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Wednesday, Mar 01, 2006


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Opinion - Budget


Mixed impact

Vikram S. Shriram

It is fortunate that the Government has decided to de-reserve 180 more industries from the SSI list.

The Budget has had a mixed impact on various businesses in DSCL's portfolio.

While the thrust and focus on agriculture and rural development would help DSCL's Agri Businesses, the reduction in Customs Duties would adversely affect the Plastics & Chemicals Business.

Plastics & Chemicals

In the case of these businesses, the Customs Duty has been reduced and there would be a negative impact on profitability. In case of plastics, over the last two years, by a series of steps, the custom duty rates have been brought down from 25 per cent to 5 per cent. These rates are now lower than the `ASEAN' rates.

It is fortunate that the Government has decided to de-reserve 180 more industries from the SSI list. This should help in accelerating the demand, particularly for plastics.

Agri business

The Government has shown continued focus on rural development and agriculture, and this would be beneficial to DSCL's business interest. In particular, the special focus on providing credit to farmers at economical interest rates would help the Agri Trading Division and Haryali Kissan Bazar. The focus on irrigation and rural road development will help the sugar business in the medium to long term. In addition, there have been a number of concessions and incentives provided to food processing and allied industries, including the soft drinks industry.

Power

There has been an announcement of further liberalisation regarding allotment of coal blocks for captive power plants. However, as the details of the policy have not been spelt out, it is not possible to assess what gains could accrue to the company.

Direct Taxes

As the Direct Tax rates have not been increased, the Budget is neutral regarding DSCL's income tax liability.

In the case of Fringe Benefit Tax, some changes have been made, particularly with respect to contribution towards superannuation fund, which will reduce the FBT liability.

The tax holiday for new Power Plants has been extended up to March 2010. This will provide relief to DSCL, as we plan to substantially increase cogeneration and sale of power from the Sugar division.

(The author is Vice Chairman and Managing Director, DSCL.)

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