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BW Businessworld

Audi India May Re-Evaluate Its Pricing Strategy

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Michael Perschke, Head, Audi India

The increase in excise and customs duty on large cars in this budget is very surprising. This increase comes at a time when the Indian automotive industry was finding favour with customers looking for better and efficient cars. We may now need to re-evaluate our pricing strategy in India.

However we do welcome the positive announcements on increase of investments in infrastructure and encouragement to private investment which should drive higher growth in the economy. The revision and reduction of personal tax slabs  will result in increased savings and possibly higher spends. The GDP growth forecast of 7.6 per cent for next financial year also augurs well for the country and we expect India to remain one of the most vibrant consumer markets.

A.M. Muralidharan, Managing Director, Volvo India

The Union Budget 2012-13 has turned out well overall for the infrastructure industry. The Honourable Finance Minister has proposed good steps bringing cheer to the infrastructure and equipment manufacturer segment.

The government's plan to invest Rs.50,000 crores in infrastructure will encourage more projects on PPP model for massive infrastructure development. The signs for the road construction segment are very promising considering the government's plan to invest Rs 10,000 crore and introduce external commercial borrowing. It has planned 8800 kms of road construction, which will provide more avenues for projects.

The implementation of the GST model will be watched carefully. With the government still in consultation with different states, we hope to see a practical road map for GST by August. This will be a huge boost for equipment manufacturers as it will reduce taxes on sales of equipment between states.

The mining sector has also seen some very bright spots with the exemption of customs duty on coal. I believe this is one of the high points of the budget since mining companies will look at venturing into newer projects. Another key point which will have a positive impact on equipment companies is the reduction of tax on iron ore equipment from 7.5 per cent to 2.5 per cent.

Overall the budget resonates well with the verticals we cater to. In the coming year, I hope to see positive developments in the equipment manufacturers industry.
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Ramesh Chandak, President, IEEMA

The slowdown in the power sector and escalating imports of electrical equipment, which have led to sharp deceleration in the growth of the domestic electrical equipment industry this financial year, have not been addressed. The power transmission and distribution sector has been largely ignored while the generation sector has received some attention.
 
None of the major demands of the industry, including service tax exemption for all power projects, duty free import of CRGO electrical steel (a critical raw material for manufacturing transformers), demand for a level playing field for domestic electrical equipment manufacturers vis-à-vis imports.
 
The hike in service tax and excise duty rates, will further impact the top-line and the bottom-line of electrical equipment manufacturers and consequently their commercial viability, who are already facing a crunch and working at broadly 65 per cent of their production capacities.
 
Given the huge effort required in rural electrification, the fall in Central Plan allocation for Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) from Rs 6,000 crores (BE 2011-12) to Rs 4,900 crores (BE 2012-13) is a matter of concern. Further, the revised estimates of Rs 3,544 crores against the budget estimates for 2011-12 show that funds provided have not been fully utilised.
 
The entire power sector value chain crucially hinges on the financial viability of the power distribution sector and reduction of aggregate technical & commercial (AT&C) losses, close to 30 per cent currently, is a national imperative. The Restructured Accelerated Power Development and Reforms Programme (R-APDRP), which is primarily focussed on reduction of AT&C losses, has seen a welcome hike in Central Plan allocation from Rs 2,034 crores (BE 2011-12) to Rs 3,114 crores (BE 2012-13), but here again the revised estimates for 2011-12 (Rs 1,668 crores) show under-utilisation of allotted funds.
 
The additional Rs. 10,000 crores provision for tax free infrastructure bonds for the power sector, reduction of withholding tax from 20 per cent to 5 per cent on interest payments on external commercial borrowings for power sector, the extension of the sunset date by one year for power sector undertakings for claiming 100 per cent deduction of profits for 10 years are some positive features of the Budget proposals.

Rakesh Malhotra, Founder Chairperson of Luminous Power Technologies & also Managing Partner, Ncubate Capital Partners
 
With Mukherjee's hands tied behind his back, there was not much to expect and the budget matches the lack of expectation that was there. It's a dead budget, there is no policy initiative in the budget that will lead to growth or will solve the structural problem of fiscal deficit. The increase of service tax and excise duty by 2 per cent would translate higher price for goods and services across the board, for the common man. This can potentially fuel inflation. Fiscal deficit at 5.1 per cent, FY13 looks like a far-fetched dream.