Union Budget FY15

Airports Infrastructure 26

Realistic fiscal targets, but slippage possible in disinvestment: The government has stuck to a realistic target of
fiscal deficit at 3.9% of GDP for 2015-16 as opposed to the Finance Commission’s recommendation of 3.6%. It has
managed to increase allocation for capital expenditure (to go up by 25.5% to Rs. 2,414 billion) because of the
headroom created from savings in oil subsidies and hike in excise duties on petrol and diesel. As a share of GDP,
capital expenditure will increase from 1.5% in 2014-15 to 1.7% in 2015-16. Even though tax collection targets look
achievable, there are chances of slippage in capital (disinvestment) receipts, which might bloat the fiscal deficit to
4.2% in the absence of any expenditure cut.
Getting public sector to revive investments: The budget lays focus on public investments, which will have large
spillovers on growth if implemented effectively. Despite pressure on fiscal consolidation, enough room has been
created for infrastructure spending through the government’s own resources and by nudging PSUs to invest more.
Focus clearly is on four sectors -- roads, railways, power and rural development. This emphasis on strengthening
transportation infrastructure will also boost manufacturing. Overall, the budget is growth-enhancing as it supports a
mild pick-up in public investments, which can draw in private investments over time.
Fiscal federalism is an enabler: The government has raised states’ share in total divisible pool of tax revenues to
42% from 32% as per the recommendation of the 14th Finance Commission, recording the biggest-ever increase in
vertical tax devolution. This not only increases the pool of resources available to the states but also raises flexibility
to help states design, implement and finance programmes according to their specific needs. Total transfers from the
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Financial sector reforms – a structural positive: Inclusion of NBFCs under the SARFAESI Act and new
bankruptcy code will provide a boost to recovery efforts and help rein in asset quality problems over the long run.
The setting up of autonomous bank board bureau for public sector banks is a step in the right direction. It is
expected to provide greater functional autonomy and pave way for bank holding company structure which will
optimise government’s capital contribution.
Greater public funding and innovative financing schemes to support infrastructure: Higher government
allocations coupled with increase in funding availability for the infrastructure sector through National Infrastructure
Investment Fund, higher fuel cess for roads and rationalisation of tax on Infrastructure Investment Trusts will provide
significant opportunity for construction and capital goods companies.
Minor changes in tax rates, but glide path to lower rates and simplification: True to its promise, the finance
minister has avoided undertaking many sector/product specific changes in duties or exemptions. On the direct tax
front, too, in line with the Finance Minister’s stated philosophy, the budget has provided a path towards lowering of
corporate tax rate and simultaneously doing away with multiple exemptions to simplify the tax administration and
reduce disputes.
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Incentivising financial savings and social security: The Budget includes measures to promote financial savings
and enhancing coverage of pension and health insurance. Gold bond scheme is also intended to encourage shift
from non-productive to productive saving. However, the efficacy of the schemes needs to be watched - given the
country’s penchant for physical gold holdings.
Little to cheer for the bond markets: Tax-free infrastructure bonds, encouragement for insurance and pension
products, clarity of taxation for Alternative Investment Funds etc. will help channel more investment to the bond
markets. Also, given the ambitious plans for improving infrastructure, debt markets need to play a vital role.

2013-14 2014-15F 2015-16F Budget Impact
GDP (y-o-y %) 6.9 7.4* 7.9 The budget supports a mild pick-up in public investments
which can crowd in private investments over time
CPI inflation (%, average) 9.5 6.5 5.8 Despite shifting the fiscal target by a year, commitment to
stick to fiscal consolidation is a plus for the downward
trending inflation and augurs well for further rate cuts by
RBI
Fiscal Deficit (% of GDP) 4.5 4.1** 3.9 Headroom created by savings on fuel subsidy bill and
increased income from duty hikes has allowed the
government to tread the fiscal consolidation path with ease
10 year G-sec yield (%, March-end) 8.8 7.7 7.5 Rate cuts and a restrained market borrowing programme
of the government would make yields go further south
Note: F=CRISIL Forecast, *CSO advance estimate, ** Budget estimate
Source: RBI, CSO, Ministry of Finance, Ministry of Commerce and Industry, CRISIL Research
Is the fiscal arithmetic credible?
The fiscal arithmetic laid out in the budget for 2015-16 is a standout when compared with the previous ones for the
following reasons:
! The government continues to follow the path of fiscal consolidation by aiming to bring down fiscal deficit to 3.9%
of GDP in 2015-16 from 4.1% of GDP in 2014-15. There is, however, a relaxation of 30 basis points when
compared with the 3.6% target set by the 14th Finance Commission (FFC). This is justified because:
Greater devolution to states will constrain central government finances.
Thrust on capital spending means additional money generated by relaxing the fiscal deficit target will be
used to improve the productive potential of the economy
! Nominal GDP growth target is realistic at 11.5% for 2015-16, same as for 2014-15.
! Revenue targets look achievable though scope of slippage remains on the disinvestment front.
! Rationalisation of the overall subsidy bill is still not adequate, though the trend of carrying forward arrears has
been reduced substantially.
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The government has stuck to a more realistic fiscal deficit target of 3.9% of GDP for 2015-16 compared with the
Finance Commission’s recommendation of 3.6% so as to provide an impetus to investments.
Allocation to capex is made possible by savings in oil subsidies and hike in excise duties on petrol and diesel.
Capex in 2015-16 is budgeted to increase 25.5% to Rs 2,414 billion. As a share of GDP, it is slated to rise from
1.5% in 2014-15 to 1.7% in 2015-16.
We estimate that the extra revenue generated on account of excise duty hikes on petrol and diesel will be Rs 780
billion and savings in petroleum subsidies over last year account for another Rs 267 billion. Together, the headroom

Figure 1 & 2 : Headroom created on different accounts in FY16
Item Revenue
Lower fuel subsidy bill due to fall in oil
prices 267
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The overall tax collection target assumed in the budget appears manageable. Gross tax to GDP ratio increases
marginally from 9.9% in 2014-15 to 10.2% in 2015-16. The budget assumes a tax buoyancy of 1.4% for 2015-16
compared with 0.9% achieved in 2014-15 but this is largely due to structural changes such as higher excise on
petrol and diesel and increase in the service tax rate 12.36% to 14%
Figure 3: Tax buoyancy
0.55
0.19
0.00
0.10
0.20
0.30
0.40
0.50
0.60
(% of GDP)
1.3
0.8
1.3
0.7
0.9
1.4
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8

Rs billion FY13 FY14 FY15RE FY16BE Average
growth
Corporation Tax 3,563 3,947 4,261 4,706 9.7 10.5
Income tax 1,965 2,429 2,786 3,274 19.3 17.5
Customs 1,653 1,721 1,887 2,083 8.2 10.4
Union Excise Duties 1,758 1,702 1,855 2,298 9.0 23.9
Service Tax 1,326 1,548 1,681 2,098 20.4 24.8
Source: Budget documents, CRISIL Research
Non-tax revenue collections are projected to rise from Rs.2,178 billion in 2014-15 to Rs.2,217 billion in 2015-16, growing
by 1.8% compared with 9.5% in the last fiscal. The slowdown in non-tax revenue growth has been on a high base
because government revenues were boosted by spectrum auctions. Non-tax revenue gains are a one-off. For
sustainable increase in revenues, it is critical to adhere to the timeline for the roll out of Goods & Services Tax.
This apart, government has an ambitious target of Rs.695 billion through disinvestments. But past trend suggests that
government has always fallen short. The learning from this is that the government needs to frontload efforts and
capitalise on the current market buoyancy. If disinvestment proceeds are similar to last year, fiscal deficit would shoot up
to 4.2% of GDP.
Figure 5: Disinvestment proceeds (Rs billion) have mostly trailed targets
400 400
Disinvestment Budgeted Disinvestment Actual
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While expenditure on subsidies in 2014-15 at 2.1% of GDP was only marginally lower than 2.2% of GDP in 2013-14, it is
budgeted to reduce significantly to 1.7% of GDP in 2015-16 benefiting from lower fuel subsidy bill. At the same time,
capex would rise from 1.5% to 1.7% even though it remains below levels of the high-growth years – such as 2.4% in
2007-08. Since the quantum of revenue slippage is expected to be much lower in 2015-16, the budgetary objective of
improving the expenditure mix, might well succeed, unlike in the last few years.
The government has managed to achieve its fiscal deficit target of 4.1% of GDP for 2014-15 by mostly cutting
productive expenditure (capex plus part of revenue expenditure that creates capital assets) because of lower
revenues. Government’s receipts in 2014-15 fell short by Rs 952 billion out of which the cut in productive
expenditure was Rs 706 billion. Majority of shortfall was due to lower tax collections, which stood at Rs 9,085 billion
compared with budgeted Rs 9,773 billion. Rest of the shortfall was in capital receipts because of lower divestments.
Non-tax revenues, on the other hand, were a tad higher at Rs 2,178 billion compared with a budgeted Rs 2,125
billion. Over the years, shortfall in revenue collections have led to huge cuts in productive spending. Between 2011-
12 and 2014-15, Rs 2,555 billion was cut in productive spending because of shortfall in revenues and persuasions of
lower-than-budgeted fiscal deficit.
-113

