Wishlist: What Budget 2010 should be like

B G Vyas, President, RAK Ceramics

"After the downturn, it is expected that the housing sector, especially affordable housing, will witness a new boom phase.

However, to make these houses really affordable, the government needs to give special exemption to all the building product manufacturers such as tiles, sanitary wares etc for the supplies made towards the government focused projects and government controlled housing bodies/ corporations and redevelopment bodies.

This will make sure that end consumer gets these houses at really affordable cost. Apart from that, the custom duty on raw material should be reduced to make it lesser than the custom duty on finished goods from China and other SAARC countries.

This will encourage Indian manufacturers to supply such products at more competitive rates as these products now should fall under basic needs category and not premium luxury items.

"Budget should be investor friendly with reforms in FDI and ECB regulations"

C Chandrasekhar, sr VP, Mecklai Financial Services

"Budget expectations are high - not only because the economy is proved to be resilient in the face of a global financial meltdown, but also because the Finance Minister is an old hand at reconciling conflicting interests.

We are anticipating an investor friendly budget, with major reforms in FDI and ECB regulations. We may expect a further thrust to investment in infrastructure, most likely by promoting a new fund to participate directly in debt and equity of infra companies (unlike the IIFCL).

The FM may also remove supply side constraints to control primary inflation, though it is difficult to envisage any concrete steps in this direction - given the indecision on GM crops and partial rollback of fertilizer subsidy.

The FM will be keen on containing the fiscal deficit, mainly by expediting disinvestment process in public sector and with contributions from 3G - auction, already deferred to next fiscal year. What we cannot expect include full-scale implementation of GST, any reduction in direct or indirect tax rates and continuation of fiscal stimulus.

Continuing instability in global financial markets, with concerns of sovereign default in Europe and Middle East, and on domestic front, limited success of recent issues by PSUs may act as dampeners - but we hope the FM will remain undaunted and will present a pragmatic budget."

"Budget should clearly set the time line to contain fiscal deficit"

Yashika Singh, head-economic analysis, Dun & Bradstreet India

"While most expectations around the Union Budget are centered round the treatment of stimulus measures announced earlier, it is most likely that the fiscal deficit is likely to get precedence in budget considerations.

The consolidated Fiscal Deficit (including off-budget liabilities) is expected to be 10.3% in FY09-10. Over the long term, this high level of deficit is not only unsustainable but could in fact derail the growth prospects themselves.

The financing of this fiscal deficit could fuel inflationary pressures, as growth picks up and capacity utilization peaks. In a scenario where inflation rates are already climbing steadily, this is not a satisfactory macro-economic environment to engender.

The financing of the deficit could put pressure on interest rates as well, thus handicapping any monetary policy measures that may be considered for containing the rising inflationary expectations.

The above argument is of course based upon the assumption that economic growth will remain strong and stable, thus implying that the stimulus measures can indeed be rolled back. There is of course no prescribed duration for fiscal policies that is recommended - it is based upon the fundamental requirement of the economy.

In that regard, there are some signs that consumer and investor confidence is returning, which may go some way in sustaining the economic growth over the next few quarters. The expected third quarter GDP numbers have been revised upwards, and even though much of the growth in the first 3 quarters of the financial year have been supported by government expenditure, there is some case for certain exemptions granted earlier to be rolled back.

While the containment of the fiscal deficit will take place only over a period of time, the budget is expected to very clearly set the time-lines for it. Even though the expectations of higher GDP growth in the coming year may be seen as relieving some pressure on the revenue front for the government, the probability of tax cut announcements remains low."

"Capital Intensive Infrastructure Projects should be exempted from the purview of Service Tax"

Vijay Kalantri, president, All India Association of Industries

"Exemption of Service Tax for Capital Intensive Infrastructure Projects such as Ports, Airports, Seaports and Highways provide the gateway and vital links to international business and this is a fundamental requirement for any successful globalization strategy.

Just as the Special Economic Zones are instrumental in promoting exports and enable hassle free trading activity, so also are the Airports, Seaports and Highways responsible for smoother and timely movement of cargo. Hence, the Seaports and Airports should also be attributed the same benefits as the SEZs as without them, mass trade facilitation is not possible.

We feel that incentives should be given to such sectors as we lack efficiency in these sectors and service tax definitely acts as a disincentive.

