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Furthermore, reduction in customs duty on key inputs such as non-ferrous metals and alloy steel from 10% to 7.5%, and plastics will reduce the production cost. This expected increase in demand for cars, compounded with the imposition of 4% of CVD on import of tyres, would have a positive impact on auto ancillary demand.

Textiles & Man-made Fibers

The textile industry is expected to benefit from increased allocation to the Textile Up gradation Fund Scheme (from Rs. 4.4 billion to Rs. 5.4 billion) and allocation of Rs. 1.9 billion to the Scheme for Integrated Textile Parks. Furthermore, the decrease in customs duty from 15.0% to 10.0% on textile machinery and raw materials such as DMT, PTA, MEG and Caprolactum, is expected to benefit the textile industry by reducing cost of production. Excise duty on all man-made fibers has been reduced from 16.0% to 8.0%; reduction in customs duty from 15.0% to 10.0% on all made-made fibers and feed-stock would lead to lower input costs. Furthermore, reduction in customs duty on naphtha (a critical input in the production of man-made fibers) from 10.0% to 5.0% will reduce cost of production.

Food Processing

Food processing industry will be treated as priority sector lending for banks. This will result in increased credit flow to the sector. Furthermore, NABARD will create a separate window with corpus of Rs. 10 billion for re-financing loans to the sector, especially for agro-processing infrastructure and market development. It is proposed to exempt condensed milk, ice cream, preparations of meat, fish and poultry, pectin, pasta and yeast from excise duty. Further, excise duty on certain ready-to-eat packaged foods to be reduced from 16.0% to 8.0%. These measures are expected to significantly benefit the packaged foods industry. The industry is also expected to benefit from reduction in excise duty on paper, reduction of customs duty on major bulk plastics and reduction of customs duty on packaging machines, which will reduce packaging cost.

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* Contributed by -
Sumit Bihani, a CA and B.Com. (Hons.) graduate from Calcutta Univ, has worked with PricewaterhouseCoopers and Microsec Commerze Ltd.
Currently, student of PGP1 at BIM, Trichy,
Article published in KRIYA, March 2006 Issue, BIM's monthly magazine.