attracts NIL customs duty under India-Sri Lanka Free Trade Agreement. Customs duty on Import of tiles from Malaysia is 5% under CECA.

Taking these factors into account customs duty on basic input for tiles i.e clays needs to be reduced.

What CII Wanted • Reduce customs duty from 5% to 2.5% on clays.



Glazed ceramic tiles (6908) 10 10 12 10 10 10

Vitrified tiles, whether polished or not (6907 10 10, 6907 90 10)) 10 10 12 10 10 10

Inputs

Clays (2508 40) NIL NIL NIL 5 2.5 5

Boric Acid (2810 00 20) 10 10 12 5 5 7.5

Impact of Budget 2012-13 • Excise duty on tiles has been increased from 10 to 12%.

• Customs duty on boric acid has increased from 5% to 7.5%.


Tractors

Industry Issues Government has exempted excise duty on tractors vide excise notification 6/2006-Sl. No. 40. Excise duty is also exempted vide excise notification 6/2006-Sl. No. 92 on parts produced and used within the factory of manufacture of tractors. This helps the companies having single location unit in reducing the cost of their tractors.

Most of the tractors manufactures are having multi locational units and parts manufactured in one unit are transferred to other units. Such manufacturers have to pay excise duty of 10% on parts so transferred for which no CENVAT credit can be availed. This adds to their cost. The exemption of excise duty on tractor parts vide Sl. No. 92 of excise notification 6/2006 needs to be extended to such cases also.

In case of power tillers falling under tariff heading 8432 excise duty is NIL as per tariff. In the budget 2011, full exemption from excise duty was extended to parts of power tillers when cleared to another factory of the same manufacturer vide Central Excise Notification 16/2011 dated 1st March 2011. Similar provision would help the tractor manufacturers having more than one unit.

What CII Wanted • Extend the existing provision of NIL excise duty on parts of tractors when produced in any factory

of the manufacturer.



Tractors (except road tractors for semi-trailers of engine capacity more than 1800 cc) (8701) NIL NIL NIL 10 10 10

Inputs

Parts of tractors (8708 or any other chapter) 10 10 12 As applicable As applicable As applicable

Parts used within the factory of production for manufacture of tractors (any chapter) NIL NIL NIL As applicable As applicable As applicable

Parts manufactured and transferred to other unit of same manufacturer (any chapter) 10 NIL 12 As applicable As applicable As applicable

Impact of Budget 2012-13 Excise duty on parts of tractors has been increased from 10% to 12%.

Annexures


Annexure 1 Budget at a Glance

(In Crore of Rupees)

2011-12 Budget

Estimates

2011-12 Revised

Estimates

2012-13 Budget

Estimates

1 Revenue Receipts 789892 766989 935685

2 Tax Revenue (net to Centre) 664457 642252 771071

3 Non Tax Revenue 125435 124737 164614

4 Capital Receipts (5+6+7)$ 467837 551730 555241

5 Recoveries of Loans 15020 14258 11650

6 Other Receipts 40000 15493 30000

7 Borrowings and other Liabilities* 412817 521980 513590

8 Total Receipts (1+4)$ 1257729 1318720 1490925

9 Non Plan Expenditure 816182 892116 969900

10 On Revenue Account of which, 733558 815740 865596

11 Interest Payments 267986 275618 319759

12 On Capital Account 82624 76376 104304

13 Plan Expenditure 441547 426604 521025

14 On Revenue Account 363604 346201 420513

15 On Capital Account 77943 80404 100512

16 Total Expenditure (9+13) 1257729 1318720 1490925

17 Revenue Expenditure (10+14) 1097162 1161940 1286109

18 Capital Expenditure (12+15) 160567 156780 204816

19 Revenue Deficit (17-1) 307270 (3.4)

394951 (4.4)

350424 (3.4)

20 Fiscal Deficit (16-(1+5+6))

412817 (4.6)

521980 (5.9)

513590 (5.1)

21 Primary Deficit (20-11) 144831 (1.6)

246362 (2.8)

193831 (1.9)

Notes:

• $ Excluding receipts under Market Stabilisation Scheme.

• * Includes draw-down of Cash Balance

• GDP for BE 2012-2013 has been projected at Rs.10159884 crore assuming 14% growth over the Advance Estimates of 2011-2012 (Rs. 8912179 crore) released by CSO.

• Individual items in this document may not sum up to the totals due to rounding off.