7
Figure 7: Direct benefit transfer can re-write the food subsidy script
Direct benefit transfer, or DBT, will likely prove to be a game changer in food subsidy. We estimate that DBT could help
the government save as much as 20% (or Rs 250 billion) in food subsidy expenditure by eliminating costs associated
with procuring, distributing and storing foodgrains. Moreover, DBT will help bring millions of poor households that
currently do not have access to PDS into the food subsidy net. We estimate that at fiscal 2016 prices, the cash transfers
under the DBT will amount to almost Rs 5,800 per year for a family of five, which will implicitly raise their disposable
income. At first glance, Rs 5,800 may seem small, but it is higher than the reported total annual expenditure (food +non-
food) of the poorest 5% of the rural households and more than half the annual expenditure of the poorest 10% of urban
households. Given the high marginal propensity to consume at lower income levels, such a significant unconditional cash
transfer will undoubtedly raise discretionary spending of the recipient households, providing a consumption boost the
economy.
Will there be a boost to public investments?
Despite improving macros, India Inc remains cautious on fresh investments. A recent CRISIL survey of 192 listed,
private and public sector companies shows that planned capex by private companies surveyed is likely to decline in
2015-16. A revival in investments, therefore, hinges on increased public spending, especially on infrastructure –
roads, power transmission/distribution and railways – because of its significant multiplier effect of creating demand
for steel, cement, capital goods and commercial vehicles and spurring investments in the manufacturing space as
well.
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The budget plans a 25% increase in capital expenditure in 2015-16, compared to 2.5% increase in 2014-15, taking
its ratio in GDP up by 20 basis points to 1.7%. Central plan outlay is budgeted to increase by 35.5% in 2015-16
compared to an average fall of 3.4% in the last three years. The budget lays focus on four sectors providing crucial
2.4
1.7

infrastructure - roads, railways, power and rural development.
Focus on these sectors is important again because of the multiplier impact on output. For instance, the output
multiplier for rail equipment is 2.7. This means one unit increase in demand for rail equipment raises overall output
by 2.7 units. Similarly, the output multiplier for rail transport services is 1.9, while that for electricity is 2.2. The
Economic Survey said this “government can now do for the neglected railways sector what the previous NDA
government did for rural roads”. Such focus on strengthening transport infrastructure will also boost manufacturing.
Figure 9: Sectors with higher plan outlay (%, y-o-y) Figure 10: CPSUs shoulder most capital spending
RE: Revised estimate, BE: Budgeted estimate
Note: Data is only for central plan outlay and taken as per Heads of Development. I.E.B.R.: Internal and extra
budgetary resources which are raised by central PSUs through profits, loans and equity
Source: Budget documents
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The relaxation of the fiscal deficit target for 2015-16 by 30 basis points directly releases Rs 423 billion for funding
projects. So, while total central plan outlay is budgeted higher next fiscal, much of it is due to an increase in
budgetary support, which is 37.3% higher on a weak base.
Road cess and taxes on petroleum products - The budget raised additional excise duty on petrol and diesel to Rs 6
per litre from Rs 2 per litre, which is levied as road cess. This raises available funds for roads and railways to
Rs 431 billion in 2015-16 from Rs 232 billion in 2014-15. In addition, to fund infrastructure development
(particularly roads), the government had increased the basic excise duty on petrol and diesel by around Rs 7 to
8 per litre between October and January. Incremental revenues accruing from this is estimated at Rs 780 billion
in 2015-16.
Govt’s revenue collections – In 2015-16, the budget plans to collect divestment revenues of Rs 695 billion on
account of stake sales and spectrum sale revenues of Rs 431 billion which can be utilised towards
infrastructure development.
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The budget also envisages a sharp 34.1% increase in investments by central public sector enterprises (CPSUs)
compared with a 10% drop last fiscal. Their share in total central plan outlay is thus budgeted at nearly 55%. To fund

60.6 61.1 56.4
% share in total capital outlay
Budget support I.E.B.R.
9
37.1% is to come from accruals (down to 49% from last year), 37% from capital market (up from 26%) and 26% from
external commercial borrowings and other sources. From the bond markets, PSUs in the roads and railways sector
are together slated to borrow Rs 803 billion in 2015-16 compared with Rs 208 billion last year. The budget allows for
a large part of this borrowing to be in the form of tax-free bonds.
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Public investment in infrastructure (especially railways and roads) can create large complementarities for private
sector investments. In addition to increased spending, the budget also takes a few other measures to boost
infrastructure investments.
On infrastructure financing, the budget announced the setting up of a National Investment and Infrastructure Fund
(NIIF) where an annual budgetary flow of Rs 200 billion will be ensured. This will enable it to raise debt and further
invest as equity in infrastructure finance companies such as IRFC and NHB. The budget also proposed to permit
tax-free infrastructure bonds for roads and railway sectors where large investments are being planned. The budget
reiterates the government’s intention to revisit the private-public-partnership.
Overall, despite the pressure on fiscal consolidation, the budget has managed to create room for infrastructure
spending through a mix of its own resources as well as by nudging CPSUs to invest more. However, though there is
an increase in resources available for funding infrastructure, the government’s implementation capacity to ensure
efficient delivery remains a concern. This, therefore, should be the next area of focus for the government.
How fiscal federalism is an enabler
It is well understood that greater power to states is essential for local capacity building and efficient use of resources.
This power emanates through higher resources and flexibility in utilising these resources at the state level. The
government has taken steps in the right direction in this regard in the current budget. Total transfers as a percentage of
GDP from the centre to the states have increased from 4.5% in 2013-14, 5.5% in 2014-15 to 6.0% in 2015-16.
Figure 11: Increasing fiscal flexibility for states
2014-15 2015-16 Change in Flexibility
Total transfers % of GDP 5.5 6.0
Rs billion
States Revenue share 3,378 5,240 Fully flexible/Untied
Central Assistance for State and UT plans 2,703 1,958 Restructured to make semi - flexible :
23 schemes fully supported by union,
13 supported on sharing pattern and 8
delinked from the union
Non - Plan grants and loans 803 1,086
Note : Total transfers include grants and loans under the central assistance for state and UT plans, non-plan
grants and loans, revenue share of states and centrally sponsered scheme transfers.
Source: Budget documents, Crisil Research

10
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The Budget has raised states’ share in total divisible pool of tax revenues to 42% from 32% as per the recommendation
of the FCC, recording the biggest-ever increase in vertical tax devolution. In level terms, states’ share of the divisible
pool will rise to Rs 5.24 trillion in 2015-16 – twice the share in 2011-12 – from Rs 3.38 trillion in 2014-15. This money
will help states design, implement and finance programmes according to their specific needs. In addition, higher tax
devolution will also imply that any buoyancy in tax collections will benefit states to a greater extent as compared to
previous years.
;-/$+@5-+ *$)5- "5$,-/22& +0 onsered schemes have risen …
In order to ensure that the fiscal situation of the center remains preserved, with increasing transfers from the divisible
pool –the central assistance to states has seen a decline. The total central assistance for State and UT plans has
moderated from Rs 2.7 trillion in 2014-15 to Rs 2 trillion in 2015-16. On the flipside, even as the centre’s position is
squeezed with higher devolution, the transfers under centrally sponsered schemes has risen substantially to Rs 239
bilion from Rs 46 billion in 2014-15. Allocations as per schemes has risen under MGNREGA ( rose by Rs 12 billion) and
in sectors such as agriculture, education, health, and rural infrastructure including roads.
But flexibility of transfers has also increased…
Past data suggests that above 50% of the divisible pool is given to the states but a major portion of this goes under tied
or conditional transfers. In the last few years, plan transfers have moved away from the Gadgil formula to more
discretionary transfers resulting in lower flexibility. These are the “conditional or tied” transfers. As per the
recommendation of the FFC, the central assistance to state and UT plans has been restructured.The budget has
announced a changed sharing pattern between the centre and the state in terms of scheme implementation and
financing. The budget also proposes 8 centrally sponsered schemes (CSS) to be de-linked from the support of the centre
and 13 schemes ( for example, Urban Rejuvenation Mission – 500, Development of 100 smart cities etc) to be run in a
sharing pattern between the centre and states. Details of the sharing pattern are yet to be disclosed.
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With an increase in fiscal flexibility of the states also comes the question of capability of the states to invest these
resources. In the past, states have not fully utilised the fiscal resources available to them resulting in insufficient capital
expenditure. Capital expenditure as a % of GDP has fallen from 2.8% in 2008-09 to 2.2% in 2012-13. As, recommended
by the FFC, the absorptive capacity of states needs to be enhanced to raise capital expenditure and boost growth.
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The government since June has also announced other changes that will result in greater benefit for states. One such
change is the revenue sharing on natural resources auctions. The auctions of 204 coal blocks – a corrective measure
after the coal scandal – will benefit state finances. So far, 18 blocks have been auctioned and will help raise over Rs 1
trillion over the next 30 years in states such as Jharkhand, Odisha, Chhattisgarh, Madhya Pradesh, Maharashtra and
West Bengal. This will contribute towards states’ fiscal resources.

