Rubber4U

Rubber4U - 1st March 2013 issue

Highlights of Union Budget 2013-14

Finance minister P Chidambaram unveiled a bigger-than-expected outlay for 2013-14 fiscal in one of the most highly anticipated Indian budgets of recent years. India faces challenge of getting back to its potential growth rate of 8%.

Following are few highlights of the Budget 2-13-14:

Revised estimate for total expenditure is 14.3 trillion rupees in 2012-13, which is 96% of budget estimate

Fiscal deficit seen at 5.2% of GDP in 2012-13

Fiscal deficit seen at 4.8% of GDP in 2013-14

Total budget expenditure seen at 16.65 trillion rupees in 2013-14

Plan expenditure seen at 5.55 trillion rupees in 2013-14

Non-plan expenditure estimated at about 12 trillion rupees in 2013-14

Set aside 100 billion rupees towards spending on food subsidies in 2013-14

India will need more than $75 billion this year and next year to fund current account deficit

Proposes surcharge of 10% on rich taxpayers with annual income of more than 10 million rupees a year

To increase surcharge to 10% on domestic companies with annual income of more than 100 million rupees

To continue 15% tax concession on dividend received by India companies from foreign units for one more year

Propose to impose withholding tax of 20% on profit distribution to shareholders

To introduce commodities transaction tax (CTT)

CTT on non-agriculture futures contracts at 0.1%

Plans to issue inflation-indexed bonds

Proposes capital allowance of 15% to companies on an 1 billion rupees

Foreign institutional investors (FIIs) can use investments in corporate, government bonds as collateral to meet margin requirements

Investor with less than 10% stake in a company will be regarded as FII, more than 10% stake as FDI

Will the government increase import duty?

The natural rubber prices in the local market have fallen nearly 20% since 2nd January 2012, when price of RSS4 grade was at 195.50 per kg, due to slowdown in economy and also on sluggish demand. There is a possibility that government could increase import duties on natural rubber in order to support falling rubber prices. The current duty is `.20 per kg, or 20%, whichever is lower.

Government won’t miss this opportunity

The Budget is again round the corner. The economy faces two clear problems - slowing economy and high inflation. Over 15 years have passed since P. Chidambaram presented what was called the ‘dream budget’. It was a budget that changed the discourse of financial policy and offered a vision of India matching the growth and dynamism of the tiger economies of Southeast Asia.

India’s economic growth is far below potential at this moment; perhaps more important is that price inflation, which could trigger mass discontent anywhere in the world, which has reached an uncomfortable levels. When the government announces the budget for 2013-14 fiscal on 28th February, it could be a platform to show that it has the long-term thinking to do the right thing.

One encouraging fact is that the spending cuts have started across the board, and even the military has not been spared. The number of state-sponsored schemes is likely to get drastically reduced, with a particular focus on areas with inefficiencies and wasteful spending. Therefore, the deficit target of 4.8% for 2014, after the 5.3% set for 2013, looks within reach. The fiscal deficit in FY11-12 was 5.8% while the budget estimate for FY12-13 was 5.1%.

The 28^th February 2013 budget is very crucial. The Finance Minister may outlined broad plans about the budget to restore the confidence in the economy and can expect no major surprises from this budget. It appears unlikely that the budget will make any substantial changes to the direct or indirect tax regime as any major tax hike may prove counter-productive by hurting the nascent recovery in business confidence. The government is likely to keep the reform momentum going and at the same time keep an eye on upcoming state elections in the second half of 2013 and general elections in 2014.

Highlights of the Indian Railway Budget 2013-14

The highlights of the Rail Budget as presented by Indian Railway Minister - Pawan Kumar Bansal:

No increase in passenger fare

Railways will absorb `. 850 crore on account of no hike in passenger fare

Marginal increase in reservation charges, cancellation charges

Internet booking to be provided from 0030 hours to 2330 hours

Superfast and Tatkal charges to rise

27 new passenger trains to be introduced

67 express trains to be launched

Run of 58 trains to be extended

72 additional suburban services in Mumbai and 18 in Kolkata

9 Electric Multiple Unit trains to be introduced

22 new lines to be taken up in 2013-14

500-km new lines to be completed in 2013-14

Electrification of 1,200 km to be completed this year

Concessional fare for sportspersons

5% average increase in freight

Diesel price hike added `.3,300 crore to fuel bill of Railways

5.2% growth in passenger traffic expected in 2013-14

Railways to set up a Debt Service Fund

`.3,000 crore loan from Finance Ministry repaid with interest by Railways this financial year

New coach manufacturing and maintenance facilities to be set up in various places

Centralised training institute to be set up in Secunderabad

Will provide better living conditions for Railway Protection Force personnel

Seek to fill 1.52 lakh vacancies in railways this year.