Annexure: II Key Indicators (2006-07 to 2011-12)

Data Categories and Components Units 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1. GDP and Related Indicators

GDP(current market prices) Rs Lakh Crore 42.9 49.9 56.3 64.6 PE 76.7 QE 89.1 AE

Growth Rate % 16.3 16.1 12.9 14.7 18.8 16.1 GDP (Factor cost 2004-05 prices)

Rs Lakh Crore 35.7 39.0 41.6 PE 45.1 PE 48.9 QE 52.2 AE

Growth Rate % 9.6 9.3 6.7 8.4 8.4 6.9 Savings Rate % of GDP 34.6 36.8 32.0 33.8 32.3 na Capital Formation (rate) % of GDP 35.7 38.1 34.3 36.6 35.1 na Per Capita National Income (factor cost at current prices) Rs 31,206 35,825 40,775 46,117 53,331 60,972

2. Production Foodgrains Mn Tonnes 217.3 230.8 234.5 218.1 244.8 250.4a

Index of Industrial Production (growth) b

%

12.9

15.5

2.5

5.3

8.2

3.6c

Electricity Generation (growth) % 7.3 6.3 2.7 6.1 5.5 9.4c 3. Prices

Inflation (WPIc) (52-week average) % 6.6 4.7 8.1 3.8 9.6 9.1d

Inflation CPI (IW)(average) % 6.7 6.2 9.1 12.4 10.4 8.4d 4. External Sector Export Growth (US$) % 22.6 29.0 13.6 -3.5 40.5 23.8d Import Growth (US$) % 24.5 35.5 20.7 -5.0 28.2 29.4d Current Account Balance (CAB)/GDP % -1.0 -1.3 -2.3 -2.8 -2.7 -3.6e

Foreign Exchange Reserves US$ Bn 199.2 309.7 252.0 279.1 304.8 292.8f Average Exchange Rate Rs/US$ 45.25 40.26 45.99 47.44 45.56 47.70g

5. Money and Credit Broad Money (M3)(annual) % 21.3 21.4 19.3 16.8 16.0 14.4h Scheduled Commercial Bank Credit (Growth)

%

28.1

22.3

17.5

16.9

21.5

16.4h

6. Fiscal Indicators (Centre) Gross Fiscal Deficit % of GDP 3.3 2.5 6.0 6.5 4.8i 4.6j Revenue Deficit % of GDP 1.9 1.1 4.5 5.2 3.2i 3.4j Primary Deficit % of GDP -0.2 -0.9 2.6 3.2 1.8i 1.6j Population Million 1122 1138 1154 1170 1210k na

AE: Advanced Estimates PE: Provisional Estimate QE: Quick Estimates. na: not yet available/released for 2009-10. a: Second Advance Estimate. b: The Index of Industrial Production has been revised since 2005-06 on base (2004-05=100). c: April – December 2011. d: April 2011 to January 2012. e: CAB to GDP ratio for 2011-12 is for the period April-September 2011. f: At end January 2012. g: Average exchange rate for 2011-12 (April 2011-February 2012) h Provisional (upto January 27, 2012) i: Fiscal indicators for 2010-11 are based on the provisional actuals. j; Budget Estimates. k: Census 2011.


Figure 3.1: Key Deficit Indicators (as% of GDP)

3.32.5

6.0 6.5

4.95.9

5.1

1.3

3.4

-0.6

1.94.41.9

4.55.2

3.33.2 1.8

0.4 -0.2

2.6

-2.0

0.0

2.0

4.0

6.0

8.0

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12(RE)

2012-13(BE)

Fiscal Deficit Revenue Deficit Primary Deficit

]

Receipts Total receipts increased by 6.8% in 2011-12 (RE) over 2011-12(BE). Revenue collections moderated primarily due to low economic growth and slowdown in industrial activities due to global factors and high domestic interest rates. Moreover, disinvestment plan of the government were also hit due to uncertainty in the stock market fuelled by global economic slowdown.

The Budget estimates (BE) of the total receipts during 2012-13 stands at Rs.1,490,713 crore, which is 11.0% higher than the revised estimates (RE) for 2011-12. Out of the total receipts, the revenue have increased by 22% whereas, capital receipts have shown a decline of 3.7%.

