The Union Budget 2020-21 – or as Finance Minister Nirmala Sitharaman called it the traditional Bahi Khata 2020-21 – with its accent on infrastructure, has kept buoyant the hopes of the Indian steel industry. Presenting the first Union Budget of the third decade of the 21st century, the finance minister, on February 1, 2020 unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term and long-term measures. Here is the list of the Union Budget’s key highlights compiled by Steel360 from a steel maker’s perspective:
Economic development (industry, commerce and investment):
-INR 27,300 crore allocated for 2020-21 for development and promotion of industry and commerce. Investment Clearance Cell proposed to be set up, to provide “end to end” facilitation and support; and to allow for working through a portal.
-Five new smart cities proposed to be developed.
-All ministries to issue quality standard orders as per PM’s vision of “zero defect-zero effect” manufacturing.
– INR 100 lakh crore to be invested in infrastructure over the next five years.
– National Infrastructure Pipeline: INR 103 lakh crore worth of projects; launched on December 31, 2019. More than 6,500 projects across sectors, to be classified as per their size and stage of development.
- National Logistics Policy (to be released soon)
– To clarify roles of the Union government, state governments and key regulators.
– A single window e-logistics market to be created.
- National Skill Development Agency to give special thrust to infrastructure-focused skill development opportunities.
– Focus to be on generation of employment, skills and making MSMEs competitive.
– Project preparation facility for infrastructure projects proposed. To actively involve young engineers, management graduates and economists from universities.
– Infrastructure agencies of the government to involve youth-power in start-ups. INR 1.7 lakh crore proposed for transport infrastructure in 2020-21.
– Accelerated development of highways to be undertaken, including 2,500 km access control highways, 9,000 km of economic corridors, 2,000 km of coastal and land port roads, 2,000 km of strategic highways.
– The Delhi-Mumbai Expressway and two other packages to be completed by 2023. The Chennai-Bengaluru Expressway to be started.
– Proposal to monetise at least 12 lots of highway bundles of over 6,000 km before 2024.
- Indian Railways
– Large solar-power capacity to be set up alongside rail tracks, on land owned by railways.
– Four station re-development projects and operation of 150 passenger trains through PPP.
– More Tejas-type trains to connect iconic tourist destinations.
– High-speed train between Mumbai and Ahmedabad to be actively pursued.
– A 148-km long Bengaluru suburban transport project at a cost of INR 18,600 crore to come up, which will have fares on the Metro Rail model. The Central government to provide 20% of equity and facilitate external assistance up to 60% of the project cost.
- Ports & Waterways
– Corporatising at least one major port and its listing on stock exchanges to be considered. Governance framework in keeping with global benchmarks needed for more efficient sea-ports. Economic activity along river banks to be energised as per Prime Minister’s Arth Ganga concept.
– Around 100 more airports to be developed by 2024 to support the Udan scheme.
– Air fleet number expected to go up from the present 600 to 1,200 during this time.
– INR 22,000 crore proposed for power and renewable energy sector in 2020-21.
– Proposal for expansion of the national gas grid from the present 16,200 km to 27,000 km.
– Further reforms to facilitate transparent price discovery and ease of transactions.
- Infrastructure Financing
– INR 103 lakh crore National Infrastructure Pipeline projects earlier announced. INR 22,000 crore to provide equity support for infrastructure finance companies such as the India Infrastructure Finance Company (IIFCL) and a subsidiary of the National Investment & Infrastructure Fund (NIIF).
– IFSC, GIFT city: Full of potential to become a centre of international finance as well as a centre for high-end data processing.
– International Bullion Exchange(s) to be set up as an additional option for trade by global market participants with approval of the regulator.
- Direct Tax
– Corporate tax: Tax rate of 15% extended to new electricity generation companies. Indian corporate tax rates now amongst the lowest in the world.
– Dividend distribution tax (DDT): DDT removed, making India a more attractive investment destination. Deduction to be allowed for dividend received by holding company from its subsidiary. INR 25,000 crore estimated annual revenue forgone.
