Engineering sector: What's in store this Budget?

Ravi Uppal, Vice Chairman & Managing Director, ABB India

General

1. Reduce composite tax burden on corporates

2. Invest in infrastructure with a sense of urgency

3. Bring down peak customs duty to 15% and announce concrete timeframe to bring to ASEAN levels

4. Simplification of tax structure and increased efficiency of tax administration

Power

1. Speedy implementation of Electricity Act and recently announced National Electricity Policy

2. Increase government investment in power and clearly indicate funding pattern. At the same time, facilitate private investment by making it financially viable and ensuring a fair and transparent regulatory regime

3. Correct inverted customs duty structure

Manufacturing

1. Proactively facilitate & encourage investment in Manufacturing through incentives like investment allowance, tax holiday for new undertakings etc.

2. Incentivise exports of manufactured goods, engineering services etc.

3. Process automation industry contributes greatly to quality and productivity making Indian manufacturing globally competitive. It should therefore enjoy the same benefits as computer hardware for customs and other indirect taxes as well as depreciation.

4. Service tax should be exempted on domestic engineering services and all other input services used in the delivery of output services that are either exported or rendered in the domestic market. This will help in development and growth of the emerging engineering services market

Private sector participation in Greenfield airport projects will be encouraged through a package of concessions.

Renovation of two air ports at an estimated cost of around Rs 110 bn.

Specified raw materials for manufacture of parts of cathode ray tubes and specified capital goods for manufacture of mobile handsets, plasma display panels exempted

10% rebate on railway freight rates for heavy machinery

2% education cess on all taxes

Power play: Since power utilities are one of the biggest consumers (generation, transmission and distribution) for engineering companies, reforms introduced in the power sector like privatisation of SEBs will help in strengthening the order book size. Huge addition in power generation capacity (100,000 MW by 2012), in order to meet the demand supply gap will be a big positive for the sector.

Infrastructure development: The government is focusing on development of infrastructure like roads, ports etc. This will be big positive for engineering and construction companies.

Industrial 'act': Industrial divisions of engineering companies are likely to benefit from the increased focus on automation and capacity addition plans drawn by the India Inc.

Slow pace of reforms: Since the new government is planning to review some of the provisions of the Electricity Act, reform implementation could slowdown. To that extent, the order booking for engineering companies could grow at a slower rate.

Captive competition: Duty free import of T&D equipments by power generation units if allowed by government can have some impact on margins of the T&D majors because of competition.