Table 3.2: Receipts (Rs. Crores)

Share (%) in Total

Receipts Growth (%)

2011-12 (BE)

2011-12 (RE)

2012-13 (BE)

2012-13 (BE)

2011-12 (RE) over 2011-12

(BE)

2012-13 (BE) over 2011-12

(RE)

Average Annual Growth Rate (2006-07 to

2012-13 (BE))

Revenue Receipts 7,89,892 7,66,989 9,35,685 62.8 -2.9 22.0 16.1

Tax Revenue 6,64,457 6,42,252 7,71,071 51.7 -3.3 20.1 16.6

Non-Tax Revenue 1,25,435 1,24,737 1,64,614 11.0 -0.6 32.0 17.6

Capital Receipts 4,47,836 5,76,395 5,55,240 37.2 28.7 -3.7 21.2

Recoveries of Loans 15,020 14,258 11,650 0.8 -5.1 -18.3 6.2

Other Receipts 40,000 15,493 30,000 2.0 -61.3 93.6

Borrowings and Other Liabilities 4,12,817 5,21,980 5,13,590 34.5 26.4 -1.6 29.1

Total Receipts 1,257,728 1,343,384 1,490,713 100.0 6.8 11.0 16.2

Both tax and non-tax revenues have moderated in 2011-12. In the tax revenue segment, while direct tax collections have suffered on account of significant quantum of tax refunds and lower corporate profits, Indirect tax segment has suffered on account of declining GDP growth.


Figure 3.2: Growth of Tax & Non-Tax Revenue (%)

Revenue Receipts

Revenue receipts comprise of tax revenue and non tax revenue. The share of tax revenue in revenue receipts is estimated to decrease from 88% in 2011-12 RE to 87% in 2012-13 BE and that of non tax revenue is estimated to increase from 12% to 13%.

Figure 3.3: Composition of Revenue (%)

Tax Revenue

Tax Revenue has been the major contributor to revenue receipts. According to the Budget Estimate of 2011-12, Gross Tax Revenue was expected to grow by 18.5%. However the revised estimate shows that gross tax revenue collection fell by 3.3% from the BE 2011-12 level in RE 2011-12. The fall in over all tax collection is mainly on account of moderation in growth rates. The target for direct taxes was 21% expansion over provisional actual (PA) and that for indirect taxes was 15% over PA. Budget 2011-12 had made its estimations with the assumption that the Indian economy will grow at a robust rate of 9%. However, according to the advanced estimates, India is accepted to grow by only 6.9% in 2011-12. Also, the reduction in the excise duty on diesel and abolition of customs duty on the import of crude petroleum in May 2011 (estimated at Rs 38,000 crore in a full year) placed further stress on tax collections targets.

The budget 2012 estimates that gross tax revenue in 2012-13 will grow by 19.5% over RE 2011-12, on the back of robust service and excise duty collection.


Annexure 3

Fiscal Situation Fiscal Deficit The fiscal situation had improved considerably since the enactment of the Fiscal Responsibility and Budget Management Act (FRBMA) in 2003. However, the impact of growth cycles of the economy has been visible over the years with downturns raising deficits and recoveries reducing them. It is observed that when the economy was growing at a robust 9.6% in 2006-07 and 9.3% in 2007-08, India’s fiscal deficit as a%age of GDP stood at 3.3% and 2.5% respectively. In 2008-09 subsequent to the global economic crisis, while GDP growth moderated to 6.7%, the fiscal deficit shot up to 6.0% of GDP due to various fiscal stimulus packages in the form of increased subsidies and salary hikes under the sixth pay commission.

In 2011-12, government finances have come under severe stress with moderation in growth coupled with sticky inflation and increase in international crude oil prices. The revised estimate of fiscal deficit for 2011-12 stands at 5.9% as compared to the budgeted estimate of 4.6%. The Budget 2012 is designed with the assumption that growth has bottomed out during 2011-12 and the economy is likely to grow at a higher rate than in the previous year rate. By bringing back the focus on fiscal consolidation, government has undertaken measures to reduce the fiscal deficit from 5.9% of GDP in RE 2011-12 to 5.1% of BE 2012-13. This reduction in fiscal deficit by 0.8% is largely revenue driven. Trend in Deficits

Table 3.1: Changes in Deficits (Rs Crore)

2011-12 (BE) 2011-12 (RE) 2012-13 (BE)

Revenue Deficits 3,07,270 3,94,951 3,50,424

Fiscal Deficits 4,12,817 5,21,980 5,13,590

Primary Deficits 1,44,831 2,46,362 1,93,831

As a percentage of GDP

Revenue Deficits 1.8 4.4 3.4

Fiscal Deficits 4.6 5.9 5.1

Primary Deficits 1.6 1.8 2.8


Table 3.3: Gross Tax Revenue (Rs. Crores)

