Auto industry views on Budget mixed

Despite cap-gains tax hike, stocks to grow on global cues

Hyundai, GM to cut price of small cars by up to Rs 16,000

Raise FDI in insurance, retail; divest 10% in PSUs: Survey....

Govt retains peak customs duty at 10 pc

NEW DELHI, Feb 29: Considering that imports have become cheaper due to rise in rupee value, the Budget 2008-09 has proposed to keep peak customs duty rate unchanged at 10 per cent.

"Since April 2007, the rupee has appreciated against the dollar by 9.8 per cent. Consequently, the case for reducing the peak rate at this stage is very weak," Finance Minister P Chidambaram said while proposing no change in the peak rate of customs duty on non-agriculture products in the General Budget for 2008-09, presented in Parliament.

The peak rate for non-agricultural products was 20 per cent in January 2004. Analysts said had there been not such a huge rupee appreciation, a cut in customs duty to the ASEAN level would have been possible.

However, the Finance Minister did announce a cut in customs duty in certain sectors to "provide a fillip to that industry or to promote value addition or to remove inversion or any other anomaly."

In this respect, Chidambaram proposed a cut in customs duty on Project Imports from 7.5 per cent to 5 per cent.

However, he also proposed 4 per cent special countervailing duty on a few projects in the power sector.

The Finance Minister also withdrew duty on steel melting scrap and aluminium scrap from the current 5 per cent to "improve the supply of raw material".

Life saving drugs and bulk drugs used for manufacture of such drugs will attract lower customs duty of five per cent against 10 per cent at present.

The Finance Minister also cut customs duty on specified parts of set-top-boxes, convergence products, specified machinery and raw materials for sports goods and certain raw materials for gems and jewellery and certain cattle feeds. (PTI)

Auto industry views on Budget mixed

NEW DELHI, Feb 29: It was a mixed bag of response from the automobile industry towards Finance Minister P Chidambaram's Budget proposal to cut excise duty for the sector, even as small car makers are gearing up to pass on the benefits to customers.

Chidambaram has proposed reducing excise duty on small cars to 12 per cent from 16 per cent and a similar cut in two and three wheelers and buses and chassis.

The Finance Minister also announced that excise on hybrid vehicles would be slashed from 24 per cent to 14 per cent.

"We are happy with the proposal, but he (the Finance Minister) could have taken a few more steps for the bigger cars and exports," Hyundai Motor India Senior Vice-President, Sales and Marketing, Arvind Saxena told PTI.

He said the company would pass on the excise duty cut benefit on small cars to the customers.

"We are in the process of calculation and latest by tomorrow we will be announcing price cuts," he said.

Honda Siel Car India Senior (HSCI) General Manager Jnaneswar Sen said while the step was a welcome one, it would create a further gap between the small cars and the big cars segment.

"This will skew the market further," he said.

On the excise cut on Hybrid cars, Sen said it would not benefit the customers much as the hydrid would be fully imported and the customs duty has not been changed.

Sen said HSCI, which is planning to launch its hybrid Civic later this year, would benefit little from the excise cut as there were very little components which gain from the excise cut.

Suzuki Motorcycle India Vice-President Sales and Marketing Atul Gupta said, "Very good, but unexpected to stop degrowth. Finance availability is a major issue." (PTI)

Despite cap-gains tax hike, stocks to grow on global cues

MUMBAI/NEW DELHI, Feb 29: The knee-jerk reaction of the bourses to the hike in capital gains tax notwithstanding, experts today exuded confidence in the future growth of Indian stock market, saying that global cues would continue to play a key role.

The stock market's benchmark index, Sensex, dipped by close to 500 points in mid-day trade today, soon after Finance Minister P Chidambaram proposed a hike in short-term capital gains tax from 10 per cent to 15 per cent.

Besides, no reduction in corporate tax rates and a loan waiver package worth Rs 60,000 crore announced for farmers also contributed to the intra-day plunge, the experts said.

However, analysts said that increased capital gains tax would deepen the market by cutting down on the speculative part of the trading, as a higher tax would impact mostly the traders and not the investors.

Kotak Mahindra Bank Managing Director Uday Kotak said global cues would continue to be the biggest driver for the Indian markets. Domestic inflation and interest rate regime would be the second biggest driver, followed by growth trend of the Indian economy.

