This being the last Budget before the next general elections, PSUs can expect less tinkering with their policies and plans. The past four years of the current government have seen no major divestment of PSU stakeholding to private or strategic partners. While PSU companies from most of the industries have raked in strong growth rates during this period owing to the overall economic momentum, the fact that their efficiency levels remain at low levels as compared to private sector players cannot be doubted.
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Industry wish list
IEEMA (Power PSUs)
- Infrastructure status to power sector on par with telecom, roads and ports
- Tax relief to be made available to PSUs for activities in rural areas in line with those extended to the Rajiv Gandhi Gramin Vidyutikaran Yojana
- Hike budgetary allocation to SEBs for APDRP scheme to Rs 80 bn by next year
- Cut excise on products and components supplied to the sector from 16% to 8%
FICCI (Energy PSUs)
- Currently, the first 7 years of commercial production/refining are provided as a tax holiday under 80-IB. Instead, flexibility to choose any 7 consecutive years out of the first 15 years.
- Alternately, tax holiday for any 10 consecutive years out of first 15 years of commercial production/refining under section 80-IA on par with the Power sector.
- Levy of service tax @ 12.36% (inclusive of education cess) on survey and exploration, site formation, mining services, etc should be abolished.
- Include natural gas in the list of 'declared goods' under section 14 of the Central Sales Tax Act in order to reduce incidence during inter-State trade.
Bank of Baroda, CII, FICCI (Banking PSUs)
- Openly kick-start the process of consolidation amongst the public sector banks, which will go a long way in strengthening this sector.
- The government may also think of introducing a few fiscal incentives for bank deposits, which are facing a tough competition from the capital market schemes as well as housing sector. As 85% to 90% of the banks' funds still come from deposits, the government should introduce a few incentives, which can make these deposits an attractive avenue for investment for the household sector.
- Reducing the government ownership in PSU banks to 33% as promised by the previous government. Increasing the FII/ FDI limit in PSU banks from 20% to 49%.
- Granting more managerial autonomy to PSU banks so that they have better specialists working for them at market-related packages and more independent directors on their boards.
- Allowing PSU banks to close down loss-making rural branches.
- Further liberalisation of directed lending norms.
- Allowing another round of VRS in PSU banks and more powers to attract suitable talent.
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Budget over the years
Budget 2005-2006
Power
Rural infrastructure development fund a corpus of Rs 80 bn for FY06
Banking
- Introduce provisions to enable the consolidated supervision of banks and their subsidiaries by RBI.
- Increase bank lending to agricultural sector by 30% and PSU banks to increase number of agricultural borrowers by 5 m.
Energy
- Customs duties on crude oil halved to 5% from 10%.
- Customs duties on petrol and diesel reduced to 10% from 20%.
- Customs and excise duties on LPG and kerosene eliminated.
- Customs duties on all other petroleum products other than above reduced to 10% from 20%.
- Excise duties on petrol and diesel fixed as a combination of ad-valorem and specific duties.
- Cess on petrol and diesel increased by 50 paise per litre.
Budget 2006-2007
Power
- Five ultra mega power projects of 4,000 MW each to be awarded before December 31, 2006
- Tenth plan target of 3,075 MW of installed capacity for non-conventional energy sources exceeded by December 31, 2005 with installation of 3,650 MW capacity.
- Rs 5.9 bn proposed to be spent on non-conventional energy resources.
- 10,000 villages in 2005-06 and 40,000 more villages in 2006-07 to be electrified under the Rajiv Gandhi Grameen Vidyutikaran Yojana.
- Coal reserves of 20 bn tonnes to be de-blocked for power projects
- Customs duty on natural gas reduced from 10% to 5%
Banking
- Banks to increase disbursements to farmers to Rs 1,750 bn by FY07 (with addition of 5 m farmers) and open a separate window for self-help groups (SHGs). Additional 0.4 m SHGs to be credit-linked by FY07 in association with NABARD.
Energy
- Cess on petroleum crude oil under the Oil Industry (Development) Act 1974 stands increased from Rs1, 800 per tonne to Rs 2,500 per tonne
- Tariff rate of customs duty on petroleum crude reduced from 10% to 5%. Effective rate continues at 5%.
- Tariff rate of customs duty on petroleum products reduced from 15% to 10%. Effective duty has been kept at 10%.
- Customs duty on naphtha reduced from 10% to 5 %.
- Customs duty on natural gas, propane and butanes falling reduced from 10% to 5%
Budget 2007-2008
Power
- Hike in corpus of Rural Infrastructure Development Fund-XIII from Rs 100 bn to Rs 120 bn
- Government's equity support of Rs 164 bn and loans of Rs 30 bn to central public sector enterprises
- Hike in budgetary support for APDRP from Rs 6.5 bn to Rs 8 bn
- Increase in allocation for Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) from Rs 30 bn to Rs 40 bn
Banking
- To augment resources for refinancing rural credit cooperatives, NABARD to issue Government guaranteed rural bonds to the extent of Rs 50 bn
- SARFAESI Act to be extended to loans advanced by Regional Rural Banks (RRBs). RRBs to be permitted to accept NRE/FCNR deposits and those that have a negative net worth to be recapitalised
- The government has proposed to acquire RBI's equity holding in State Bank of India (59% currently). It has provided a sum of Rs.400 bn for this purpose, but the transaction will be deficit neutral to the government. Also, the fund of Rs 7.5 bn created for awarding 0.1 m (of Rs 6,000 each per year) will be placed with the SBI, and the yield from the fund will be used for awarding the scholarships. Advalorem component of the excise duty on petrol and diesel reduced from 8% to 6%.
Energy
- Infrastructure status to cross-country natural gas distribution network, including gas pipelines and storage facilities integrated to the network, and to navigation channel in the sea.
- Extension of service tax to services outsourced for production of oil and gas.
- Custom duty on plastics reduced from 12.5% to 7.5%, while the custom duties on DMT, PTA and MEG reduced from 10% to 7.5%.