Growth (%) 2011-12 (BE) 2011-12

(RE) 2012-13

(BE) 2011-12 (RE) over 2011-12 (BE)

2012-13 (BE) over 2011-12 (RE)

Gross Tax Revenue 9,32,440 9,01,664 10,77,612 -3.3 19.5

Corporation Tax 3,59,990 3,27,680 3,73,227 -9.0 13.9

Income Tax 1,72,026 1,71,879 1,95,786 -0.1 13.9

Wealth Tax 635 1,092 1,244 72.0 13.9

Customs 1,51,700 1,53,000 1,86,694 0.9 22.0

Union Excise Duties 1,64,116 1,50,696 1,94,350 -8.2 29.0

Service Tax 82,000 95,000 1,24,000 15.9 30.5

Taxes on Union Territories 1,973 2,317 2,310 17.4 -0.3

Figure 3.4: Share of Direct Tax and Indirect Tax in Gross Tax Revenue (%)

51.0 53.0 55.2 60.5 56.2 55.5 52.9

49.0 47.0 44.5 39.3 43.8 44.5 47.1

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12(RE) 2012-13(BE)Direct Tax Indirect Tax

Direct tax

As a proportion of gross tax revenue, direct taxes have been accounting for over a half of the total since 2007-08. The drop in growth rate has resulted in a shortfall of Rs 32,000 crore direct tax collection from the BE 2011-12 level in RE 2011-12. The shortfall is attributed to a 9.0% decline in corporate tax collection. BE 2012-13 expects corporate and income tax collection to increase by 13.9% each over the RE 2011-12.

Figure 3.5: Growth of Components of Direct Tax (%)

0.05.0

10.015.020.025.030.035.040.045.0

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12(RE)

2012-13(BE)

%

Corporation Tax Income Tax


Indirect tax

Slowdown in the manufacturing sector has resulted in excise duty collection to fall by 8.2% in 2011-12 over the budgeted estimate. However increase in the excise duty from 10% to 12% is assumed to increase excise collection by 29.0% in 2012-13 (BE). Similarly, increase in service tax from 10% to 12% is expected to increase service tax collection by 30.5% in 2012-13 (BE) as compared to 15.9% in 2011-12 (RE). Custom duty collection is estimated to increase by 22.0% in 2012-13 (BE) as compared to a growth of 0.9% in 2011-12 (RE).

Figure 3.6: Growth of Components of Indirect Tax (%)

-30.0-20.0-10.0

0.010.020.030.040.050.060.070.0

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12(RE) 2012-13(BE)

%

Customs Union Excise Duties Service Tax

Tax GDP Ratio

Returning to the path of fiscal consolidation necessarily involves significant enhancement of revenue productivity of the tax system. The tax-GDP ratio reached its peak in 2007-08 when the Centre’s tax ratio was 11.7%. Subsequently, there has been a decline in tax-GDP ratio which reached 10.1% in 2011-12. Increasing the ratio at least to the 2007-08 levels is important to achieve fiscal consolidation. With the partial roll back of stimulus measures, coupled with economy estimated to do better than 2011-12, gross tax revenue as a%age of GDP has been estimated to 10.6% in BE 2012-13. Two major reform areas on the tax side are the enactment of the Direct Taxes Code (DTC) and the introduction of Goods and Services Tax (GST), which are yet to be implemented.

Figure 3.7: Gross Tax Revenue as a%age of GDP (%)

10.911.7

10.89.7 10.3 10.1 10.6

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12(RE) 2012-13 (BE)


Non Tax Revenue

In 2011-12 receipts from non tax revenue are estimated to be Rs. 1,25,345 crores. The revised estimate of non tax revenue for 2011-12 shows that it fell by 0.6%. In 2012-13, non tax revenue is estimated to increase by 32%

Table 3.4: Gross Non-Tax Revenue (Rs. Crores)

Growth (%)

2011-12

(BE) 2011-12

(RE) 2012-13

(BE) 2011-12 (RE) over

2011-12 (BE) 2012-13 (BE) over

2011-12 (RE)

