Overall Sector Impact

Subsidies:
1. Efforts to keep central subsidies under 2% of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75%. 2. Subsidies related to administering the Food Security Act will be fully provided for. 3. A mobile-based fertilizer management system (recommended by the task force headed by Nandan Nilekani) has been designed to provide end-to-end information on movement of fertilisers and subsidies. Nation-wide roll out during 2012. 4. State-owned oil marketing companies have launched LPG transparency portals to improve customer service and reduce leakage. Endeavour to scale up and roll out Aadhaar enabled payments for various government schemes in at least 50 districts within next 6 months.

Tax Reforms:
1. Direct Tax Code (DTC) Bill to be enacted at the earliest after expeditious examination of the report of the Parliamentary Standing Committee. 2. Drafting of model legislation for the Centre and State Goods Services Tax in concert with States is under progress. 3. GST network to be set up as a National Information Utility and to become operational by August 2012.

Disinvestment Policy:
For 2012-13, Rs 30,000 crore to be raised through disinvestment. Foreign Direct Investment: Efforts are on to arrive at a broad-based consensus to allow FDI in multi-brand retail upto 2.51%.

Direct Taxes: 1. Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs 1,80,000 to Rs 2, 00,000. 2. Upper limit of 20% tax slab proposed to be raised from Rs 8 lakh to Rs 10 lakh. 3. Proposal to allow individual tax payers, a deduction of upto Rs 10,000 for interest from savings bank accounts. 4. Senior citizens not having income from business proposed to be exempted from payment of advance tax. Financial Sector: 1. Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50% to new retail investors (whose annual income is below Rs 10 lakh), who invest upto Rs 50,000 directly in equities. The scheme will have a lock-in period of 3 years.

Legislative Reforms: 1. Rs 15,888 crore capital support proposed to public sector banks and financial institutions. 2. Official amendment to "The Pension Fund Regulatory and Development Authority Bill, 2011", "The Banking Laws (Amendment) Bill, 2011" and "The Insurance Law (Amendment) Bill, 2008" to be moved in this Budget session. Infrastructure and Industrial Development: 1. During 12th Five Year Plan period, investment in infrastructure to go up to Rs 50 lakh crore, half of which is expected from private sector. 2. Tax free bonds of Rs 60,000 crore to be allowed for financing infrastructure projects in 2012-13. It was Rs 30,000 crore in 2011-12. 3. IIFCL has put in place a structure for credit enhancement and take-out finance for easing access of credit to infrastructure projects. Power and Coal:
The Union Budget 2012-13 is a positive for the power sector. Exemption of 5 per cent customs duty on thermal coal, natural gas and liquified natural gas (LNG) will provide some relief to power generators reeling under high fuel costs. The extension of the sunset clause by one year to avail the 10-year tax holiday and additional depreciation of 20 per cent in the first year also bode well for new power projects. The proposal to allow external commercial borrowings (ECB) to part finance the rupee debt of existing power projects and reduction of withholding tax on interest payments on ECBs (from 20 per cent to 5 per cent) will reduce the cost of borrowings for the sector. The Budget also enhanced the availability of funds for financing power projects through tax-free bonds.

Indirect Taxes:

1. Standard rate of excise duty to be raised from 10% to 12%, merit rate from 5% to 6% and the lower merit rate from 1% to 2% with few exemptions. 2. Excise duty on large cars also proposed to be enhanced. 3. Indirect taxes estimated to result in net revenue gain of `45,940 crore.

Civil Aviation: 1. Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft. 2. External Commercial Borrowing (ECB) to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion.

Housing Sector:
ECBs have been allowed as a funding option for affordable housing projects. The withholding tax rate on interest payments for these ECBs has been cut to 5 per cent from 20 per cent for the next three years. However, given weak balance sheets, many real estate developers will find it difficult to raise ECBs. The interest rate subvention of 1 per cent for housing loans up to Rs 1.5 million (for houses costing below Rs 2.5 million) has been extended for another year. A credit guarantee fund is proposed to be set up to improve housing loan disbursements to the low-income category. The rural housing fund has been enhanced to Rs 40 billion from Rs 30 billion. All these measures will support affordable housing projects; however, these projects form only a small proportion of the industry currently. The service tax hike will push up prices of under-construction properties marginally.

Education: To ensure better flow of credit to students, a Credit Guarantee Fund proposed to be set up for 2012-13, Rs 25,555 crore provided for RTE-SSA representing an increase of 21.7 per cent over 2011-12. Aviation:
The proposal to allow full exemption from customs duty and countervailing duty for aircraft spares, tyres and testing equipment is expected to bring down the costs of Indian maintenance, repair and overhaul (MRO) service providers. Airport infrastructure companies are likely to benefit marginally from the reduction in the rate of withholding tax on interest payments on ECBs from 20 per cent to 5 per cent, as it will bring down the cost of ECBs.