Budget 2015-16: No big bang proposals but a strong focus on infrastructure

Finance minister Arun Jaitley’s much-awaited Union Budget 2015-16 has no big-bang announcements but there is a clear focus on boosting infrastructure in the country with Rs 70,000 crore more to be spent in this area.

Of direct benefit to the automobile sector will be the commitment to build 100,000 kilometres of new roads. The Budget has increased the allocation for roads to Rs 14,031 crore and the support to the railways by just over Rs 10,000 crore. Further, the minister said the Goods & Services Tax (GST) is in place and will be in force from April 1, 2016. The finance minister said in his speech, "GST is expected to play a transformative role in the way our economy functions. It will add bouyancy to our economy by developing a common Indian market and reduce the cascading effect on the cost of goods and services. We are moving on various fronts to implement GST from next year." 

Meanwhile, the electric vehicle (EV) sector has received an allocation of Rs 75 crore, which while is a need of the hour for the sector, is not a big amount. This allocation, the minister said, will come in the form of a scheme called Faster Adoption and Manufacturing of Electric vehicles (FAME). 

Another benefit for the EV sector is that the concessions from customs and excise duties currently available on specified parts for manufacture of EVs and hybrid vehicles (zero basic customs duty, 6% CVD and zero SAD) is being extended by one more year -- upto March 31, 2016. 

The finance minister had also proposed the setting up of a national investment and infrastructure fund with a corpus of Rs 20,000 crore.

The Skill India programme gets a boost with the Budget and will be closely coordinated with the Make in India programme. At 54 percent of the total populations below 25 years, India has one of the youngest populations in the world but the fact is less than 5 percent of this potential workforce gets formall skill training to be employable. The government plans to launch a National Skills Mission through the Skill Development and Entrepreneuship Ministry. This Mission will consolidate skills across 31 sectors.

In a fillip to small business entrepreneurs, who need the latest technology to innovate, the Budget proposes to reduce the rate of income tax on royalty and fees for technical services from 25 percent to 10 percent.   

The agricultural sector has received a boost, which can help given that rural incomes have been affected by the poor monsoons. The government also said it will increase allocation to the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), which will help boost rural incomes.

Corporates will welcome the reduction of corporate tax to 25 percent from 30 percent over a four-year period aimed at enabling increased investment, higher growth and more jobs.   

AUTO INDUSTRY COMMENTS
Arvind Saxena, president and managing director of GM India
“The Budget looks to be a pragmatic one as it focuses on infrastructural development, education, skill development, agriculture, irrigation, health care and social security schemes. The government’s intention to introduce GST, reduce the corporate tax from 30 to 25 percent over a 4-year period, simplification of the tax regime, financial sector reforms, and GAAR deferral are encouraging news. The steps outlined for the manufacturing, power, coal and mining sectors should spur economic activity going forward.

“As far as the automotive industry is concerned, we were expecting an excise duty cut on all categories of vehicles as the auto industry continues to bleed due to high interest rates and the economic slowdown. The focus on rural roads, highways, expressways and incentives for electric vehicles are welcome decisions. Overall, the Budget lays down a blueprint for a stable tax regime that can lead to growth in the economy.” 

Sumit Sawhney, country CEO and managing director, Renault Operations in India
"It is a well-balanced Budget and includes a lot of positive measures to give impetus to infrastructure growth. Another positive is the announcement of a firm date on GST. Although we will have to study the fine print of the Budget in terms of clear programs to boost investment, manufacturing and skill development, the directional focus is in sync with the overall expectations to boost growth. Although the Budget didn’t have much for the automobile sector, we are hopeful for some pro-business policies in the near future to benefit the industry."

Joe King, head, Audi India
“It is no doubt a visionary Budget with focus on long-term growth. We welcome the move towards the rollout of GST next year. We are happy to see the emphasis placed on boosting infrastructure. This will go a long way in fulfilling the government's vision to make India the fastest growing large economy in the world. We welcome the reduction of corporate tax as well as focus on infrastructure via various schemes and investments. However, we expected more of a direct support to the auto industry which has been contributing, significantly to the GDP.”

Anders Grundströmer, MD, Scania India and senior vice-president, Scania Group
"We at Scania feel overall, this is a balanced Budget with emphasis on manufacturing as part of Make in India along with appropriate importance to skilling India. We also like the government’s commitment to make the development process as environment friendly as possible. While the increase in customs duty for commercial vehicles is disappointing, overall the positives outweigh the negatives. The clear commitment to implement GST by April 1, 2016 which is a game- changer, easing of norms to aid flow of technology, flow of capital, and focus on sustainable development along with a road map of clearly stated goals in terms of 100,000km of roads, doubling the clean energy cess on use of coal and launch of a scheme for faster adoption are all measures in the right direction. However, we would have liked to have seen more clarity around the country’s biofuel agenda and sustainable solutions in the transport sector. Bio-ethanol promises carbon savings of about 70 percent.” 

