Sector

Announcement in Budget

Implications

Impact

Power

Five new Ultra Mega Power Projects, each of 4000 MW to be installed and will operate in Plug-and-Play mode. Kudankulam Nuclear Power Plant Unit 2 of 1000 MW capacity to be commissioned in FY 2016.

This will increase the overall installed capacity of power generation in the country. Further, all the clearances and linkages for five UMPPs will be in place before the project is awarded by a transparent auction system. The pre-clearance would play a critical role in ensuring timeliness of projects. Overall an investment of USD 20 bn will be required to convert these 5 UMPPs into reality, leaving huge room for private sector participation.

 

Government has also extended 10-year tax holiday for power projects improving the attractiveness of new investments in power sector.

 

Key companies to be benefited: NTPC, Reliance Power, Tata Power, Jindal Power Ltd, etc)

 

POSITIVE

Formation of Expert Committee for preparing draft legislation on single window clearance.

Time elapsed in acquiring different permits clearances was always a major challenge in any energy & infrastructure project. With this move, government has made its intent very clear that it will work towards improving the ease of doing business in India and such legislation will have a significant positive bearing on the investor and private sector outlook towards power sector projects and other infrastructure sector likewise.

 

With this move, Prime Minister Modi led Government of India is on its course to improve India’s ranking in ease of doing business from current 142 to target of 50.

 

POSITIVE

Electrification of the remaining 20,000 villages including off-grid Solar Power by 2020.

Rural electrification is critical in terms of socio-economic development of rural areas. This move is expected to bring incremental infrastructure requirement for power transmission and power distribution.

 

InfraInsights was always and is of the opinion that off-grid solar power is the most economical and best fit solution for achieving 100% rural electrification. This move boosts need for solar roof-top and augurs well for solar pv cells manufacturers.

 

Key companies to be benefitedMoser Baer, Tata Solar and even to Suzlon that is now fraying into Solar.

POSITIVE

Roads & Highways

Conversions of existing excise duty on petrol and diesel to the extent of Rs 4 per litre into Road Cess to fund investment.

The step will aid in public fund generation for development of roads and highways. Financing has always been problem for successful PPP projects and such instrument augurs well for “Public” contribution for a PPP project.

POSITIVE

Completion of around 1 lakh km of Roads

For faster completion of the projects, the government would be setting up Rs 20,000 crore infrastructure funds, and will auction projects with clearances to generate more funds.

The completion of roads will create demand for steel, bitumen and cement. The move complements well with government’s smart cities initiative. This will lead to huge capex investment and new wave of road project tenders will augur well for construction equipment and will essentially lead to job creation.

 

Key companies to be benefitedIRB Infra, GMR Infra, IVRCL, Gammon, GVK, Unitech etc.

POSITIVE

 

The Government would also consider similar (as for UMPP) plug-and-play projects in other infrastructure projects such as roads, ports, rail lines, airports etc

Delays in statutory clearances have significantly impacted the PPP model in infrastructure sector.  The vision to provide similar level of clearances beforehand will go a long way in reviving the PPP model

POSITIVE

Railways

Tax free infrastructure bonds in rail, roads and irrigation

Tax free infrastructure bonds for projects in Railways and roads will boost up investments in Infra and railways and this will be reflected on the stocks.

POSITIVE

Excise duty on rails for manufacture of railway or tram way track construction material exempted retrospectively from 17-03-2012 to 02-02-2014, if not CENVAT credit of duty paid on such rails is availed.

Will boost the steel and iron industry as well as railways.

POSITIVE

Water & Irrigation

Rs 5,300 crore to support micro-irrigation, watershed development and the ‘Pradhan Mantri Krishi Sinchai Yojana’.

This will a major development in the irrigation sector and will boost the agricultural developments.

 

Key companies to be benefitedJain Irrigation, Finolex

POSITIVE

‘PradhanMantri Gram Sinchai Yojana’ to provide ‘Per Drop More Crop’

This will be a boost for the agricultural sector.

POSITIVE

Coal

Clean energy cess increased from Rs 100/ tonne to Rs 200/tonne

Doubling of clean energy cess will have a bearing on the price of power, coal and steel. This will also lead to hike in thermal power tariff indirectly this hike will be passed to discoms and then to consumers who will end up paying ~5 paise per unit more for electricity; nearly 75% of power in India is generated through coal fired power plant. Coal India alone will be hit by about 5500 crore due to this.

 

This overall is a step in right direction to promote clean energy and showcases India’s resolve & commitment to tackle climate change.

