RESEARCH IT  >>  INDIAN ECONOMY  >>  BUDGET 2002

Paints Industry

  

Budget measures

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    Increase in exemption limit for interest payment towards housing loans from Rs 100,000 to Rs 150,000.

  • Dividend tax has been reduced from 20% last year to 10% in the current year.


      

    Budget Impact

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    The increase in exemption of interest payment towards housing loan would stimulate construction activity. This in turn will benefit companies like Asian Paints, Goodlass Nerolac and Berger Paints.

  • The reduction in dividend tax in expected to boost Asian Paints profit by more than Rs 60 m in FY02.


      

    Industry wish list

    Mr. Ashwin Dani, Vice-Chairman and Managing Director, Asian Paints:

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    Reduction of duty on Titanium Dioxide: The rate of duty on Titanium Dioxide is the same as that of the finished product paints i.e. 38.5 %. Hence the duty on Titanium Dioxide should be reduced.

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    Fast track clearance for Titanium Dioxide: Since paint manufacturers require Titanium dioxide regularly, it is requested that the government brings TiO2 under fast track clearance.


      Key Positives     Key Negatives

  • Very low consumption levels compared to other developing economies.

    		 

  • The auto sector is on the downtrend with a significant drop in passenger car sales in the current year. This is likely to lead to a slowdown volume growth for the automotive paint manufacturers.

  • The impending boom in the housing sector is likely to boost demand in the decorative segment.

    		 

  • Agriculture output has shown a negligible growth in the current year, which is key for demand of decorative paints. This could spell out tough times in the coming year.

  • The industry has been a beneficiary of reduced excise duties over the last three budgets. This has helped the organised sector to match the price of the unorganised sector. With WTO coming in, organised sector would continue to benefit.

    		 

  • With crude oil prices going up titanium dioxide prices are also on the uptrend. This could pressurize margins.

    		 

  • We have been witnessing a lot of competition amongst the car manufacturers, which is bound to lead to tough pricing norms for auto paint suppliers.

    		 

  • Imports from China could pose a bigger threat for the Indian paint companies.

  • How was this sector impacted by Budget 2001?