Gross Non-Tax Revenue 1,25,435 1,24,737 1,64,614 -0.6 32.0

Interest Receipts 19,578 21,125 19,231 7.9 -9.0

Dividend and Profits 42,624 50,122 50,153 17.6 0.1

External Grants 2,173 3,477 2,887 60.0 -17.0

Other Non-Tax Revenue 59,891 49,909 91,207 -16.7 82.7

Receipts of Union Territories 1,169 1,105 1,136 -5.5 2.8

Expenditure The total expenditure during 2011-12(RE) has grown by a moderate 5.0% owing to decline in plan expenditure. The plan expenditure decreased by 3.0% in 2011-12(RE) as compared to 2011-12(BE) due to lower than expected spending on plan revenue expenditure which has decreased by 5.0 % in 2011-12(RE) over 2011-12(BE), while plan capital expenditure increased by 3.0 % in 2011-12(RE) over budget estimate. Non-plan expenditure in 2011-12 (RE) was higher by 9.0% compared to the budget estimate. This was triggered by higher spending at 11.0% on non-plan revenue component owing to growth in interest payments, subsidies, defence, pension and police. In 2012-13 it is assumed to grow at a relatively moderate rate of 8.7% due to slower growth in non plan revenue expenditure particularly subsidies. Subsidy bill will see a decline of 12.2% in 2012-13(BE) owing to better targeting and monitoring using UID and direct transfer of fertilser subsidy to beneficiaries. On the other hand, plan expenditure lower by 3.0% as per 2011-12 revised figures over the budget estimate owing mostly to decline in plan revenue expenditure of 5.0%. However, this is likely to shoot up significantly by 22.1% in 2012-13 (BE). Increase in plan capital expenditure by 25.0% in 2012-13 (BE) is a welcome sign showing greater allocation to productive activities. Trend in Major Components of Expenditure

Expecting further spurt in overall expenditure, total budgeted expenditure for 2012-13 has been assumed to grow at 13.1% to Rs. 14.9 lakh crore. While expenditure growth is expected to be lower compared to 18.1% average growth during 2006-07 to 2011-12 (RE), more concerted effort is required towards expenditure control.


Table 3.5: Trends in Expenditure (Rs. Crores)

Growth (%)

2011-12 BE

2011-12 RE

2012-13 BE

% Share 2012-13

(BE)

2011- 12(RE) over 2011-

12(BE)

2012-13(BE) over 2011-

12(RE)

Avg. Annual Growth Rate 2006-07 to

2011-12(RE)

Non-Plan Expenditure 8,16,182 8,92,116 9,69,900 65.1 9.0 8.7 17.1

On Revenue Account 7,33,558 8,15,740 8,65,596 58.1 11.0 6.1 18.4

On Capital Account 82,623 76,736 1,04,304 7.0 -7.0 35.9 8.4

Plan Expenditure 4,41,547 4,26,604 5,21,025 34.9 -3.0 22.1 20.2

On Revenue Account 3,63,604 3,46,201 4,20,513 28.2 -5.0 21.5 19.3

On Capital Account 77,943 80,404 1,00,512 6.7 3.0 25.0 24.2

Total Expenditure (Plan and Non-Plan) 12,57,729 13,18,720 14,90,925 100.0 5.0 13.1 18.1

Total Revenue Expenditure 10,97,162 11,61,941 12,86,109 86.3 6.0 10.7 18.7

Total Capital Expenditure 1,60,567 1,57,140 2,04,816 13.7 -2.0 30.3 14.4

The growth in total expenditure for the next financial year 2012-13 would also be led by faster growth in capital expenditure (30.3%) in comparison to revenue expenditure (10.7%). However, share of revenue expenditure in total expenditure is still dominant (86.3% in 2012-13) as compared to that of capital expenditure which would comprise of only 13.7% in 2012-13(BE).

Figure 3.8: Shares of Revenue and Capital Expenditure in Total Expenditure (%)

87.1 83.0 89.8 89.0 86.9 88.1 86.3

12.9 17.0 10.2 11.0 13.1 11.9 13.7

2006-07 2007-08 2008-09 2009-10 2010-11 2011-2012 RE

2012-2013 BE

Capital Expenditure Revenue Expenditure

Share of plan expenditure in total expenditure has increased from 32.3% in 2011-12 (RE) to 34.9% in 2012-13(BE). For 2012-13, the plan expenditure is expected to grow by 22.1%, led by increase in both plan revenue and capital components. Former is expected to go up by 21.5% whereas, latter would see a growth of 25.0%. The medium to long term growth trend shows that plan and non plan expenditure has been growing at an annual rate of 20.2% and 17.1% respectively in the last six years (2006-07 to 2011-12(RE).