Target of `.4,000 crore for railway production units in 2014

Trying to connect Manipur through railways

Investment of `.3800 crore for port connectivity projects

Target of `.1000 crore each for Indian Railways Land Development Authority and Indian

Railways Station Development authority

Labs to test food provided in trains. ISO certification for all rail kitchens

Induction of e-ticketing through mobile phones

Next-generation e-ticketing system to improve end user experience.

`.100 crore to be spent to augment facilities at Delhi, New Delhi and Nizamuddin railway stations

Free wi-fi facilities in select trains

More ladies specials in metros and a helpline number to be implemented

Elimination of over 10,000 level crossings and 17 bridges sanctioned for rehabilitation

Enhancement of the track capacity and the Train Protection Warning System

Indigenously developed collision avoidance system to be put to trial

Induction of self-propelled accident relief trains along with fast and reliable disaster management system

Operating ratio of 88.8% achieved

Dividend reduced from 5 to 4%

`.63,000 crore investment in 2013-14

1,047 million tonnes freight loading estimated during 2013-14

Freight earning to grow by 9% to `.93,554 crore.

Passenger earnings of `. 42,000 crore estimated in 2013-14

Indian Railways Institute of Financial Management to be set up at Secunderabad

New wheel factory to be set up at Rae Bareli

Greenfiled EMU manufacturing facility at Bhilwara

Railway energy management company to be set up to harness solar and wind energy

179 escalators and 400 lifts at A 1 and other select stations

Raised four companies of women RPF personnel, and another eight to be raised for women's safety

Losses mounted from `.22,500 crore in 2011-12 to `.24,600 crore in 2012-13

Planning Commission pegged 12th Plan at `.125.19 lakh crore

`.1 lakh crore to be raised from public-private partnership, `.1.05 lakh crore through internal.

Use of Aadhaar card by Railways to render user friendly services

More RPF guards, ladies specials in metros and helplines to be implemented

Railways hopes to end 2013-14 with a balance of `.12,506 crore

Will it be a Aam Admi Rail Budget?

There are hopes that there would be some increase in ticket prices and freight prices. But there is also a fear that the budget would be populist. Indian Railway Minister Pawan Kumar Bansal is likely to announce passenger-friendly aam admi Rail Budget 2013 on Tuesday in Parliament. He is likely to announce measures such as improvement in catering service, development of stations and launching of about 75 odd new trains in his maiden budget.

Railways had aimed to mop up an additional revenue of `.6,600 crore but the fuel hike had wiped out `.3,300 crore. All eyes will be on Railway Minister tommorrow on whether he will hike passenger fares yet again or looks at other measures to mobilise resources to offset the burden of the recent diesel price hike.

Bearish trend to continue

According to Society of Indian Automobile Manufacturers, in January 2013, car sales and commercial vehicles sales have dropped by 12.44% and 9.51% respectively and on the other hand according to Rubber Board of India, the natural rubber production has declined by 5% to 97,000 tonnes and consumption fell by 9% to 75,000 tonnes, in January.

The largest natural rubber exporter - Thailand, will review a program to support prices by purchasing from farmers at the end of March. The contract for February delivery on the Tokyo Commodity Exchange gained to ¥282 per kg, while July delivery dropped to ¥297.1 per kg.

In India, rubber is set for a drop on concern that demand may slow as China called for property curbs and European data signaled the region’s recession is set to continue. Rubber prices in NMCE March contract traded sideways to bearish on lack of fresh buying and closed at `.157.55 per kg and June contract closed at `.166.50 per kg. Support is seen at `.155 per kg level while `.162 per kg is the resistance. Overall trend is looking bearish.