– Start-ups: Start-ups with turnover up to INR 100 crore to enjoy 100% deduction for three consecutive assessment years out of 10 years. Tax payment on ESOPs deferred.
– MSMEs to boost less-cash economy: Turnover threshold for audit increased to INR 5 crore from INR 1 crore for businesses carrying out less than 5% business transactions in cash.
– Parity brought between co-operatives and the corporate sector. Option to co-operative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions.
– Cooperative societies exempted from the alternate minimum tax (AMT) just like companies are exempted from the minimum alternate tax (MAT).
- Tax concession for foreign investments
– 100% tax exemption on the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before March, 31, 2024 with a minimum lock-in period of three years by the Sovereign Wealth Fund of foreign governments.
- Affordable Housing
– Additional deduction up to INR 1.5 lakh for interest paid on loans taken for an affordable house extended till March, 31, 2021.
– Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till March, 31, 2021.
Key Changes Announced
- Basic customs duty on calcined petroleum coke falling under tariff 2713 1210 and 2713 1290 reduced from 10% to 7.5%.
- It has been observed that imports under free trade agreements (FTAs) are on the rise. Undue claims of FTA benefits have posed a threat to domestic industry. Such imports require stringent checks. In this context, suitable provisions are being incorporated in the Customs Act. In the coming months, the government shall review Rules of Origin requirements, particularly for certain sensitive items, so as ensure that FTAs are aligned to the conscious direction of the policy.
- The government is also strengthening provisions relating to safeguard duties which are applied when surge in imports causes serious injury to the domestic steel industry. Amended provisions shall enable regulating such surge in imports in a systematic way. The provisions for checking dumping of goods and imports of subsidised goods are also being strengthened for ensuring a level playing field for the domestic industry. These changes are in line with international best practices.
‘Discreet And Considered’ Stimulus
Six days after announcing the Budget, Finance Minister Nirmala Sitharaman said it provides a “discreet and considered” stimulus. Speaking to industry representatives in Mumbai, Sitharaman said the Budget draws on experiences of all the past instances of a slowdown in growth where the government has had to provide for a booster. It can be noted that some constituencies have expressed disappointment with the Budget for not having any big announcements, especially at a time when growth has slipped to a decadal low.
“Based on the experiences that we had in the last round of government trying to provide stimulus, we’ve essentially made sure that we are doing it in a very discreet and considered manner,” Sitharaman said at the interaction.
“We kept the macro-economic fundamentals in mind and made sure that the necessary stimulus, which was the demand of the time, both for increasing consumption and also for ensuring investments in long-term asset building as a means to providing stimulus, will be taken up,” she added.
Accompanied by the Secretaries in the ministry, Sitharaman said, unlike the past instances of providing for a stimulus, the remedies that the Budget has provided are “very focused, very clear that it is going in a well-chalked- out path with a clear intention of spending responsibly in building capital assets”. She pointed out that the rural and farm sector had got attention through the 16-point agenda, start-ups have been given a fillip and infrastructure investments have also been taken up.
“The remedy is a considered remedy. I’m sure discerning people will be able to see why it is so,” she said. Sitharaman said divestments are necessary to get transparency in the working of companies by making necessary disclosures. She added that the government will only sell those companies where it sees no strategic rationale in running those.
N. Baijendra Kumar, CMD, NMDC Limited
Budget 2020 puts a thrust on infrastructure creation. This would certainly enhance the demand for steel. NMDC Limited would play a pivotal role in catalysing the growth in the steel sector in the future.
Abhyuday Jindal, Managing Director, Jindal Stainless
The government’s continued thrust on the infrastructure sector in the Union Budget is indeed encouraging. I believe that the Indian industry will reap huge benefits from the proposed National Logistics Policy.
The stainless steel industry is expecting a boost from the announcement of accelerated development of highways, ports, airports, railways and station redevelopment projects along with renewed emphasis on water management measures.