Overall, this budget showcased a strong resolve towards encouraging cooperative federalism in India. That said, certain
sections of the transfers continue to be tied/conditional. Therefore, continued steps towards increased federalism will be
needed in the coming years. In addition, the ball is in the states court now and they need to use these resources
judiciously to enhance growth.
How will the budget boost manufacturing?
Manufacturing sector is a private sector enterprise with over 90% of the investments and output generated in the private
sector. Government can play a facilitative role in improving its prospects. The budget has taken many small steps to
support the manufacturing sector through indirect channels.
Support through forward and backward linkages : The government has taken measures to boost the
manufacturing sector by improving the domestic investment environment and raising the spending on physical
infrastructure which complements manufacturing activity. Spending on rail, road and ports will crowd in private
investment and support manufacturing activity via backward and forward linkages.
Improvement in ease of doing business : The above will be complemented by efforts to improve the ease of doing
business in India - its current rank is 142 out of 189 countries. Towards this regard, the budget announced reforms
in bankruptcy law to bring about legal certainity and speediness.
Reduction in custom and excise duty to support ‘Make in India’ : The budget supports the Make in India
initiative through reduction in custom duty on certain inputs to address the problem of duty inversion and reduce the
cost of raw materials.

Overall sectoral impact
There are five focus areas in the Union Budget and each will impact India Inc. Here’s a look at how:
Enabling financial sector efficiencies: Setting up of autonomous bank board bureau marks the initial move
towards formalising a holding company structure for public sector banks. This will improve governance, optimise
capital contribution by government, and provide greater functional autonomy. Along with more stringent bankruptcy
laws, these are two key long-term positives. On the other hand, providing a mere Rs.79 bn towards capital support
for public sector banks is grossly inadequate. Elsewhere, the inclusion of NBFCs under the purview of SARFAESI
Act, along with the new bankruptcy code will improve recovery efforts for financial institutions and support their
capital position. The new Micro Units Development Refinance Agency (MUDRA) Bank for refinancing of
microfinance institutions will support micro credit. Proposals to promote financial savings are also a positive.

Enabling infrastructure investments: The intent to ratchet up public spending on infrastructure is clearly visible.
There is a sharp increase in allocation to roads, railways and rural infrastructure development. In addition, many
significant steps have been taken to improve the availability of funds for infrastructure. This includes higher
allocation for road cess, more funding through the National Infrastructure Investment Fund, tax-free bonds and
rationalisation of taxes for infrastructure investment trusts. However, timely implementation of projects remains a
key concern. The government’s intent to salvage the broken public-private partnership model to attract investment is
also a positive. The deferment of GAAR and allowing foreign capital in alternative investment funds will attract
foreign capital.

Boosting power and renewable energy: The government has set an aggressive target for renewable energy of
close to 175 GW, including 100 GW of solar capacity by 2022. It has also announced five new UMPPs for
conventional power -- with all approvals in place to ensure faster execution. But the key concerns remain timely
implementation, resolution on fuel availability, clearances, transmission corridor availability and financial health of
distribution companies. The government continues increasing allocation towards transmission and distribution – it’s
up 26% in 2015-16 compared with the current fiscal. Coal cess has also been increased a touch, which will

Marginal changes in taxes: The budget has proposed a marginal increase in excise duty from 12.36% to 12.5%
and in service tax from 12.36% to 14%. However, given the decline in input prices (both food and non-food), we
expect companies (manufacturers or service providers) to largely pass on the burden to customers and protect their
margins. Although surcharge on corporate tax has been increased for this fiscal, paving a structural path towards
lower rates by doing away with many exemptions is a positive.
Leg-up to rural income: With increased allocation to MGNREGA, rural incomes should rise. Add a good monsoon
and what you get is greater consumption of FMCG products and higher sales of consumer durables and two-
wheelers. Increased agricultural credit would also lead to higher sales of tractors and irrigation equipment. Better

15
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Farm credit target increased by Rs 500 billion to Rs 8.5 trillion. Higher allocation to rural financing agencies such as
NABARD and RRBs, and to initiatives such as MGNREGA, micro-irrigation watershed programs, etc.
Allocation of Rs 750 million to promote manufacturing of electric vehicles (EVs). Concessional customs and excise
duties on hybrid and EV parts extended until March 2016.
Increase in customs duty on fully-built commercial vehicles (CVs) from 10% to 20%. Reduction in excise duty on
ambulance chassis from 24% to 12.5%.
Tax on royalty payments to foreign companies reduced to 10% from 25%.
Creation of a trade receivables discounting platform for medium and small enterprises (MSMEs).
CRISIL Research’s S15B
The increase in allocation to farm credit and rural schemes is likely to be favourable for tractor sales. Proposals on
electric and hybrid vehicle parts will not materially impact the sector given low population of vehicles in India (less than
1% share). The proposals will have a limited impact on the CV segment as imports of fully built CVs and sales of
ambulances comprise a small proportion of the CV industry. The reduction in tax on royalty payments to foreign
companies will be marginally positive for Indian companies who import technology. Creation of an electronic platform for
facilitating financing of trade receivables of MSMEs will help improve liquidity of auto component manufacturers.
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Investments outlined under various infrastructure schemes related to areas such as roads, urban development and
irrigation indicate a targeted government spending of Rs 1,080 billion in 2015-16.
Duties and tariffs directly levied on cement have increased marginally. The effective excise duty on cement has
increased marginally from 12.4% + Rs 120 per tonne to 12.5% + Rs 125 per tonne.
The clean energy cess on coal (domestic and imported) has been hiked to Rs 200 per tonne from Rs 100 per tonne.
The rail freight rate for cement has been increased by 2.7% and for coal by 6.3%.
The government’s focus on infrastructure is evident with the total targetted spending in 2015-16 almost double the
revised estimates of 2014-15. This should result in a sustained recovery in demand, but the execution capability of
funding institutions/players has to be scaled up appropriately. Further, the rise in duties and tariffs is expected to have a
muted impact on total cost, which is expected to increase 0.8%. Power and fuel cost (~20% of cost of sales) will increase

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Basic customs duty on organic LED (OLED) panels removed.
Specific excise duty on tobacco and tobacco products increased 15-25%.
Excise duty of 2% without CENVAT credit or 6% with CENVAT credit levied on condensed milk and peanut butter.
Basic excise duty increased to 18% from 12% on mineral water and aerated water containing added sugar or other
sweeteners/flavours. Additional excise duty of 5% on the products exempted.
Excise duty on leather footwear with retail price exceeding Rs 1,000 per pair halved to 6%.
Improvement in rural income, owing to increase in MNREGA allocation, to support consumer durable and FMCG sales.
Removal in customs duty on OLED to only marginally affect OLED TV sales as segment accounts for less than 0.5% of
panel TV sales. The excise duty hike will hurt the demand for tobacco-based products, but aerated beverages demand
will only be marginally impacted.
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The Union Budget has proposed to provide Rs 79.4 billion as capital support to all public sector banks (PSBs) in
2015-16.
NBFCs registered with RBI, having an asset size of Rs 5,000 million and above, may be considered for notification
as 'Financial Institution' under the SARFAESI Act, 2002.
Autonomous Bank Board Bureau and bank holding company to be set up to improve governance of public sector
banks.
Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 200 billion and credit guarantee
corpus of Rs 30 billion, to be created.
MUDRA Bank will be responsible for refinancing all microfinance Institutions, which lend to small entities, and
focusing on scheduled caste/ scheduled tribe entrepreneurs.
Allocation of funds (an average of Rs 111 billion has been infused over the past three years till 2014 -15) for capitalising
PSBs seems inadequate, given the high capital requirements to meet Basel 3 commitments. In this context, the proposal
to create a holding and investment company and an Autonomous Bank Board Bureau would be a positive and improve
autonomy for PSBs and help them raise funds, as the holding company too can leverage.
Allowing NBFCs recourse to SARFAESI Act will help smoothen the asset recovery process. This, coupled with
establishment of the Bankruptcy Code would help improve asset quality within the banking and financial services
industry.

17
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Budgetary allocation: Total outlay for infrastructure has been increased by 1.5 times to Rs 2.8 trillion (roads,
railways and urban infrastructure the biggest beneficiaries).
Roads: Investments for development of national highways proposed to be hiked by 178% y-o-y to Rs 85,607 crore.
A major portion of this increase will be funded by a Rs 4 per litre increase in road cess on petrol and diesel.
Railways: Total outlay raised by 52% to Rs 1,000.11 billion. In the Railway Budget 2015-16, there have been many
announcements of PPP projects in areas of coastal connectivity, gauge conversion, dedicated freight corridors
(DFCs) and the Mumbai suburban rail.
Airports & Ports: No new project announcements. Exemption on service tax for constructing airports and ports has
been withdrawn.
Funding availability: A Rs 200 billion National Investment and Infrastructure Fund to be set up for infrastructure
finance companies to raise debt. The budget also provides for issuance of tax-free bonds for roads, railways and
irrigation projects, and aims to rationalise the tax regime for Infrastructure Investment Trusts.
Other measures: The government's intent to table a Public Contracts (Settlement of Disputes) Bill will help speedy
redressal of disputes in large public projects and create a conducive environment for PPP projects.
At a time when private sector interest in infrastructure development is low, the increase in budgetary support holds the
potential to kick-start capital investments in the economy. Moreover, the significant increase in public funding for the
roads sector has the potential to boost execution of national highway projects by about 5,800 km annually and create a
robust construction opportunity for road engineering procurement & construction (EPC) companies.
The National Investment and Infrastructure Fund will create additional funding resources for private developers, over and
above the rise proposed in public funding. Moreover, rationalisation of tax regime for Infrastructure Investment Trusts
may help free up private capital currently locked in completed projects.
While the budget provisions are positive, it puts the execution capability of implementing agencies such as the National
Highways Authority of India (NHAI) at test. Addressing on-ground issues such as clearances and land acquisition
becomes extremely critical to ensure a sharp increase in project execution.
35,/2+E Q# 81= /$$#*$"5%5$, Q5*,-/2
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Basic excise duty increased to 12.5% from 12.36%.
Clean energy cess on coal doubled to Rs 200 per tonne.
Basic customs duty on metallurgical coke raised to 5% from 2.5%.
Special additional duty on iron and steel scrap reduced to 2% from 4%.