In this context we would like to bring to your kind attention that in 2005 2006 Budget the seaports have been brought under the purview of Service Tax. The service tax levied on seaports would mean a burden on the economic viability of the project as it would increase the cost factors of the services rendered as also to the project development cost. We therefore request the Government to exempt seaports from the purview of Service Tax.

Further, the Service Tax introduced in this Budget on Dredging would have an adverse impact on port development. Dredging is a continuous process in ports in order to create & maintain adequate draughts. None of our ports can cater to the latest 3rd generation vessels due to lack of adequate draught, hence Dredging is an integral and critical activity for transforming our ports and making them international hubs that require minimum 16 mtrs. draught.

The capital cost of dredging constitutes nearly 30% - 40% of the overall project outlay, levying of Service Tax would increase the cost of such projects upfront to the tune of nearly 5%-7% which is a phenomenal increase considering infrastructure projects have long gestation projects.

Further annual maintenance on dredging is a recurring cost every year and constitutes nearly 10%-15% of the operating cost in a port due to constant siltation and demands huge capital outlay in the range of more than Rs.100 crores. This regular burden on the project is itself a deterrent to the investors and the Service Tax will further aggravate the problem.

Investment in infrastructure projects such as ports has always been slow and painstaking and the levy of Service Tax on such projects at such high rates will further dampen the development of the ports sectors.

Further most of our ports are stretched beyond capacity and are working well below world standards. Keeping in mind the growth of trade which is expected to be to be approximately in the range of 16% - 18% and considering the GDP growth projected at 8%, we need to develop quickly many more ports to facilitate this growth in trade.

In view of the above there should be more incentives advanced to this sector rather than burdening it with more taxes.

The Finance Minister has also spoken about initiating 20 ports in the next 5 years but the Service tax factor would be detrimental to the development of these projects as Dredging & Construction are a continuous process. Further, private promoters new Ports that are being developed in the domain of Public Private Partnership will be discouraged from investing in this sector.

In above background, we request the Government to exempt the Capital Intensive Infrastructure Projects such as Ports from the purview of Service Tax.

"Digitalization of the Pay TV sector should be a national priority"

Vikram Kaushik, MD and CEO, TATA Sky

"Digitalization of the Pay TV sector should be a national priority. There should be an urgent rationalization of the tax burden on the DTH industry, which currently exceeds 50%!

This means, consumers are paying more than they should for digital TV services and the analog cable industry that under-declares its connections and evades tax on a massive scale is being indirectly subsidized. The Government loses more than Rs 4500 crore of tax, which should be coming to it from the cable industry every year.

Secondly, the imposition of Customs duty on DTH set top boxes last year was short-sighted and serves no purpose except to increase prices and make us uncompetitive.

The Government should also look at the early introduction of GST and the subsuming of State Entertainment taxes under it, which is very critical."

"Economic Stimulus Package for Exporters should be extended"

Mehul Choksi, CMD, Gitanjali Group

Mehul Choksi, CMD, Gitanjali Group, has explained his expectations form Union Budget 2010-11 as follows:

For the gems and jewllery sector:

Economic Stimulus Package for Exporters to be extended. The economic stimulus package including 2% interest subvention may be extended for a further period as the economic slowdown in global markets continues to impact the export industry.

Liberalization of Gold imports to make it easier for all players to have access to necessary supplies at competitive prices. Complete liberalization of gold imports so that all leading players can import gold without any restrictions. This will aid supply to the industry throughout the country at competitive prices.

Search & Seizure provisions of proposed Direct Tax Code should be withdrawn. The powers to seize stock in trade during Search operations by authorized officer should be withdrawn, as seizure of raw materials will hamper continuation of business.

Supply of goods from SEZs to domestic markets should be permitted - appropriate duty on raw materials may be chargedExporters in SEZs may be permitted to send some part of the product to the domestic market on payment of appropriate duties on raw materials without tax on labour costs.

Also definition of jewellery SEZ should be broadened to include all accessories that are manufactured with precious metals or studded with diamonds and precious stones.

Machinery imports for jewellery units should be allowed duty free. The jewellery industry provides massive employment across India and has potential to grow further. Modernization of the sector will also be encouraged by this step.