The acknowledgement of the current import issues, under India’s active free trade agreements (FTAs) in the Union Budget is a symbolic move in favour of the domestic manufacturing industry. The government must pro-actively review all the FTA provisions to strengthen and ensure a level-playing field for the domestic industry. This will not only promote the ‘Make in India’ programme, but will boost job creation.
Mandeep Singh, CEO & Executive Director, JSL Lifestyle
With the reinforcement of India’s leadership as the 5th largest economy, we foresee ample opportunities for growth. The current fiscal measures to revive manufacturing and production will certainly enable us to achieve 6-6.5% GDP by 2021. The increased focus on entrepreneurship, job creation and technology will also act as a catalyst to spur growth in India’s economy. The intent to utilise available resources with increased spend in infrastructure, railways and transportation amongst various other sectors is an absolute roadmap to overcome the current economic slowdown. Reducing personal taxes coupled with other rebates will also bring in liquidity and further increase consumer spending in the market, which is vital to boosting demand. The increased focus on public-private participation will also prove to be a game-changer this year to achieve a collective goal of becoming a global power.
Dr Bhaskar Chatterjee, Secretary General & Executive Head, Indian Steel Association
The Indian Steel Association (ISA) welcomes reduction of the basic customs duty on calcined pet coke from 10% to 7.5%. The Union government’s thrust on strengthening trade remedy measures like safeguards, anti-dumping, anti-circumvention and anti-subsidy in FY2020 will guard against dumping of imports, including steel. The government’s resolve to implement more mandatory standards will help the quality of domestic products, including steel, with a focus on “Zero defect-zero effect”.
The Union Budget, 2020 presented on February 1, being the first of this decade is a holistic and integrated Budget, focused on promoting “ease of living” for the common man and “ease of doing business” for SMEs, MSMEs and corporates.
Though there has not been a direct focus on core industries, including the steel sector, with a clear thrust on infra projects, keeping sustainability and optimum use of resources in mind, the Budget outlines plans to strengthen infrastructure relevant for renewable energy, transport, IT and agriculture and allied industries. The Budget has focused on transport, with the development of highways, waterways and air-routes, especially Krishi Udaan and Krishi Rail for agro produce transportation using cold storage.
The proposal of 100% tax concession to sovereign wealth funds on investment in infra projects, budgetary allocations of INR 22,000 crore earmarked for the power and renewable energy sector and allocations of INR 4,400 crore for clean air in cities with a population of over one million, expansion of the national gas grid from 16,200 km to 27,000 km, concessional tax rate of 15% to power generation companies and government initiatives to forge global partnerships for environment are impactful steps in the direction of building a robust infrastructure for sustainable energy resources.
All these initiatives showcase the government’s commitment to driving an integrated, sustainable and humane approach to economic growth that will have a long-term impact on the country’s economy and liquidity. All the above focus will give impetus to steel demand as well.
Ramesh Nair, CEO & Country Head, JLL India
The Budget has no direct impact on real estate, focus continues on infrastructure and revival of consumer demand. JLL rates Budget 3/10 for the real estate sector. The Union Budget continues to focus on affordable housing and infrastructure, more specifically, urban infrastructure and logistics. However, we do not see significant impact on the realty sector. Keeping in mind the limited fiscal room available to the government, the focus of the Budget is to increase liquidity and enhance consumer demand through extension of benefits and simplification of personal income-tax.
Anil Kumar Chaudhary, Chairman, SAIL
This Budget is promising and full of opportunities for the entire industry, including steel. The government’s plan of massive investment in infrastructure projects will definitely work to boost steel consumption in the country and give momentum to the economy, which would also help to generate job opportunities. Along with this, the steel industry will be directly benefited from the government’s renewed focus on investment in Indian Railways and plan to develop 100 new airports and piped water supply lines. This Budget will definitely prove to satisfy the aspirations of the industry and will also provide a new impetus to economic development.