18
on the sector. Increase in basic excise duty will only slightly raise aluminium and steel prices by Rs 200 and Rs 50 per
tonne, respectively. Hike in clean energy cess will also have only a mild impact on sponge iron and aluminium players.
Similarly, impact of hike in customs duty on metallurgical coke will be negligible as most Indian steel players import
coking coal and subsequently convert it into coke.
O12 U =/+E T1=75- N#>, +7/-5 1$ *$)5-V-5"#>5-& 8*-)5$ @#- FWCXVCYE 0#+1,1>5 @#- #12 "#%0/$15+ H#+1,1>5
R5& 8*)=5, 0-#0#+/2+E
Government announces oil subsidy of Rs 300 billion for 2015-16.
Change in excise duty structure on petrol and diesel: Reduction in CENVAT by Rs 3.5-3.7 per litre, increase in road
cess by Rs 4 per litre, removal of 3 per cent education cess levied on overall excise duty
Exemption of special additional customs duty on petrol and diesel, in excess of Rs 6 per litre
The overall impact is marginally positive. The government's estimate of oil subsidies in 2014-15 and 2015-16 will wipe
out the subsidy rollover of Rs 90-100 billion from 2014-15, reducing working capital requirements of oil marketing
companies. With the government contributing Rs 300 billion towards fuel subsidies (including rollover), upstream oil
companies will see a 5% decline in their contribution to under-recoveries in 2015-16.
Increase in road cess on petrol and diesel has been completely offset by the decline in basic excise duty and removal of
education cess. Hence, there will be no impact.
As petrol and diesel imports are marginal, exemption in special additional customs duty will not have any major impact.
H#B5-E T1=75- 8*)=5,/-& /22#"/,1#$+ /$) @*$) />/12/8121,& ,# 8##+, 1$>5+,%5$,+ H#+1,1>5
R5& 8*)=5, 0-#0#+/2+E
Capacity additions: Installed capacity target for renewable energy set at 175 GW, led by additions of 100 GW of
solar power capacity by 2022. Setting up of five ultra-mega power plants (UMPPs), each of 4,000 MW, with pre-
awarded clearances and fuel linkages envisaged.
Budgetary allocation: Allocation to transmission & distribution (T&D) segment increased by 26% to Rs 63.5 billion .
Funding to renewable energy sector has also been increased by 5% to Rs 61.6 billion.
Funding availability: Rs 200 billion National Investment and Infrastructure Fund to be set up for help infrastructure
finance companies to raise debt.
Duties and levies: Clean energy cess on coal doubled to Rs 200 per tonne in 2015-16; however, the rise in
generation cost of Rs 0.06/unit to be largely passed through. Moreover, steps have been taken to correct the
inverted duty structure in renewable energy for selected components. However, the overall impact on capital costs is
less than 5%.
environment for PPP projects
Other benefits: Additional depreciation of 20% granted to new plant and machinery installed by a manufacturing unit
or a unit engaged in generation and distribution of power.

19
planned expenditure. We believe that a healthy growth in capacity additions and augmentation of T&D infrastructure will
reduce power deficit to about 1% by 2018-19. However, a favourable regulatory framework coupled with states
facilitating implementation of projects will be critical to boost investments.
While the provisions are positive, addressing fuel availability issues and improving the financial health of state distribution
companies is important to alleviate financial stress in the sector
Z5/2 !+,/,5E .#%%5-"1/2 -5/2 5+,/,5 )5>52#05-+ ,# 85$5@1, 1$ ,75 %5)1*% ,5-% Q5*,-/2
R5& 8*)=5, 0-#0#+/2+E
Rationalisation of capital gains tax for the sponsors at the time of listing of real estate investment trusts (REITs).
Service tax increased from 12.36% to 14%.
Rationalisation of capital gains tax for the sponsors* exiting at the time of listing of REITs is positive for developers with a
significant exposure to rental yielding real estate assets. The increase in service tax will be marginally negative for the
real estate sector.
* As per the Securities Exchange Board of India, ‘sponsor’ has been defined as any person(s) who set(s) up the REIT and
designated as such at thetime of application made to the Board
;5<,125+E P22#"/,1#$ *$)5- ;JMI +21=7,2& -5)*"5)[ Q# %/\#- 1%0/", Q5*,-/2
R5& 8*)=5, 0-#0#+/2+E
Budgetary allocation under the Technology upgradation Funds Scheme (TUFS) has been reduced to Rs 15.2 billion
for 2015-16 from Rs 18.6 billion in 2014-15.
The government has been supporting the industry through TUFS, which enables players to expand/ modernise at lower
costs. Though the budgetary allocation under TUFS has been reduced slightly in 2015-16, it will not greatly impact the
industry given the existing demand-supply dynamics. Continuation of a zero excise duty will aid a 6-8% rise in domestic
sales volumes of apparels in 2015-16, vis-a-vis a 5-6% rise in 2014-15.
;5"7$#2#=&? 35)1/ U ;525"#%E Q# +1=$1@1"/$, 1%0/", #@ ,75 L*)=5, 0-#0#+/2+ Q5*,-/2
R5& 8*)=5, 0-#0#+/2+E
Mobile handsets: Excise duty on mobile handsets (costing above Rs 2,000) hiked from 6% (with CENVAT credit) to
12.5%.
Service tax: Service tax, hiked from 12.36% to 14%, will have a bearing on the bills of postpaid telecom
subscribers.
Telecom receipts: Budgeted receipts from spectrum auctions, one-time spectrum charges and other levies have
been estimated at Rs 429 billion for 2015-16, vis-a-vis Rs 432 billion for 2014-15.
Media: Service tax to be levied on tickets purchased for events such as concerts, pageants, sporting events and

20
IT: Rs 10 billion has been allocated towards the Techno-Financial Incubation and Facilitation Programme for
technology start-ups and self-employment activities. Also, input components used in manufacturing tablet computers
have been exempted from basic customs duty, countervailing duty (CVD) and special additional duty (SAD).
.Z(I(G Research’s S15B
The proposals are unlikely to have a significant impact on the telecom and media sectors. The hike in excise duty on
mobile handsets would result in an increase in their prices, which would somewhat impact the rate of growth in
smartphone adoption. The hike in the service tax rate would inflate the bills of postpaid subscribers, who, however,
constitute only about 5 per cent of India’s wireless subscriber base. The budgeted receipts from telecom services
indicate that another round of spectrum auctions can be expected in 2015-16.
Service tax to be levied on event ticket prices exceeding Rs 500 is unlikely to have a major impact as organisers would
pass on the resultant price hikes to the ticket buyers.
The proposals will not have a significant impact on the IT industry. Allocation of funds for start-ups will help the IT
industry adopt new technologies and provide employment opportunities. Tablet computer prices are set to reduce with
the removal of custom duties.

A. Enhancing coverage of pension and health insurance:
With an aim to expand pension and insurance coverage in India, Arun Jaitley’s Budget seeks to include the
unorganized and the under-privileged. As per CRISIL estimates, about 65% of the old age population in India is not
covered by social security.
Increase in deduction (by Rs 50,000) under Section 80C for contributions to pension funds and National Pension
System (NPS), and under Section 80CCC for pension funds launched by insurance companies is expected to boost
interest in these products. An additional tax deduction of Rs 50,000 has also been provided for contribution to the
NPS under Section 80CCD.
Increase in tax incentives for health insurance is expected to enhance the coverage of health insurance products.
The budget has increased the available choices in pension and health insurance. Subscribers can plan for
retirement by choosing between asset classes and products offered by the Employees Provident Fund (EPF) and
the NPS. Likewise, products recognised by the Insurance and Regulatory Development Authority of India (IRDA) for
health cover are an option to Employees State Insurance Corporation (ESIC). These measures are expected to
encourage healthy competition in the insurance and pension funds sectors.
B. Funding infrastructure through alternative investment funds
The budget includes key measures to enhance investor interest in alternative investment funds (AIFs). Increased
asset flow to AIFs, especially Category I and II AIFs, will boost funding options for the infrastructure and real estate
sectors.
The introduction of pass-through status for taxation of Category I and II AIFs allows for tax to be levied on the
investors (unit holders) of these funds and not on the funds. This is expected to increase investor interest in these
funds.
Opening of AIFs to foreign investors will enhance the investor base for AIFs. This is expected to boost inflows and
energise start-ups and projects that may otherwise face difficulties in funding. Details are, however, awaited on the
tax implications for such foreign investments.
C. Channelling physical gold savings to financial savings
India is amongst the largest consumers of gold. Gold investments are predominantly held in a physical form, which
means the investment once made is not used productively. Further, the huge demand for gold increases India’s gold
imports, which adversely impacts the balance of payment and the rupee. The budget seeks to introduce schemes
such as Gold Monetising Scheme, Indian Gold Coin and Sovereign Gold Bonds, which address these concerns.
While these are steps in the right direction, the efficacy of the schemes - given the country’s penchant for physical
holdings - remains to be seen.

