12
T
he
U
nion
B
udget
2017-18
View:
The budget was neutral from the IT sector perspective.
However, incentivising digitisation would provide a boost to
start-ups working on digital ecosystems.
Metals & Mining
Budget Recommendations
• The ‘Clean Energy Cess’ levied on coal, lignite and peat has
now been renamed ‘Clean Environment Cess’, which remained
stable at
R
400 per tonne.
• Basic customs duty on nickel removed from the current 2.5%.
• Customs duty on stainless steel tapes to be applicable at 10%
from zero currently.
• Customs duty on cold rolled steel coils reduced to 5% from
10%.
• Custom duty on hot rolled coils reduced to 10% from 12.5%.
• Export duty on aluminium ores, including laterite, is now at
15% from zero earlier.
View:
Overall, the budget seemed neutral for the metal sector, as the
government remained muted on major budgetary expectations.
The increase in custom duty on steel, coupled with higher
infrastructure allocation would revive the growth of domestic
steel producers. However, an unchanged clean environment
cess on coal (which continues to stand at
R
400/tonne) is a
negative, as it is likely to continue to hurt domestic steel and
aluminium steel producers in terms of production costs.
Oil & Gas
Budget Recommendations
• Provision of
R
250 bn of subsidy on petroleum in FY18, as
against
R
290 bn in FY17BE.
• Proposed setting up of strategic crude oil reserves at two
more locations, namely, Chandikhole in Odisha and Bikaner
in Rajasthan, so as to take the strategic reserve capacity to
15.33 MMT.
• Proposed creation of an integrated public sector ‘oil major’ to
match the performance of international and domestic private
sector oil and gas companies.
• Allocation of
R
25 bn in FY18 to provide new LPG connections
to BPL households in rural areas, as against
R
20 bn in FY17BE.
• Basic customs duty on liquefied natural gas reduced from 5%
currently to 2.5%.
View:
The budget sounded mixed for the oil and gas sector. The
subsidy for FY18 seems adequate at
R
250 bn. The budget
remained muted as regards reduction of cess on crude oil from
20% ad valorem. This should continue to further impact the
profitability of upstream companies like ONGC and Oil India. No
increase in import duty on crude oil spells a significant relief to
downstream PSUs (BPCL, HPCL and IOCL) and a partial relief
to RIL, as the government has retained duty protection for the
domestic refining sector.
Power
Budget Recommendations
• The basic customs duty on solar tempered glass (for use in the
manufacture of solar cells/panels/modules) has been removed
from 5% earlier.
• In case of resins and catalysts used in the manufacture of cast
components for wind operated energy generators (WOEG),
the basic custom duty has been reduced to 5% from 7.5%
and additional duty of customs and special additional duty of
customs have been removed from the earlier 12.5% and 4%
respectively.
• The government is committed to achieving 100% rural
electrification by 1st May, 2018. The government has
allocated
R
106 bn (as against
R
85 bn in FY17BE) for the
Deendayal Upadhayaya Gram Jyoti Yojna and Integrated Power
Development Schemes.
• Second phase of Solar Park development proposed for an
additional 20,000 MW capacity.
• Proposed to feed about 7,000 stations with solar power in the
medium term, as part of 1,000 MW solar mission.
View:
The budget was negative for the power sector with no major
policy announcement. However, the government highlighted
its intention of diversifying the sources of power to achieve
its target for renewable energy, towards which it reduced
the basic custom duties on the raw materials required for
solar panels. The strong focus on electrification is a positive
for transmission and distribution equipment suppliers in the
medium term. However, it will be a positive for the generation
sector also in the long term, as addition of villages to the
grid will spur the demand for electricity which in turn would
improve the PLFs. The clean environment cess on coal, lignite
and peat has been kept unchanged at
R
400/tonne per metric
tonne of coal, which is unlikely to have any impact on regulated
power utilities like NTPC. However, it could be negative for
many other companies, as the entire capacity is not tied-up
with a cost-plus PPA, such incremental cost would adversely
impact earnings.
Real Estate
Budget Recommendations
• Affordable housing to be given infrastructure status.
• Allocation to Pradhan Mantri Awaas Yojana – Gramin increased
to
R
230 bn in FY18.
• National Housing Bank will refinance individual housing loans
of about
R
200 bn in FY18.
• Under the scheme for profit-linked income tax deduction for