 

Key companies to be impacted: JSPL, Reliance Power, Jindal Power, Tata Power, Monnet Ispat Energy, CIL

NEGATIVE

Oil & Gas and Fertilizer

Total Urea Subsidy for FY 2016 to be around Rs 73,000 Crore

Government had already announced increase in freight rates for urea and subsidy burden is just the repercussion of that hike in freight rate. This will have no bearing on the urea prices.

NEUTRAL

GST will be implemented by April 2016. Educational cess and higher educational cess to be subsumed as a part of GST.

This is the much awaited tax reform for the gas sector. The move will help in doing away with multiple taxation and ensure clarity on pricing of gas

POSITIVE

 

Introduced Public Contracts (Resolution of Disputes) Bill

This will streamline the institutional arrangements for resolution of disputes, which take long to resolve, and the process is very costly too.

 

This could bebeneficial for oil and gas companies like RIL, Cairn Energy, Niko Resources and Videocon Industries are among those engaged in arbitration with the government; almost half of the 21 cases of arbitrations in 15 years have been initiated only in the past five years

 

Renewable Energy

Target of renewable energy capacity revised to 1,75,000 MW till 2022, comprising 1,00,000 MW Solar, 60,000 MW Wind, 10,000 MW Biomass and 5,000 MW Small Hydro.

This will be a big positive for renewable energy sector and will create confidence among the investors. The incumbent Government has already been emphasizing on the renewable energy generation and the sector is already looking forward to investment of around USD 200 Billion.

 

Key companies to be impacted: Suzlon Energy, Greenko group, Azure Power, Tata Power Solar, etc

POSITIVE

Rs 75 Crore earmarked for faster adoption and manufacturing of electric vehicles (FAME) in FY 2015-16

It’s a huge positive for automotive industry that can now spend on R&D related to EV vehicles. Indian companies like Tata, M&M etc can emulate what global companies like Toyota; Honda has done in the space of EV vehicles. This outlay, however is too small to provide any significant acceleration to EV adoption in India. India would need significant investment to facilitate R&D and put in place charging infrastructure

 

The concessional excise duty of 6 per cent on specified goods for use in manufacture of electrically operated vehicles and hybrid vehicles, presently available up to this March, has being extended up to another year.

POSITIVE

Reality

Housing for all - 2 crore houses in Urban areas and 4 crore houses in Rural areas by year 2022

The move will create an additional demand in the reality sector and will also drive the demand for cement and steel. This will also be a great fillip to housing finance companies.

 

Key companies to be benefited: Financers (LIC Housing, HDFC, etc), Paint Companies (Asian Paints, Berger, etc), Cement Companies (ACC, Ambuja, UltraTech, etc), Realestate Companes (IVRCL, NCC, DLF,etc)

POSITIVE

The rural-urban divide is no longer acceptable

Ports

Ports in public sector will be encouraged, to corporatize, and become companiesunder the Companies Act to leverage the huge land resources.

Will unleash the untapped potential in the Ports sector and will attract investments. The incumbent government has already showed its willingness to promote inland waterways and coastal trans-shipment. Hence, development & de-bottlenecking of major and minor ports becomes crucial.

 

Key companies to be benefited: IMC Ltd, Adani Ports, Essar Ports, Other private sector port companies, etc)

POSITIVE

Other key announcements made by Finance Minister Mr. Arun Jaitley while presenting the Union Budget FY16

Government is making Efforts on various fronts to implement GST from next year i.e. April 01, 2016.

GST is perceived as a major tax reform which is expected to get a 360degree welcomed. GST will not only streamline the tax administration and result in higher tax collection for center and states, but also make production and exports from India more competitive

 

POSITIVE

Government to work with the States, in NITI, for the creation of a Unified National Agriculture Market.

Will boost the agricultural sector and improve the benefits to the farmers.

POSITIVE

PPP model for infrastructure development to be revitalized and govt. to bear majority of the risk.

This is a bold but much awaited move that was expected from the incumbent government. Unless the government revive private sector’s faith in PPP model, much of earmarked infrastructure development may not become a reality

POSITIVE

Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 20,000 crore, and credit guarantee corpus of Rs 3,000 crore to be created.

Will be a major step in the MSME sector and will have positive impact on MSMEs.

POSITIVE

National Investment and Infrastructure Fund (NIIF), to be established with an annual flow of Rs 20,000 crore to it.

Will create a positive investment environment in the infrastructure sector.

POSITIVE

Proposal to introduce a regulatory reform Bill that will bring about a cogency of approach across various sectors of infrastructure.

POSITIVE

Service-tax plus education cess increased from 12.36% to 14% to facilitate transition to GST.

Will result into increase in cost of basic amenities for common man.

NEGATIVE

 

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