23
D. New agency for government borrowings, yet very few measures for deepening debt market
The proposal to establish a ‘Public Debt Management Agency’ for government borrowings is expected to facilitate
better planning and management of domestic and foreign market borrowings for the Centre. This will also reduce the
operational burden on the Reserve Bank of India and help it focus on core functions related to monetary policies.
Introduction of tax-free infrastructure bonds will help channnelise investments to the bond market. While provisions
for pension funds and AIFs are also likely to have a positive impact on asset flow to the debt markets, given the role
that the debt markets have to play in the realisation of several of the measures that have been announced in the
Budget, there is very little to cheer. No concrete measures have been announced for deepening or broadening the
markets.
E. Encouraging foreign investments
Continuation of the withholding tax rate of 5% and deferment in applicability of the GAAR are likely to maintain the
positive atmosphere for foreign investors. Modification to norms of Permanent Establishments (PE) and
rationalisation in Minimum Alternate Tax (MAT) are also positive. Details are awaited on the removal in distinction
between Foreign Portfolio Investors (FPIs) and Foreign Direct Investments (FDIs).
F. Very little for the mutual fund industry
The mutual fund industry could have done with a few more measures. Given the fact that mutual funds are expected
to be a key vehicle to channelise retail savings, this is a negative.
The only positive for the industry has been the proposal to provide tax neutrality on transfer of units in case of
mergers of schemes. This will enable mutual funds to consolidate similar schemes, which is important to retain
simplicity of products for retail investors.
Introduction of service tax for mutual fund distributors is likely to reduce the margins on distribution of schemes.
Given the challenges the industry faces with distribution, this is a negative. Increase in surcharge from 10-12% for
capital gains and distributed income will increase the effective tax rates for investors and may, in turn, impact
investor interest.

Airport Infrastructure
($"-5/+5 1$ +5->1"5 ,/< ,# %/-=1$/22& 1%0/", $#$V/5-# -5>5$*5+
Company Impact Impact factors
GMR Infrastructure Ltd A,B
Source: CRISIL Research
(%0/", @/",#-+
A. Increase in service tax to 14% from 12.36% to marginally affect airports’ non-aero revenues. Non-aero revenues
constitute 30-40% of total revenues for Mumbai, Bengaluru, Hyderabad and Delhi airports.
B. Improved funding availability through establishment of National Investment and Infrastructure Fund and
rationalisation of taxes for Infrastructure Investment Trust.
C. Service tax exemption on construction of airports has been withdrawn. Accordingly, service tax (including education
cess) of 14% is applicable. Greenfield airports will be largely affected as these comprise about 77% share of total
investments over next 5 years.

(%0/", @/",#-+
A. We do not expect concessional customs and excise duty rates (6%) on specified parts of electrically operated and
hybrid vehicles to have a major impact as sales of electric vehicles are very low.
P*,# 0/-,+E ;/-1@@+
Drive transmission, steering, suspension,
radiators
Raw materials for auto components1 7.7 7.7 12.4 12.5
Excise duty includes education cess @ 3% (not applicable on 12.5% rate in 2015-16)
* Effective from 01/01/2015
1) Raw materials for auto components include galvanised plate (GP)/galvanised coil (GC) steel,
hot rolled (HR), steel, aluminium, copper and lead.
International Pre-budget Post-budget
New tyres 10.3 10.3 10.3 10.3 - - - -
Used/retreaded tyres
Car cross ply/ Radials 10.3 10.3 10.3 10.3 - - - -
Raw materials for tyres
Natural rubber (Note 2) (Note 2) (Note 1) (Note 1) 127,446 1,703 143,063 143,063
SBR (1502) 10.3 10.3 12.4 12.5 n.a. 1,338 91,800 91,800
PBR (1220) 10.3 10.3 12.4 12.5 106,000 1,500 105,381 105,381
NTC fabric 10.3 10.3 12.4 12.5 n.a. 3,665 251,548 251,548
Carbon black (N330) 5.2 5.2 12.4 12.5 n.a. n.a. n.a. n.a.
NTC: Nylon tyre cord; PBR: Polybutadiene rubber; SBR: Styrene butadiene rubber
n.a.: Not available
* Domestic carbon black prices are available on quarterly basis. Included prices are for Q4 2014-15.
Notes
1) For natural rubber, there is a cess of Rs 2 per kg in lieu of excise duty w ith effect f rom September 1, 2011.
2) Customs duty on natural rubber w ill be charged at 20% or Rs 30 per kg, whichever is low er, w .e.f. December 20, 2013.
3) New tyres include the following categories: Truck and bus, light truck, car (cross ply and radial), tractor front,
tractor rear, tractor trailor, moped, scooter and motorcycle.
4) An additional countervailing duty of 4% is levied on raw materials except f or NTCF
5) Prices and landed cost are average rates for January 2015.
(Rs/tonne)
3/-=1$/22& 0#+1,1>5 @#- ,-/",#-+[ $5*,-/2 @#- #,75- +5=%5$,+
Tata Motors Ltd A,B
Ashok Leyland Ltd A,B
(%0/", @/",#-+
A. Increase in effective rate of customs duty on import of fully-built commercial vehicles (CV) to 20% from 10% will not
have a significant impact as fully-built CV imports are negligible.
B. Reduction in excise duty on ambulance chassis to 12.5% from 24% will not have a major impact on CV sales as
they form a small proportion of total sales.
C. Concessional customs and excise duty rates (6%) on specified parts of electrically operated and hybrid vehicles are
not expected to have a major impact as sales of electric vehicles are very low.
D. Reduction in tax on royalty payments to foreign companies to 10% from 25% will have a marginally positive impact
for Indian companies who import techonolgy.
E. The increase in funds allocated for farm credit by Rs 500 bn to Rs 8.5 trillion and agricultural initiatives such as
increase in allocation to MGNREGA and NABARD will be marginally favourable for tractor sales.
F. Allocation of Rs 750 million to promote manufacturing of electric vehicles (EVs) is another directionally positive step

-Semi-knocked dow n units (SKD) 61.8 61.8 - -
-Completely built units (CBU) 128.8 128.8 - -
-Specified small cars1 - - 12.4 12.5
-Other than specif ied small cars2 - - 24.7 24.7
Utility vehicles (less than 1500 cc) 128.8 128.8 24.7 24.7
SUVs (including utility vehicles exceeding 1500 cc and length 128.8 128.8 - -
exceeding 4000 mm, ground clearance of 170 mm and more) - - 30.9 30.9
Tw o-w heelers 10.3 10.3 12.4 12.5
Trucks (LCVs and MHCVs)3 10.3 20.6 12.4 12.5
Buses (LCVs and MHCVs)3 10.3 20.6 12.4 12.5
Tractors 10.3 10.3 - -
Drive transmission, steering, suspension, braking
parts,silencer, exhaust pipes and radiators 10.3 10.3 12.4 12.5
Electrical parts 7.7 7.7 12.4 12.5
Steel items 7.7 7.7 12.4 12.5
Pig iron 5.2 5.2 12.4 12.5
Excise duty includes education cess @ 3% (not applicable on 12.5% rate in 2015-16)
LCV: Light commercial vehicles; MHCV: Medium and heavy commercial vehicles
Notes:
* Effective from 01/01/2015
1 Specified small cars include cars w ith length not exceeding 4000 mm and engine
capacity not exceeding 1200 cc for petrol cars and 1500 cc for diesel cars.
2 Others w ill include cars w ith length exceeding 4000 mm and
engine capacity exceeding 1200 cc for petrol cars and 1500 cc for diesel cars.
3 Represents eff ective rate f or fully-built vehicles. Customs duty on commercial vehicles in
CKD kits w ill continue to be at 10%
Punjab National Bank A,C
(%0/", @/",#-+
A. The Union Budget has proposed to provide Rs 79.4 billion as capital support to all PSBs (PSBs) in 2015-16, lower
than the average Rs 131 billion provided in the past five years till 2014-15. This cut in allocation has come at a time
when PSBs are witnessing significant pressure on profitability and need to comply with stringent Basel III capital
requirements. To support credit growth of 15-16% in 2015-16, PSBs will need much more capital than the levels
budgeted for. Weaker banks with a lower capital adequacy, would be impacted the most if the required capital
infusion does not occur.
B. In this context, the government’s intention to create a holding and investment company and an Autonomous Bank
Board Bureau for PSBs is a positive. This would provide autonomy to banks and help them raise funds. The bureau,
a precursor to the holding company, will search and select heads of PSBs and help them develop differentiated
strategies and capital raising plans through innovative financial methods and instruments. This step is in the right
direction as it will improve operating efficiency of PSBs.
C. NBFCs registered with RBI and having an asset size of Rs 5,000 million and above, would now be covered under
the SARFAESI Act, 2000. This, coupled with formulation of a new Bankruptcy Code, would help the banking and
financial sector manage their asset quality better.
D. Establishment of the Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 200 billion,
and credit guarantee corpus of Rs 30 billion has been proposed. MUDRA Bank will be responsible for refinancing all
microfinance Institutions, which lend to small business units through the Pradhan Mantri Mudra Yojana. A Trade
Receivables discounting System (TReDS) - an electronic platform for facilitating financing of trade receivables of

