A Vellayan, Executive Chairman, Murugappa Group

A Vellayan, Executive Chairman, Murugappa GroupContrary to general apprehensions of possible cuts in outlay and several likely proposals for mobilising resources, Union Budget 2013 has a higher outlay by 29.4% for Plan expenditure and adequate outlay for all the welfare / developmental schemes. There are also several positive moves to stimulate savings and investment. There has not been any big imposts or levies that could be called burdensome or pain on any one specific segment.

However, on certain key growth-stimulating aspects for the Agri-business industry, the Budget has been disappointing.

On Agri-business sector

The increase of the crop loans kitty, the rural farm credit increase to 7 lakh crores and expanding the incentive to farmers for repaying loans to private sector banks also on time, will provide some relief to the farmers. However, the Indian farming sector was reeling under severe problems like monsoon failures and shortage of farm labour. In this scenario, we were expecting key initiatives to help address the soil nutrition and water and power availability issues. Budget 2013 has not addressed this sector holistically. The increased allocation to MNREGA will increase the burden on the farmer, because it would impact the availability of labour for farming activity.

From the Fertiliser industry perspective, given that fiscal deficit target committed by the Finance Minister is at 4.8% GDP for 2013-14, it can be reasonably expected that much needed reforms in urea segment of fertilizers will be carried through. It would be desirable to introduce Nutrient Based Subsidy for urea also to encourage balanced use of fertilizers. However, substantial increase in urea price will be called for to remain within budgeted expenditure on fertilizer subsidy for 2013-14. Investment policy for fertilizers especially for urea is already in place and 15% investment allowance will further improve viability of Projects/major plant and machinery replacements. We should see at least 4 to 5 urea projects achieving financial closure during 2013-14.

From the Sugar industry perspective, the request for removing levy obligations, imposing flexible duty on sugar imports and ethanol blending have not been addressed, stifling the growth of the industry.

Insurance sector

India is a very under-insured economy. A few positive measures have been announced to increase the penetration and to ease the process of issuing insurance policies, which would help enhance the insurance cover of a larger population.

Overall industry and growth

There are some welcome measures to promote growth in the capex and infrastructure investments like

  • Introduction of Investment allowance for investments in excess of 100 Crores

  • Support for the waste-to-energy projects

  • Support to Mumbai – Delhi, Bangalore – Chennai Industrial corridor Projects

  • Energising the Capital markets / Overseas investments for fund flows

The increased investment allowance will be beneficial to the industry. The allocation of 1 lakh crores over 5 years to NSDC is a positive long-term move to address the gap in skilled labour, which is badly needed for the manufacturing sector.

India Inc will be impacted by the increased surcharge on Income Tax and the additional dividend distribution. There is also no impactful initiative to boost demand for the industry.