Figure 3.9: Shares of Plan and Non-Plan Expenditure in Total Expenditure (%)

70.3 70.7 68.9 70.4 68.3 67.7 65.1

29.7 29.3 31.1 29.6 31.7 32.3 34.9

2006-07 2007-08 2008-09 2009-10 2010-11 2011-2012 RE

2012-2013 BE

Plan Expenditure Non-Plan Expenditure

Composition of Plan Revenue and Capital Expenditure

In 2011-12(RE) plan revenue expenditure constituted about 81.2% of the plan expenditure, which almost remained same at 80.7% in 2012-13(BE). Of the total plan revenue expenditure, for 2012-13 (BE), 72.2% will be spent on central plan and remaining 27.8% on central assistance for States/ UTs plans.

Table 3.6: Trends in Plan Revenue and Capital Expenditure (Rs. Crores)

Growth (%)

2011-12 BE

2011-12 RE

2012-13 BE

% Share 2012-13

(BE) 2011-

12(RE) over 2011-12(BE)

2012-13(BE) over

2011-12(RE)

Avg. Annual Growth

Rate 2006-07 to

2011-12(RE)

Plan Revenue Expenditure 3,63,603 3,46,201 4,20,513 100.0 -5.0 21.5 19.3

Central Assistance for States and Union Territory Plans 95,317 93,604 1,16,985 27.8 -2.0 25.0 17.6

Central Plan 2,68,286 2,52,597 3,03,528 72.2 -6.0 20.2 20.0

Plan Capital Expenditure 77,943 80,404 1,00,512 100.0 3.0 25.0 24.2

Central Assistance for States and Union Territory Plans 10,709 11,595 13,013 12.9 8.0 12.2 15.2

Central Plan 67,234 68809 87499 87.1 2.0 27.2 26.3

Similar trend has been observed in plan capital expenditure too. The share of central plan is projected to rise to 87.1% during the next financial year while, the share of States/ UTs to 12.9% in 2012-13(BE).

Trends and Composition of Central Plan Outlay

Central plan outlay has gone up by 16.7% from Rs. 5.6 lakh crore in 2011-12(RE) to Rs. 6.5 lakh crore in 2012-13(BE). Budgetary allocation has increased on all major heads but has been significant in case of irrigation and flood control (160.1%), general services (57.2%), industry and minerals (41.0%), communications (28.5%), science technology and Environment (30.5%), general economic services (27.6%) and agriculture (19.1%) over 2011-12(RE). Relatively marginal increase of about 5.0% in the allocation to energy and rural development sectors could have been more given that these sectors have the potential to lift the growth momentum. Furthermore, the government’s continuing stress on inclusive growth is visible in increased spending on social services, whose share inched up though marginally from 26.5% in 2011-12(RE) to 27.5% in 2012-13(BE).


Table 3.7: Major Heads in Central Plan Outlay

Growth (%)

Sectors

2011-12 BE

2011-12 RE

2012-13 BE

% Share2012-13

(BE)

2011- 12(RE) over 2011-

12(BE)

2012-13(BE) over 2011-

12(RE)


2011-12(RE)