32
Cement
35/+*-5+ ,# 8##+, "#$+,-*",1#$ /",1>1,& / 0#+1,1>5[ "#+, 5+"/2/,1#$+ %1$#-
(%0/", @/",#-+
A. Duties and tariffs directly levied on cement hiked marginally. An increase in freight, power and fuel costs to drive up
players’ operating costs by 0.8%. However, they will be able to hike prices to offset this increase owing to rising
demand.
B. Clean energy cess on coal (domestic and imported) doubled to Rs 200 per tonne, which will increase power and fuel
costs (that form about 20% of cost of sales) by 2%.
C. Rail freight rate for cement hiked by 2.7% and for coal by 6.3%. This would drive up freight costs (which account for
25-30% of cost of sales) by 1%.
D. Increase in infrastructure funding to aid recovery. Key outlays are:
E. Investments towards roads and highways more than doubled to about Rs 856 billion.
F. Outlay towards urban infrastructure increased by 37% to Rs 188 billion.
G. The above moves would improve demand for cement over the medium term; however execution capability of
funding institutions/ players has to be scaled up appropriately. Further, steps taken to improve access to financing
for infrastructure projects could aid higher credit offtake over the long term.
Cement: Tariffs
(Per cent)
Portland cement 0 0 12.4 +Rs120/tonne 12.5 +Rs125/tonne 0 0
White cement 10.3 10.3 12.4 12.5 30 30
Cement clinker 10.3 10.3 12.4 12.5 0 0
Limestone 5.2 5.2 0 0 0 0
Gypsum 2.6 2.6 0 0 0 0
Pet coke 2.5 2.5 14.4 14.4 0 0
Imported coal 2.5% BD+2.0% CVD 2.5% BD+2.0% CVD 0 0 0 0
BD: Basic duty; CVD: Counter veiling duty
Customs Excise Abatement rate
Company Impact Impact Factors
Larsen & Toubro Ltd A,B,C,D,E,F
IVRCL Ltd A,B,C,D,E,F
Simplex Infrstructures Ltd A,B,C,D,E,F
(%0/", @/",#-+
A. Hike in allocation towards infrastructure sectors by 1.5 times to around Rs 2.8 trillion to provide strong construction
opportunity to EPC players. Roads & highways, railways and urban infrastructure segments to be major
beneficiaries. As private sector interest is muted, the budget plans to step up public funding. However, institutional
capacity to execute projects across sectors will have to be monitored.
B. Investment for development of national highways has been increased by 178% y-o-y to Rs 856 billion. A significant
portion will be funded through a Rs 4 per litre hike in road cess on petrol and diesel. The increase in public funding
has the potential to boost national highway execution by about 5,800 km annually, creating strong construction
opportunity for road EPC companies.
C. In railways, outlay has been increased by 52% to Rs 1 trillion, with focus on capacity expansion and decongestion of
the existing network. There have been significant PPP announcements in coastal connectivity, gauge conversion,
Direct Freight Corridor and expansion of the Mumbai suburban railway network.
D. Planned outlay on urban infrastructure development, which includes development of smart cities and metro rail
projects, has been increased by 37%.
E. Issuance of tax-free bonds for roads, railways and irrigation projects and establishment of the National Investment
and Infrastructure Fund (with corpus of Rs 200 billion) proposed to be explored as means for additional finance.
Rationalisation of tax regime for infrastructure investment trusts could free up private capital locked in completed
projects.
F. Government’s intent to table Public Contracts Resolution of Disputes Bill to provide speedy dispute redressal in

P$$#*$"5) +*8+1)& /)5A*/,5[ #>5-/22 $5*,-/2 1%0/",
Coromandel Fertilisers Ltd A, B
Gujarat State Fertilisers Company Ltd A, B
National Fertilisers Ltd A
Zuari Industries Ltd A, B
(%0/", @/",#-+
A. Budgeted subsidy of Rs 730 billion for 2015-16 will be adequate to cover the subsidy burden of Rs 697 billion. The
subsidy spillover to 2016-17 will be lower at Rs 260 billion, compared with Rs 290 billion in the previous year.
B. Customs duty on sulphuric acid (used for manufacturing phosphatic fertilisers) has been reduced to 5% from 7.5%.
However, sulphuric acid accounts for a small proportion of overall costs. Hence, the impact will be marginal.
Fertilisers: Tariffs, prices and landed costs
Tariffs (per cent) Prices (January 2015)
Customs Excise Domestic International Pre- Post-
2014-15 2015-16 2014-15 2015-16 (Rs/tonne) ($/tonne) budget budget
Urea 5.0 1.0 5,360 303 21,190 21,190
DAP 5.0 1.0 23,000 484 35,019 35,019
MOP 5.0 1.0 17,000.0 325 21,897 21,897
Ammonia 5.0 1.0 n.a. 515 36,590 36,590
Phosphoric acid 5.0 - NT 765 51,055 51,055
Sulphur 2.5 - n.a. 193 12,470 12,470
Rock phosphate 2.5 - NT 121 9,410 9,410
Naphtha 0 - 26,609 428 28,539 28,539
Fuel oil 0 - 27,262 280 18,399 18,399
Contracted LNG2 5.0 - - 713 46,588 46,588
Notes:
1) There is no excise and customs duty on naphtha and fuel oil used for production of fertilisers.
2) International prices are FOB prices.
MOP: Muriate of potash; NT: Not traded; n.a.: Not available
"-" indicates not applicable
(%0/", @/",#-+
A. The budget proposes to increase the service tax from 12.36% to 14%. For hotels in India, the service tax is
applicable for both rooms and food & beverage (F&B). CRISIL Research expects the increase in the service tax to
have a negligible impact on the hotel industry as hoteliers will be able to pass it on to the customers.
B. The budget proposes to extend the Visa on Arrival (VoA) facility, currently available for 43 countries, to 150
countries in a stagewise manner. This is expected to improve the tourism competitiveness of India and boost foreign
tourist arrivals (FTAs) in the country, which were 7.5 million in 2014. As per a survey conducted by the World
Economic Forum in 2013, India ranked 65th in the overall travel and tourism competitiveness but ranked a dismal
132nd in terms of visa restrictiveness (which factors in the ease in obtaining visas). Among the BRICS nations,
South Africa, Brazil and Russia outrank India in terms of flexible visa policies. In another move to boost FTAs along
with domestic tourist arrivals (DTAs), the budget proposes to carry out restoration work on nine World Heritage Sites
across India – churches and convents of Old Goa, Hampi in Karnataka, Elephanta Caves near Mumbai, Kumbalgarh
and other hill forts of Rajasthan, Rani ki Vav in Patan, Gujarat, Leh Palace in Ladakh, Varanasi Temple Town in

Household Appliances
L/+1" "*+,#%+ )*,& 5<5%0,1#$ #$ OG!6+ ,# 7/>5 %1$1+"*25 1%0/",
Videocon Industries Limited A,B
MIRC Electronics Limited A,B
(%0/", @/",#-+
A. The basic customs duty for Organic LED (OLED) panels has been reduced to nil from 10%. However, as OLED TVs
account for less than 0.5% of total panel TV sales, this cut will not have any significant impact.
B. Increase in MNREGA allocation is expected to improve rural incomes, thus supporting consumer durable sales. This
will have a marginal positive impact on the sector.
Household Appliances: Tariffs
2014-15 2015-16 2014-15 2015-16# 2014-15 2015-16
B/W TVs 10.3 10.3 12.4* 12.5 - -
Colour TVs (CRT, LCD, LED) 10.3 10.3 12.4* 12.5 30 30
Refrigerators 10.3 10.3 12.4* 12.5 35 35
Room ACs 10.3 10.3 12.4* 12.5 25 25
Washing machines 10.3 10.3 12.4* 12.5 35 35
CPT 0.0 0.0 12.4* 12.5 - -
LCD and LED panels 0.0 0.0 12.4* 12.5 - -
OLED panels 10.3 0.0 12.4* 12.5 - -
Compressors 7.7 7.7 12.4* 12.5 - -
Thermostat and tubes 7.7 7.7 12.4 12.5 - -
Steel coils 7.5 7.5 12.4 12.5 - -
Polymers 5.2 5.2 12.4 12.5 - -
Customs Excise Abatement rate
*Excise duty rates w ith eff ect from 1st January, 2015

(%0/", @/",#-+
A. Exemption of basic customs duty, countervailing duty and special additional duty on input components used in
manufacturing tablet computers to lower tablet prices.
B. Allocation of Rs 10 billion towards Techno-Financial Incubation and Facilitation Programme for technology start-ups
and self-employment to help industry adopt new technologies and provide employment opportunities.
Information technology: Tariffs
Personal computers 0.0 0.0 12.4 12.5
Monitor 0.0 0.0 12.4 12.5
Keyboard 0.0 0.0 12.4 12.5
Mouse 0.0 0.0 12.4 12.5
Printer 0.0 0.0 12.4 12.5
FDD, HDD, CD-ROM drive and other storage drives2 0.0 0.0 12.4 12.5
Motherboards 0.0 0.0 12.4 12.5
Microprocessors3 0.0 0.0 12.4 12.5
Routers 0.0 0.0 12.4 12.5
Modems 0.0 0.0 12.4 12.5
1 Tax rate is inclusive of education cess.
2FDD: Floppy disk drive; HDD: Hard disk dr ive; CD-ROM: Compact disk-read only memory.
3!"#$%&$%#'((%$( *'+,- .%$ ."-*',- ",("/' -0' 123 0%4(",567+&-%& 8%/9: * Basic customs duty and does not include CVD, SAD
Customs * Excise

