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Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five more UMPPs to the bidding stage by extending the required support.
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Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan period with a capital subsidy of Rs 280 bn; allocation of Rs 55 bn for FY09.
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Rs 8 bn to be provided for Accelerated Power Development and Reforms Project (APDRP) in FY09.
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Proposal to set up a national fund for transmission and distribution (T&D) reform in the power sector.
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Exemption from 4% additional duty of customs has been withdrawn on power generation projects (other than mega power projects), transmission, sub transmission and distribution projects, and specified goods for high voltage transmission projects.
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Custom duty on project imports reduced from 7.5% to 5%
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Initiatives like skill development programme and setting up of industrial training institutes to be taken
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Defense allocation to be increased by 10%
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Excise duty being exempted on end-use basis, on refrigeration equipment (consisting of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration) utilising power of 50 KW and above.
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Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.
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Aggressiveness in allotting UMPPs to prospective bidders expected to be helpful for engineering companies providing equipments and EPC services for power plants.
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Setting up of a national fund for T&D reforms to aid growth prospects of equipment suppliers and T&D project developers.
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Removal of exemption from additional customs duty on power generation, transmission and distribution projects to increase cost for companies importing such projects, which shall consequently be beneficial for domestic project developers. However, on the other hand, reduction in custom duty on project imports to nullify the impact.
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Initiatives like skill development programme and setting up of industrial training institutes to reduce talent crunch for engineering companies, which are reporting high levels of attrition
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Increase in defense allocation to aid prospect of companies providing defense equipments and technologies.
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Allocation of UMPPs to support growth if equipment and service providers like BHEL, L&T and Siemens.
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Greater focus on the T&D front to be beneficial for ABB, Siemens, Crompton Greaves, Emco, Bharat Bijlee. Also, companies providing T&D project services like Jyoti Structures and Kalpataru Transmission to benefit.
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Removal of exemption from additional customs duty on power generation, transmission and distribution projects to benefit domestic companies like BHEL, L&T, Siemens and Reliance Energy.
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Skill development initiatives to pare pressure of attrition from companies like L&T and BHEL.
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Increase in defense allocation to aid prospects of Tata Power, L&T and Bharat Electronics.
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FICCI's wishlist
Abolition of dividend distribution tax
Abolition of MAT or reduction in the same
Rationalisation of fringe benefit tax
| Budget 2005-06 |
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Budget 2006-07 |
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Budget 2007-08 |
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A special purpose vehicle (SPV) to be launched to finance infrastructure projects that are financially viable. Investment limit for 2005-06 is fixed at Rs 100 bn.
NHDP-III to be launched in FY06 to target selected high density highways not forming part of the GQ or the N-S, E-W corridor; Rs 14 bn provided in FY06 to four-lane 4,000 kms.
Excise duty on A/Cs has been reduced from 24% to 16%.
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Estimated outlay for Jawaharlal Nehru National Urban Renewal Mission to be Rs 62.5 bn during 2006-07, including a grant component of Rs 45.9 bn. Through this mission, the government intends to promote establishment of new towns, preferably focused on a specific industry (IT) or a specific theme (education or health).
Budget support for National Highway Development Programme (NHDP) enhanced from Rs 93.2 bn to Rs 99.5 bn in 2006-07.
Special accelerated road development programme for the North Eastern region proposed at an estimated cost of Rs 46.2 bn approved with allocation of Rs 5.5 bn in 2006-07
1,000 kms of access-controlled Expressways to be developed on the Design, Build, Finance and Operate (DBFO) model.
Capital expenditure on defense proposed at Rs 375 bn.
Peak rate of customs duty on non-agricultural products has been reduced from 15% to 12.5% with a few exceptions.
Exemption to specified goods for making capital goods for setting up a unit with an investment of Rs 50 m or more withdrawn.
Resin binders used for manufacture of rotor blades for wind operated electricity generators exempted from excise duty.
Under NELP VI, 55 blocks and area of 355,000 sq kms offered. Investment of Rs 220 bn expected in the refinery sector in the next few years.
Five ultra mega power projects of 4,000 MW each to be awarded before December 31, 2006
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Hike in corpus of Rural Infrastructure Development Fund-XIII and Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
Private sector participation in transmission projects and hike in budgetary support for APDRP
Reduction in customs duty on imports of medical equipments from 12.5% to 7.5%
Increase in allocation to defense to Rs 960 bn, including Rs 420 bn for capital expenditure
Concessions under section 80IA for infrastructure facilities extended to cross country natural gas distribution network, including gas pipeline and storage facilities integrated to the network
Customs duty on sprinklers and drip irrigation systems for agricultural & horticultural purposes is reduced from 7.5% to 5%
Concessional customs duty of 5% on specified plantation machinery extended by two years to April 2009
Customs duty on food processing machinery and parts reduced from 7.5% to 5%
Dividend distribution tax to be hiked from 12.5% to 15%
Additional education cess of 1% to fund secondary and higher education
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| [Read more on Budget 2005-06] |
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[Read more on Budget 2006-07] |
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[Read more on Budget 2007-08] |
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| Key Positives |
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Power play: Since power utilities are one of the biggest consumers (generation, transmission and distribution) for engineering companies, reforms introduced in the power sector like privatisation of SEBs will help in strengthening the order book size. Huge addition in power generation capacity, in order to meet the demand supply gap will be a big positive for the sector.
