Budget disappoints the capital goods sector

The Indian capital goods industry has not got the much needed import barriers especially for power equipments.

But on the positive side, the customs duty on 23 specified high voltage transmission equipment were made at par with the end product removing the inverter duty structure anomaly. 

Budget provision

• Plan outlay for infrastructure increased by 23.3%. The budget promoted / provided non banking financing avenues for capital flow into infrastructure and set up Group of Ministers (GOM) to expedite infra project execution. 
• Basic customs duty rates of 2%, 2.5% and 3% were unified at the median rate of 2.5%
• Concessional rate of 5% basic customs duty, 5% CVD & Nil SAD is being extended to parts and components for manufacture of 23 specified high voltage transmission equipment. 
• Scope of full customs duty exemption to water supply projects for agriculture and industrial use is being expanded to the water pumping station and water reservoir of such projects.
• Benefit of full exemption from basic customs duty and CVD currently available to 'Tunnel Boring Machine' and parts thereof for hydro-electric power projects is being extended to such machines for highway development projects too.
• Concessional CVD @ 5% (by way of central excise exemption) and full exemption from SAD is being provided to LEDs used for manufacture of LED Lights and light fixtures.
• Full exemption from customs duty is being extended to toughened glass and silver paste imported for manufacture of solar cells or solar modules on actual user basis.
• Basic customs duty on solar lamps/lanterns is being reduced from 10% to 5%.
• Basic customs duty is being reduced from 7.5% to 5% for specified gems and jewellery machinery.
• Full exemption from basic customs duty is being provided to cash dispensers and Parts thereof on actual user basis.
• The concessional import duty of 5% basic customs duty, 5% CVD and Nil SAD currently applicable to high speed printing machinery is being extended to mailroom equipment compatible with such printing machinery imported by registered newspaper establishments.
• Full exemption from basic customs duty is being extended on bio-based asphalt sealer and preservation agent, millings remover and crack filler, asphalt remover and corrosion protectant and sprayer systems for bio-based asphalt applications.
• Basic customs duty is being reduced from 5% to 2.5% on specified agriculture machinery namely paddy transplanter, laser land leveler, cotton picker, reaper-cum-binder, straw or fodder balers, sugarcane harvesters and track used for manufacture of track type combine harvester.
• Basic customs duty on parts and components required for the manufacture of above equipment too were reduced from 7.5% to 2.5%.
• Basic customs duty on micro irrigation equipment (tariff item 8424, 8100) is reduced from 7.5% to 5%.
• Full exemption from customs duty is being extended to additional specified capital goods and raw materials for the manufacture of electronic hardware.
• Excise duty exemption is being extended to goods required for expansion of an existing mega/ultra mega power project under specified conditions at par with exemption from CVD on the import goods for expansion of such projects.
• Excise duty is being reduced 10% to 5% on parts of specified textile machinery.
• Excise duty of 5% is imposed on automatic looms and project looms.
• Excise duty is fully exempt on Air-conditioning equipment, panels and refrigeration panels for installation of cold chain infrastructure for the preservation, storage, transport or processing of agricultural, horticultural, dairy, poultry, apiaries, aquatic and marine produce.
• Excise duty is also fully exempt on Conveyor belt systems for use in cold storage for the preservation, storage, and transport or processing of agricultural, horticultural, dairy, poultry, apiaries, aquatic and marine produce and in mandis & warehouses for storage of food grains and sugar.

Stock to watch

BHEL, BGR Energy, Techpro Systems and Thermax

Budget Impact

While the increased infrastructure focus and addressing of some pressing issues will help accelerated development of infrastructure and cascading effect on capital goods sector, the budget has not provided anything substantial directly barring elimination of inverted duty structure for 23 specified high voltage transmission equipment and bringing the customs duty at par with the imported end product.

Similarly the extension of excise duty exemption to goods required for expansion of an existing mega/ultra mega power project under specified conditions at par with exemption from CVD on the import goods for expansion of such projects will also augur well for players catering to mega power projects such as BHEL, L&T, BGR Energy, Techpro Systems and Thermax etc.