(%0/", @/",#-
A. Service tax is to be levied on tickets purchased for events such as concerts, pageants, sporting events and award
functions if the admission amount exceeds Rs 500 per person. However, this is unlikely to have a major impact as
we expect the event organisers to pass on the hike in ticket prices to buyers.
35)1/ U !$,5-,/1$%5$,E ;/-1@@+
(Per cent) Customs Excise
2014-15 2015-16 2014-15 2015-16
Broadcast equipment 10.3 10.3 12.4 12.5
Set-top boxes 10.3 10.3 12.4 12.5
Hindustan Copper Ltd A, C, D
Hindustan Zinc Ltd A, D
National Aluminium Co. Ltd A, B, C, D
Sesa Sterlite Ltd. A, B, C, D
(%0/", @/",#-+
A. Basic excise duty hiked to 12.50% from 12.36%; as a result, domestic prices of aluminium, copper, lead and zinc
will inch up marginally by Rs 200-300 per tonne
B. Clean energy cess on coal doubled to Rs 200 per tonne, which will also have a negligible impact as it accounts for
about 2% of total coal cost per tonne for aluminium players.
C. The Special Addtional Duty (SAD) on aluminium and copper scrap has been halved to 2%. This reduction would
address the problem of CENVAT credit accumulation emanating from the exisiting differential between the Central
Sales Tax (CST) of 2% and the SAD of 4%. In the existing structure, players are eligible for a CENVAT credit refund
of only 2% on an SAD levy of 4%. With both CST and SAD being equalised, players will be able to get a full refund
on the SAD.
D. The budget proposes to increase allocation towards the infrastructure segment by about 53% to Rs 2.8 trillion.
Higher public investments in infrastructure segments such as urban & rural development, power and aviation (end-

Domestic2 International3 Pre-budget Post-budget
Aluminium ingots 5.2 5.2 12.4 12.5 163,667 2,210 170,363 170,581
Aluminium products
- Foils 5.2 5.2 12.4 12.5 - - - -
Aluminium scrap 5.2 5.2 12.4 12.5 - - - -
Non-coking coal 2.1 2.1 6.2 6.2 - - - -
Caustic soda 7.7 7.7 12.4 12.5 - - - -
Calcined 2.6 2.6 14.4 14.4 - - - -
petroleum
coke
Copper scrap 5.2 5.2 12.4 12.5 - - - -
Copper ore and 2.6 2.6 4.1 4.1 - - - -
concentrates
Lead ore and 2.6 2.6 4.1 4.1 - - - -
concentrates
Zinc ore and 2.6 2.6 4.1 4.1 - - - -
concentrates
Note:
1) Tariff rates are inclusive of 3 per cent education cess in 2014-15
2) International prices are average LME cash prices; LME aluminium prices includes premium
3) Domestic prices are average prices for February 2015
Tariff (per cent)1 Prices (February 2015) Landed cost (Rs/tonne)
Oil and Gas
Oil & Gas: Higher Govt share in under-recovery burden for 2015-16: positive for oil companies
Reliance Industries Ltd B
GAIL A
(%0/", @/",#-+
A. The government's estimate of oil subsidies in 2014-15 and 2015-16 will wipe out the subsidy rollover of Rs 90-100
billion from 2014-15, reducing working capital requirements of oil marketing companies (OMCs). With the
government contributing Rs 300 billion towards fuel subsidies (including rollover), upstream oil companies will see a
5% decline in their contribution to under-recoveries in 2015-16.
B. Increase in road cess on petrol and diesel has been completely offset by decline in basic excise duty and removal of
education cess. Hence, there will be no impact.

Domes tic International Pre-
2014-15 2015-16 2014-15 2015-16 (Rs/tonne) ($/tonne)
Motor spirit (MS) 2.6 2.6 Rs 17.46/ltr Rs 17.46/ltr 79,595 457 30,032 30,032
Aviation turbine fuel
Superior kerosene oil
- Industrial use 5.2 5.2 14.4 14.4 44,839 500 34,039 34,039
- Domestic use 0.0 0.0 0.0 0.0 18,610 500 32,372 32,372
High-speed diesel
(HSD) 2.6 2.6 Rs 10.26/ltr Rs 10.26/ltr 57,569 468 30,674 30,674
Fuel oil 5.2 5.2 14.4 14.4 27,261 280 19,347 19,347
Liquefied petroleum
gas (LPG) 5.2 5.2 8.2 8.2 59,479 452 32,184 32,184
Bitumen 5.2 5.2 14.4 14.4 31,130 280 20,682 20,682
Crude oil 1 0.0 0.0 0.0 0.0 n.a. 353 - -
LNG3 5.0 5.0 - - - 713 46,588 46,588
CNG - - 14.0 14.0 - - 43,450 43,450
'-' indicates not applicable
n.a.: Not available
3 Prices are for contracted LNG
Notes
2) Domestic price of petroleum products are ex-storage point prices.
3) Priority sectors for natural gas include power and fertiliser.
4) Domestic natural gas prices represent landfall prices for each category.
5) Customs duty and excise duty on naphtha used for fertiliser is nil.
6) Customs duty and excise duty on fuel oil used in fertiliser is nil.
7) Additional customs duty of Rs 2/litre is levied on Motor spirit and HSD
Landed costs
(per cent) (January 2015) (Rs/tonne)
1 Cess on crude oil (in lieu of excise) is Rs 4,500 per tonne , National Calamity Contingent Duty (NCCD) of Rs 50/mt levied on
imports of crude oil
43
Paper
.#$,1$*5) 8*)=5,#-& /22#"/,1#$ @#- 5)*"/,1#$ ,# %/1$,/1$ )5%/$) @#- :UH 0/05-
Seshasayee Paper and Boards Ltd. A, B, C
Tamil Nadu Newsprint and Papers Ltd. A, B, C
West Coast Paper Mills Ltd. A, B, C
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A. Budgetary allocation of Rs 689 billion to the education sector to translate into steady demand for creamwove and
maplitho paper (that together comprise about 25% of total paper consumption), which are used primarily as
education stationery.
B. Doubling of the energy cess will drive up power costs (that form about 15 per cent of total costs) and consequently
pull down profitability by 30 basis points, given the muted demand growth.
C. The government’s push to the Digital India programme would affect demand, especially for writing and printing
paper, in the long term.
H/05-E ;/-1@@+
(per cent)
New sprint 0.0 0.0 0.0 0.0 35,000 561 34,594 34,594
Maplitho 10.3* 10.3* 6.2 6.2 51,000 n.a. - -
Duplex board 10.3* 10.3* 6.2 6.2 33,000 n.a. - -
Art board 10.3* 10.3* 6.2 6.2 56,000 n.a. - -
Wood pulp (hard) 5.2* 5.2* 2.1 2.1 NT 630 41,674 41,674
Wood pulp (soft) 5.2* 5.2* 2.1 2.1 NT 560 37,044 37,044
Waste paper (OCC) 12* 12* 6.2 6.2 12,200 250 18,326 18,326
* Custom duty values are 0 for ASEAN countries after the FTA in December 2013
n.a. - Not available
Tar iff (per cent) Pr ices (Jan 2015) Landed cost (Rs /tonne)
Customs Excise
NT: Not traded
Prices are delivered prices excluding VAT (delivered: basic+excise+octroi+avg f reight prices)
Basic petrochemicals and intermediates
GAIL A
Bhansali Engineering Polymers Ltd B
Note: The impact specified is only for the petrochemicals business of the companies listed above.
(%0/", @/",#-+
A. Excise duty on non-industrial polyethylene sacks and bags increased to 15% from 12% to have very limited impact,
as non-industrial bags segment constitutes a small portion of demand, and even after increase in duties the product
would still be cost-effective as compared to other available substitutes.
B. Basic customs duty on raw materials like ethylene dichloride (EDC), vinyl chloride monomer (VCM) and styrene
monomer (SM) reduced to 2% from 2.5%. Also, special additional duty (SAD) on EDC, VCM, naphtha and SM
lowered to 2% from 4%. Consequently, raw material cost would reduce for all naphtha-based petrochemical
producers which would be passed on. However, reductions in customs duty and SAD for feedstock would lower
costs for manufacturers of polyvinyl chloride (PVC) and downstream styrene products and support their profitability

Cipla Ltd A,B
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A. The basic excise duty has been increased from 12.36% to 12.5% but we expect the impact on margins for large
pharmaceutical companies to be less than 10 bps as over 60% of their revenues comes from exports.
B. The increase in service tax rate to 14% is unlikely to impact profitability of most players as majority of their R&D
expenditure is in-house. However, for Biocon’s subsidiaries - Syngene and Clinigene - which operate in the clinical
trials space, the increase in service tax could have a marginally negative impact.
C. The government has also proposed to set up three new National Institutes of Pharmaceutical Education and
Research (one each in Maharashtra, Rajasthan, and Chhattisgarh) to help create a talent pool in the longer term.
Pharmaceuticals: Tariffs
Formulations 12.4 12.4 6.2 6.2
47
Ports
(%0-#>5) "#$$5",1>1,& /$) @*$)1$= ,# #@@+5, 1%0/", #@ 71=75- +5->1"5 ,/<
Gujarat Pipavav Port Ltd. A
Essar Ports Ltd. A
A. Service tax exemption on construction, erection, commissioning/installation of original works pertaining to a port has
been withdrawn. This will drive up port operators’ costs, bulk of which will get passed on through tariff hikes.
B. Government-run major ports will be encouraged to corporatise. The move will allow major ports to access private
capital markets and provide them greater financial autonomy.
C. Funding availability to be improved through the establishment of National Investment and Infrastructure Fund (NIIF)
and rationalisation of taxes for Infrastructure Investment Trusts.
D. In the Railway Budget 2015-16, Rs 20 billion was allocated for a Coastal Connectivity Programme wherein ports in