Shishir Joshipura, Managing Director, SKF India
"With this high on governance Budget, the government has moved away from sectoral SOPs completely and has focused on critical macro points such as transparency, ease of doing business and social welfare. Steps taken towards creating a transparent model of governance and project clearances, setting a direction for GAAR is a clear and positive message to the investors towards ease of doing business. The roadmap for reducing corporate tax gradually is a welcome move that will drive investments. Infrastructure, an important sector, has got a positive impetus. This Budget has got something for everyone, focusing on issues which aim to drive sustainable and inclusive growth in a true sense."

Vinod K Dasari, Managing Director, Ashok Leyland
“Three themes in this Budget are critical to industry. First is infrastructure. Over 100,000km of roads have been targeted over and above the massive push in the rail sector. The massive boost in infrastructure spend (Rs 70,000 crore), as well as the mechanisms announced to fund it, will kick-start a virtuous cycle, resulting in significant primary demand for commercial vehicles. Secondly, grassroots entrepreneurship through MUDRA bank, formed to refinance MFIs, as well as the Jan Dhan Aadhaar- Mobile program. Grassroots entrepreneurs require low cost transport and this will drive demand for SCVs. The third theme is reform. Introducing a new bankruptcy law, announcing a roadmap to lower corporate taxes and other such actions are clearly directed towards making India more competitive to do business. Continued push in this direction will encourage more players to enter India, bringing investments as well as boosting economic activity.
While there has been no excise duty modification in the automotive sector, I believe that long term demand creation is more sustainable than short term sops to boost consumption. The government has moved in exactly this direction with this Budget.”

Farrokh Cooper, chairman and MD, Cooper Corporation
“The Budget is an extremely positive one. The roadmap to simplify processes, encourage growth was critically needed and several measures proposed will stimulate growth and revive the economy. The corporate tax reduction will definitively promote growth. Our congratulations to the government for a budget that is realistic and progressive.”

Sohinder Gill, director (Corporate Affairs), Society of Manufacturers of Electric Vehicles 
"SMEV welcomes the announcement on interim NEMMP towards promoting electric vehicles and supporting charging infrastructure and R&D investments. It’s like a life saver for the ailing companies who had invested into environmentally friendly vehicles but were bleeding heavily because of the lack of government support. 

Although we are awaiting details, it is expected that around Rs 1,000 crore will be allocated for a period of two years, a large part of which will go directly into the hands of the customers in term of reduction of EV prices by around 20 percent and in installing charging stations in many cities. We believe the biggest beneficiary of the NEMMP will be companies manufacturing electric two-wheelers and small electric cars. NEMMP is also likely to trigger the entry of many of the major automotive players to start launching electric and hybrid vehicles.

Now that the centre has cleared the roadmap for the growth of EVs in India, SMEV expects states to join in to support this initiative. At present many states like Uttar Pradesh, Punjab, Haryana and Maharashtra have been charging VAT as high as 14 percent or more and road tax of 4 to 6 percent, nullifying the NEMMP’s incentives. SMEV requests such states to immediately revert to zero percent VAT and eliminate road tax for few years. 

The government has an ambitious target of putting 5 million electric and hybrid vehicles on the road by 2020 and SMEV is confident that this figure can be achieved if NEMMP is continued for its committed period of 6 to 8 years, state governments pitch in with their support and manufacturers invest in technology and capacity building."

KVS Prakash Rao, President, FADA
“It is a balanced Budget with emphasis on infrastructure development and ‘Make in India’. The increased allocation in infrastructure and rural development, and emphasis on Make in India will put the economy on a high growth trajectory, thereby fuelling the auto market. The assurance on GST is welcome.

The auto market in India has been reeling under acute slowdown for the last three years.  We, at FADA, were expecting special measures including a softer excise duty regime and high depreciation rates in respect of motor vehicles, for giving a boost to the auto sector. We hope that the finance minister will consider incorporating lower excise duty and higher depreciation rates in respect of motor vehicles, before the Budget is finally passed by Parliament.”

Shekhar Vishwanathan, vice-chairman, Toyota Kirloskar Motor
“It’s an overall progressive Budget that will help put India back on the business radar globally. The special focus on job creation, skill development and insurance are all welcome announcements. We welcome the reduction on custom duties on raw materials and manufacturing cost which will help boost the automobile industry. The government’s allocation on developing alternate fuel cars is also welcome.”

Pirojshaw Sarkari, CEO, Mahindra Logistics
"The decision to increase public investment in infrastructure development including national highways is pragmatic. Better surface connectivity will provide both better speed and cost efficiency for the logistics service providers and consumers alike. The announcement of the much-awaited GST too is encouraging and should make manufacturing more competitive."

Also read: SIAM lauds Union Budget scheme to promote EVs, hybrids http://bit.ly/1AEyVpj 

Photograph (top): Arun Jaitley, Union Minister for Finance, Corporate Affairs and Information & Broadcasting, sets out from North Block to Parliament House along with Jayant Sinha, Minister of State for Finance, to present the General Budget 2015-16, in New Delhi. Photo courtesy: Press Information Bureau