Agricultural & Allied Activities 14,744 14,855 17,692 2.7 0.8 19.1 16.7

Rural Development 55,288 48,128 50,729 7.8 -13.0 5.4 24.0

Irrigation & Flood Control 565 489 1,275 0.2 -13.4 160.6 1.7

Energy 155,495 147,190 154,842 23.8 -5.3 5.2 16.1

Industry & Minerals 45,214 40,581 57,227 8.8 -10.2 41.0 25.9

Transport 116,861 109,205 125,357 19.2 -6.6 14.8 15.2

Communications 20,256 11,994 15,411 2.4 -40.8 28.5 -10.1

Science Technology & Environment 16,186 12,713 16,592 2.5 -21.5 30.5 14.0

General Economic Services 15,802 19,420 24,777 3.8 22.9 27.6 50.7

Social Services 144,816 148,060 178,906 27.5 2.2 20.8 18.3

General Services 7,230 5,536 8,701 1.3 -23.4 57.2 53.1

Grand Total 592,457 558,172 651,509 100.0 -5.8 16.7 17.2

Composition of Non-Plan Revenue and Capital Expenditure

Non-plan revenue expenditure is expected to grow by 6.1% in 2012-13 (BE). Non plan revenue expenditure is dominated by three major components, namely, interest payments, subsidies and defence which together constitutes 72.0%, marginally lower than 73.1% registered in 2011-12 (RE). However, it is interesting to note that except subsidies all other heads under non-plan revenue expenditure are expected to rise. Subsidy bill will see a decline of 12.2% to Rs. 1.9 lakh crore in 2012-13 (BE) as compared to Rs. 2.2 lakh crore in 2011-12 (RE). Subsidies are expected to be curtailed by better targeting. For example, fertilser subsidy will be transferred directly to beneficiaries. Total subsidies are expected to be capped to 2.0% of GDP in the fiscal year 2012-13 and to 1.7% in next three years. Expenditure has significantly increased on interest payment (16.0%), grants to States/UTs governments (16.1%) and pensions (12.4%) in 2012-13(BE) from 2.8%, -16.6% and 3.1% respectively in 2011-12(RE). There has been considerable increase of 36.6% in non plan capital expenditure from Rs. 76,376 crore in 2011-12 (RE) to Rs. 1.0 lakh crore in 2012-13 (BE). Composition of non plan capital expenditure has also undergone a shift in 2012-13(BE). The defence expenditure has increased by 20.3% in 2012-13(BE). Besides, other non-plan capital outlay and loans to foreign governments will grow by 149.3% and 120.0% in 2012-13(BE) over 2011-12 (RE) while loans to public enterprises will decline by 21.6%.


Table 3.8: Trends in Non-Plan Revenue and Capital Expenditure (Rs. Crores)

Growth (%)

Sectors

2011-12 BE

2011-12 RE

2012-13 BE

% Share 2012-13

(BE) 2011-

12(RE) over 2011-12(BE)

2012-13(BE) over

2011-12(RE)


2011-12(RE)

Non-Plan Revenue Expenditure 7,33,558 8,15,740 8,65,596 100.0 11.2 6.1 18.4

Interest Payments and Prepayments Premium 2,67,986 2,75,618 3,19,759 36.9 2.8 16.0 12.7

Defence Services 95,216 1,04,793 1,13,829 13.2 10.1 8.6 16.4

Subsidies 1,43,570 2,16,297 1,90,015 22.0 50.7 -12.2 32.3

Grants to State and U.T. Government 66,311 55,322 64,211 7.4 -16.6 16.1 9.7

Pensions 54,521 56,190 63,183 7.3 3.1 12.4 24.8

Police 30,595 33,302 35,611 4.1 8.8 6.9 20.8

Economic Services 25,391 23,702 24,105 2.8 -6.7 1.7 13.7

Social Services (Education, Health, Broadcasting, etc) 20,862 19,709 20,784 2.4 -5.5 5.5 24.2

Others* 29,106 30,807 34,099 3.9 5.8 10.7 16.9

Non-Plan Capital Expenditure 82,624 76,376 1,04,304 100.0 -7.6 36.6 8.3

Defence 69,199 66,144 79,579 76.3 -4.4 20.3 15.3

Other Non-Plan Capital Outlay 13,212 9,617 23,971 23.0 -27.2 149.3 -6.6

Loans to Public Enterprise 496 593 465 0.4 19.6 -21.6 -0.5

Loans to State and UTGovernments 85 75 85 0.1 -11.8 13.3 -4.8

Loans to Foreign Governments 0 250 550 0.5 - 120.0 -81.7

Others -368 -303 -346 -0.3 -17.7 14.2 -

Note: (*) Others include:Assistance to states from National Calamity Contingency Fund,Other General Services (Organs of state, tax collection, externnal affairs, etc),Postal Deficit,Expenditure of Union Territories Without Legislature,Amount Met from National Calamity Contingency Fund,Grants To Foreign Governments


Figure 3.10: Growth in Non-Plan Revenue and Capital Expenditure (%)

10.5 14.035.4

17.7 10.4 12.3 6.1

24.3

90.2

-44.1

27.1 45.3

-16.8

36.6

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 RE 2012-2013 BE

Non-Plan Revenue Expenditure Items Non-Plan Capital Expenditure Items

Figure 3.11: Trends in Subsidies (Rs. Crore)

53,463 69,742

1,29,708 1,41,351 1,73,420 1,43,570

2,16,297

2006-07 2007-08 2008-09 2009-10 2010-11 2011-2012 2011-201

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