T1=75- @*$)1$= />/12/8121,& ,7-#*=7 Q((M /$) =-#++ 8*)=5,/-& +*00#-,
Reliance Power Ltd A,B,C,D,E
Adani Power Ltd A,B,C,E
JSW Energy Ltd A,B,C,E
(%0/", @/",#-+
A. Clean energy cess levied on coal has been doubled to Rs 200 per tonne, while rail freight on coal has been hiked by
6.3%. This is expected to increase power generation costs by Rs 0.09 per unit. However, this will not have an impact
on fixed return projects as these costs will be allowed as a pass-through. Also, a large part of competitively bid
projects, which have quoted fuel and transportation charges as escalable components, will remain unaffected to the
extent of their bid.
B. Budget allocation to the transmission and distribution segment has risen by 22% to Rs 62 billion as compared to
levels in 2014-15. This will help lower T&D losses and improve power supply in rural areas.
C. Setting up of a National Investment and Infrastructure Fund (NIIF), with a corpus of Rs 200 billion to infrastructure
finance companies, will improve funding availability to the power sector. Additionally, rationalisation of the tax regime
for Infrastructure Investment Trusts will help monetise capital locked in completed projects.
D. Additional depreciation of 20% granted to new projects is a positive as it will allow companies to set-off higher
depreciation against overall profits. This will benefit capacities of around 15 GW expected to commission in 2015-16.
E. Setting up of 5 UMPPs of 4,000 MW, with pre-awarded clearances and fuel linkages each, will benefit the power

Real Estate
65>52#05-+ B1,7 +1=$1@1"/$, "#%%5-"1/2 -5/2 5+,/,5 /++5,+ B122 85$5@1,
Puravankara Projects Ltd A
Godrej Properties Ltd B
(%0/", @/",#-+
A. New home sales declined by 5-6% across most of the top 10 Indian cities* in 2014 given weak
macroeconomic conditions and high capital values. The hike in the service tax rate to 14% from 12.36% will
marginally drive up the cost of under-construction residential properties.
Similarly, a slowdown in corporate expansions over the past few years has dragged down demand for commercial
real estate space and an increase in service tax on under construction and rental commercial properties will have a
marginally negative impact on the sector.
B. Commercial lease rentals have been stagnant since 2009 owing to significant weak demand and an oversupply
situation. Rationalisation of capital gains tax for sponsors** exiting at the time of listing of a real estate investment
trusts (REIT) is a positive for developers who have a significant exposure to rent-yielding real estate assets. The
move will eventually boost cash flows of these developers in the medium term.
Notes:
* Cities - Ahmedabad, Bengaluru, Chandigarh Tricity, Chennai, Hyderabad, Kolkata, Mumbai MMR, NCR, Pune, Kochi
**As per the Securities Exchange Board of India, ‘sponsor’has been defined as any person(s) who set(s) up the REIT

Larsen & Toubro Ltd. A,B
IVRCL Ltd. A,B
Gammon India Ltd. A,B
Ashoka Buildcon Ltd. A,B
(%0/", @/",#-+
A. The Union Budget has proposed a 178% y-o-y rise in investments for development of national highways to
Rs 85,607 crore. A major portion of this rise will be funded by a Rs 4 per litre increase in road cess on petrol and
diesel. With private participation being muted as of now, the increase in public funding has the potential to boost
execution of national highway projects by about 5,800 km annually and create a robust construction opportunity for
engineering, procurement & construction (EPC) companies in the sector.
B. Tax-free bonds for road projects and setting up of the National Investment and Infrastructure Fund will provide an
additional means of financing. Rationalising the tax regime for Infrastructure Investment Trust may help free up
private capital currently locked in completed projects.
C. The government’s intent to table the Public Contracts Resolution of Disputes Bill will aid speedy redressal of

Tata Steel Ltd A, B, D, E
JSW Steel Ltd A, B, D, E
Rashtriya Ispat and Nigam Ltd A, B, D, E
Jindal Steel & Power Ltd A, B, C, D, E
Bhushan Steel Ltd A, B, C, D, E
(%0#-,/$, @/",#-
A. Education cess and secondary & higher education cess (of 3%) levied on excisable goods has been subsumed in
basic excise duty. Consequently, standard basic excise duty has increased to 12.5% from 12%. As a result, landed
cost and domestic prices of steel are likely to rise by a marginal Rs 40-50 per tonne.
B. Duty changes that have been introduced on raw materials:
C. Basic customs duty on metallurgical coke increased to 5% from 2.5%.
D. This will have negligible impact as India imports a minisule quantum of metallurgical coke. For steel manufactures,
coking coal needs to be converted to coke in coke ovens. All large integrated steel players import coking coal and
convert it into coke in captive coke ovens. Hence, reliance on coke imports is negligible.
E. Special additional duty (SAD) on iron and steel scrap reduced to 2% from 4%.
F. Reduction in SAD addresses issue of CENVAT credit accumulation emanating from existing differential between
central sales tax (CST) of 2% and SAD of 4%. In existing structure, players were eligible for refund (CENVAT credit)
of only 2% on SAD levy of 4% on imported scrap. With rates equalised for both CST and SAD, players will benefit as
they will be able to get SAD fully refunded.
G. Increase in effective rate of clean energy cess on coal to Rs 200 per tonne from Rs 100 per tonne is expected to
have a mild impact on Indian sponge iron industry. The industry is grappling with high input costs (especially thermal
coal) and subdued domestic demand. Moreover, sharp decline in international scrap prices (substitute to sponge
iron) is exerting pressure on sponge iron realisations. Resultantly, players are unable to pass on the rise in cost.
H. Owing to rising imports, steel and mines ministry had sought a hike in import duty on finished steel to 10% from the
current 5.0-7.5%. While there was no change in existing effective rates of basic customs duty, tariff rates have been
hiked to 15% from 10%, giving the government buffer to raise import duty up to a maximum of 15% (instead of 10%
earlier) if pace of imports continue.
I. The budget proposed increased allocation towards infrastructure by about 53% to Rs 2.8 trillion. Higher public
investments in infrastructure (accounts for about 21% of overall Indian steel demand) such as urban rural

GP/GC 7.7 7.7 12.4 12.5 46,500 513 41,376 41,428
CR coils 7.7 7.7 12.4 12.5 41,500 495 39,965 40,016
HR coils 7.7 7.7 12.4 12.5 37,250 415 33,697 33,739
Bars and rods 5.2 5.2 12.4 12.5 36,250 419 33,184 33,226
Alloy steel 5.2 5.2 12.4 12.5 - - - -
Billets/slabs 5.2 5.2 12.4 12.5 36,150 373 29,667 29,704
Pig iron 5.2 5.2 12.4 12.5 22,500 298 23,933 23,963
HBI/sponge iron - - 12.4 12.5 18,650 - - -
Ferro alloys - 5.2 12.4 12.5 - - - -
Steel melting scrap 5.2 5.2 12.4 12.5 28,667 210 18,348 18,371
Iron ore 2.6 2.6 12.4 12.5 - - - -
Coking coal* 2.6 2.6 2.1 2.1 - - - -
Metallurgical coke 2.6 5.2 12.4 12.5 - - - -
Non-coking coal* 2.1 2.1 2.1 2.1 - - - -
Landed cost (Rs/tonne)
1) HBI: Hot Briquetted Iron
Source: Metal Bulletin, CRISIL Research
1 Tariff rates are inclusive of 3 per cent education cess.
Notes
2) International prices are on FOB (CIS Black Sea) basis for Feb 2015
3) Domestic prices are average prices for Feb 2015

Company Impact
There was no specific proposal for the sugar industry in the Union Budget 2015-16.
I*=/-E ;/-1@@+? 0-1"5+ /$) 2/$)5) "#+,+
Domestic International Pre- Post-
(Rs/tonne) ($/tonne) budget budget
2014-15 2015-16 2014-15 2015-16
Domes tically n.a. n.a. 980 980 2,755 n.a. n.a. n.a.
produced sugar n.a. n.a. - - - - - - - -
Imported w hite sugar 25.0 25.0 n.a. n.a. - 398 24,440 24,440
Imported raw sugar 25.0 25.0 n.a. n.a. - 338 21,040 21,040
Molasses 10.3 10.3 1,000 1,000 - - - -
Tariff
3) Landed cost includes the duties, freight, port handling and transport costs.
Customs Excise
(Rs/tonne)
2) Excise duty includes basic duty, additional duty and education cess.
(per cent) (Rs per tonne)
Notes
1) Domestic and international prices are the average f or January 2015.
4) Customs duty for imported w hite and raw sugar w as hiked to 25 per cent in June 2014 before the Budget
Bharti Airtel B, C
(%0/", @/",#-+
A. The hike in excise duty for mobile phones (costing above Rs 2,000) from 6% (with CENVAT credit) to 12.5% is likely
to slow the pace of smartphone adoption.
B. The service tax has been hiked to 14% from 12.36%. This is expected to lead to an increase in the bills of postpaid
subscribers, who constitute only about 5% of India’s wireless subscriber base. Prepaid subscribers may not be as
impacted since the recharge vouchers include the service tax component and, hence, get subsumed in the
subscriber’s total cost.
C. Budgeted receipts from spectrum auctions, one-time spectrum charges and other levies have been estimated at
Rs 429 billion for 2015-16 vis-a-vis Rs 432 billion for 2014-15. This is

Union Budget FY15

Documents

Transcript of Union Budget FY15