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Infrastructure development: The government is focusing on development of infrastructure like housing, airports, roads and ports. This will be big positive for engineering and construction companies.
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Industrial ‘act’: Industrial divisions of engineering companies are likely to benefit from the increased focus on automation and capacity addition plans drawn by the India Inc.
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| Key Negatives |
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Captive competition: Duty free import of T&D equipments by captive power generation units, if allowed by government, can have some impact on margins of the T&D majors because of competition.
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People problem: Engineering companies, across the board, are facing troubled times retaining key employees. This is due to increased levels of competition for talent from MNCs, who have deep pockets and thus better paying capabilities. As a result of increasing levels of attrition, some companies are facing execution issues.
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| Sector Performance |
|
| COMPANY |
PRICE (Rs) |
|
| ABB |
777.6
(-0.0%) |
|
| AIA ENGINEERING |
381.5
(4.4%) |
|
| ALFA LAVAL |
1,392.7
(0.2%) |
|
| ALSTOM PROJECTS |
708.6
(-0.2%) |
|
| AREVA T&D |
294.8
(0.9%) |
|
| ATLAS COPCO |
1,233.3
(0.8%) |
|
| BH.EARTH MOVERS |
1,061.4
(4.8%) |
|
| BHARAT BIJLEE |
1,159.8
(1.5%) |
|
| BHARAT ELEC. |
1,723.2
(1.7%) |
|
| BHEL |
2,397.3
(-1.1%) |
|
| BLUE STAR |
445.0
(2.1%) |
|
| CARBORUNDUM UNIV. |
208.8
(0.9%) |
|
| CROMPTON GREAVES |
302.3
(0.9%) |
|
| CUMMINS INDIA |
733.0
(-0.1%) |
|
| ELECON ENG |
90.4
(1.9%) |
|
| ELGI EQUIP |
125.7
(-2.2%) |
|
| EMCO LTD. |
63.2
(-2.0%) |
|
| ENGINEERS INDIA |
335.8
(2.1%) |
|
| EVEREST KANTO CYLINDER |
113.7
(5.2%) |
|
| FINOLEX CABLES |
58.1
(0.4%) |
|
| HAVELLS IND |
795.7
(-0.9%) |
|
| HONEYWELL AUTOMATION |
2,443.0
(1.7%) |
|
| INGERSOLL RAND |
428.3
(0.2%) |
|
| JAIN IRRIG |
1,207.5
(-0.6%) |
|
| JYOTI STRUCT |
138.3
(0.3%) |
|
| KALPATARU POWER |
1,001.3
(1.2%) |
|
| KSB PUMPS |
568.8
(1.0%) |
|
| L&T |
1,841.6
(0.5%) |
|
| LAKSHMI MACHINE |
2,188.0
(0.3%) |
|
| MANUGRAPH INDIA |
45.7
(0.6%) |
|
| OPTO CIRCUIT |
277.6
(-0.7%) |
|
| PRAJ IND.LTD |
76.5
(2.2%) |
|
| PUNJ LLOYD |
108.9
(1.4%) |
|
| SANGHVI MOVERS |
180.9
(-0.5%) |
|
| SHANTHI GEARS |
44.1
(2.7%) |
|
| SIEMENS |
697.6
(0.3%) |
|
| SUZLON |
51.4
(10.2%) |
|
| THERMAX LTD. |
763.9
(0.6%) |
|
| TRF LTD. |
779.8
(-0.2%) |
|
| VOLTAMP TRANS |
1,001.9
(-0.9%) |
|
| VOLTAS |
209.1
(2.8%) |
|
| WELSPUN CORP |
246.2
(3.2%) |
|
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World-class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. And with poor infrastructure to support other growth initiatives, the Indian economy continues to be a laggard when compared to its developing peers. From a policy perspective, however, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. The realisation finally seems to be setting in. This makes the future of the Indian engineering sector extremely bright. Apart from highway development and construction and modernisation of airports, the potential for the sector lies in the oil and gas space, where high global demand has led to increased action in exploration and production activities. However, scale and execution capabilities remain the mantras for success.