"I am not worried (about impact of Budget on stock markets).... Market will stabilise and Budget would prove to be a non-event," domestic investment banking major J M Financial's Nimesh Kampani said.

"The biggest negative of the Budget was the hike in the short-term capital gains tax to 15 per cent, on which the market has reacted sharply. However, on the whole, the Finance Minister has tried to balance the show," domestic brokerage firm SMC Global's Rajesh Jain said. (PTI)

Hyundai, GM to cut price of small cars by up to Rs 16,000

NEW DELHI, Feb 29: Much to the delight of prospective small car buyers, leading manufacturers Hyundai Motor India and General Motors today said they would slash prices by up to Rs 16,000 to pass on benefits from the excise duty cut announced in the Budget.

Finance Minister P Chidambaram, in his Budget speech, has proposed to cut excise duty from 16 per cent to 12 per cent on small cars.

"We have decided to pass on the benefit of the excise duty cut to customers on three models-Santro, i10 and the Getz-effective April 1," a Hyundai official said.

The price cut on Santro could be between Rs 12,000 and Rs 14,000, while that on Getz would be between Rs 14,000 and Rs 16,000.

Price cut on the newly launched i10 could be between Rs 12,000 and Rs 16,000, the official added.

General Motors is also cutting he price of its small cars Spark and Aveo U-VA.

"We will be cutting the prices of our small cars between Rs 7,500 and Rs 14,000," GM India Vice-President P Balendran said.

Meanwhile, rival Maruti officials said the company was studying the impact of the excise cut before taking any steps. (PTI)

Raise FDI in insurance, retail; divest 10% in PSUs: Survey

NEW DELHI, Feb 29: Facing a possible slowdown in the face of a sluggish growth in developed economies, especially in the US, the Economic Survey today suggested a series of reforms including hiking FDI in insurance and retail sector to sustain the 9 per cent rate of economic expansion.

Raising growth to the double digit will require additional reforms in the backdrop of appreciating rupee, slowdown in the consumer goods segment of industry and infrastructure, said the Survey tabled in Parliament.

"Raise foreign equity in insurance to 49 per cent," it said, while also prescribing 51 per cent foreign equity in insurance companies providing all types of insurance like health and weather in rural areas.

The UPA regime had proposed raising the FDI cap in its first budget in 2004-05, however, opposition from the Left parties eluded consensus on the issue and has been referred to a GoM headed by External Affairs Minister Pranab Mukherjee.

The Survey also asked the Government to complete divestment of 5-10 per cent stake in previously identified profit making non-Navratna PSUs.

On the banking sector, the Survey suggested a 100 per cent FDI in greenfield private rural-agriculture banks.

Such a bank would be free to set up any number of branches in any rural or semi-rural area, the Survey said, adding that it would be free to lend agriculture and allied sectors anywhere in the country and to any industry located in non-urban area.

While advocating FDI in all retail trade, it said allow 100 per cent foreign equity in foreign branded, specialised retail chains like luxury brands, consumer durables and semi durable.

The Survey asked the Government to auction all loss- incurring PSUs that cannot be revived and list all unlisted PSUs by selling a minimum 10 per cent equity to the public.

Besides, it also suggested amendment of Coal Mines Nationalisation Act to allow regulated private entry into coal mining. Privatise old coal mines to improve recovery of ‘in-place’ reserves by 5-10 per cent, it said.

The pre-Budget document called for selling old oil fields to private firms to raise output, while also prescribing a new bankruptcy law to facilitate exit of old/failed management.

The Survey is all for the phasing out control on sugar, fertiliser and drugs.

In a bid to increase manpower efficiency, it suggested increasing work week to 60 hours from existing 48 hours and daily limit to 12 hours to meet seasonal demands through overtime.

On the transportation system, the Survey said public transport systems like bus in metros and large cities must be run by private companies that can use modern logistics and back office systems for planning routes and timings.

Public sector rail track company should be allowed to own new tracks and signals, while permitting free entry of private and public-private partnership in rail freight firms, it said.

Talking about power sector reform, the Survey said, State Electricity Regulatory Commissions should notify rational, credible, cross-subsidy for open access. (PTI)