Easy availability of dollar finance at internationally competitive rates Government should ensure easy availability of dollar finance available at LIBOR + 1% to be on par with other international centres of gem and jewellery industry. Current rates of 3-4% above LIBOR make Indian industry non-competitive.

Extension of IT Exemption U/s 10A / 10B / 10AA of Income tax Act In view of the global economic slowdown and the hardships faced by exporters, IT Exemption to EOUs and units in SEZs may be further extended beyond March 2010.

For the retail sector:

Grant 'Industry' Status to retail sector. This would help the rapid development of the modern retail segment by providing easier access to organized financing and garnering of fiscal incentives. In turn this would greatly boost the employment potential of the sector.

Permit FDI in Multi-Brand Retail This will help rapid modernization and strengthening of the distribution system, and speedy growth in the infrastructure, and bring in much needed professionalism into the sector.

Incentives to Encourage Consumption- Tax and other incentives to boost consumption and consumer demand are an important requirement especially in the context of the global economic slowdown.

"Government expenditure on healthcare should be doubled to 2% of the GDP"

Amit Varma, President, Healthcare, Religare Enterprises

"India is on a fast growth path and it is time that all our citizens have access to affordable and quality healthcare. For this to happen, the government has to play a strong supportive role. I am sure this budget will set a strong foundation for a vibrant healthcare system for our country. Here is a wishlist:

1) Keeping the macro scenario in view, government expenditure on healthcare should be doubled to 2% of the GDP with a focus on primary healthcare and public health in semi-urban and rural areas.

2) The impetus given earlier to promote new private healthcare facilities in tier 2 and tier 3 towns by giving a 5-year tax holiday has failed to excite the industry and we expect that in line with the thinking in earlier budgets, this will be extended to 10 to 15 years.

3) Creation of healthcare infrastructure and getting returns involve long gestation. It is thus necessary that this sector, given the pressing need for adding bed capacity in the country, be recognized as a priority sector leading to easy availability of funding.

4) Employees in the organized sector in India can also be mandated to provide healthcare insurance cover to their families through group medical insurance cover. This will help growth of health insurance, which is yet to make any major headway in the country.

5) As a step towards universal health insurance, the private health insurance sector should be provided subsidies to encourage them to rapidly enhance penetration.

6) There is a huge shortage of doctors, nurses and trained paramedical staff today and the situation will only worsen with the commissioning of new and expansion of current hospitals. Medical education policy needs to change to encourage increase in quantity and quality of medical personnel.

"Simulus packages for exporters should be continued"

R K Sen, director general, Merchants' Chamber of Commerce, Kolkata

He explained his budget expectation as follows:

1. Stimulus package given to exports like interest subsidy, higher duty refunds etc. in October 2008 should not be withdrawn, as positive growth in exports and manufacturing is not uniform. The sectors like Engg., Textiles & Leather are facing rough terrain and need incentives to recover on a sustainable basis.

2. Lending rates of Banks should not be raised in order to keep costs under control and products competitive in the world markets. Ways should also be found to increase credit-flow into the SME sector and cut down their transaction costs. A Mechanism may be devised by RBI urgently to streamline credit-rating norms by all nationalised banks on a uniform basis. For the SME enterprises, credit rating norms should be relaxed, as an incentive for their rapid growth.

3. Prices of energy-inputs like Petrol, Diesel, LPG etc. for industries should not be raised at a time when the economy has just started recovering and high inflation is visible in the economy. Prices of Food articles have shot up by 20 p.c. and any inflationary step will upset the recovery process, decelerate economic growth and lead to serious hardship for the common people.

4. Fiscal deficit which has crossed 6.8% of GDP now should be reduced and kept down to around 4 p.c. To achieve it, government should cut down non-Plan expenditure drastically, effectively plug all loopholes to avoid time-and-cost over-runs in the execution of Plan projects and substantially increase the disinvestment amount.

5. Food inflation is posing a serious problem. Both short-term and long-term measures need to be taken to overcome this crisis and build-up a strong base for long-term food security. Agricultural investment must be stepped up - in roads & transport linkages, irrigation facilities, seeds - soil treatment - manures - pesticides, storage facilities & Cold chain etc. To improve the current supply management aspect, imports of essential items in short production, backed by an effective Distribution System and target-based Rationing should be adopted to tackle the present crisis.