Budget 2017 implications for the Indian chemical industry

NEW DELHI, INDIA: Chemical industry is one the most significant segment of the Indian economy, which is valued to contribute around 3 percent of the country's GDP. With the introduction of the Union Budget 2017, Finance Minister Arun Jaitley laid down new amendments including new income tax rules, actions on black money and push towards a digital economy.

Sectors like information technology hardware, capital goods, defence production, textiles, mineral fuels and mineral oils, chemicals and petrochemicals, paper, and much more will see changes in their customs and excise duty structure.

The pharma sector representatives have said that the Union Budget has failed to specifically address imminent challenges directly affecting the key industry, reported the business daily Economic Times.

The high import duty on domestic agrochemicals will benefit the domestic manufacturers in India. This will bring down manufacturing and compliance costs, boosting global competitiveness. In many of these cases, inputs attract higher duties than finished goods, making imports more attractive than local manufacture. 

Quotes for Indian Budget 2017

The Union budget is a balanced budget focusing on providing an impetus to the economy and offers encouraging measures for the taxpayers. As expected GST, demonetisation have ushered in tectonic changes for an economy and the same was conspicuous in the budget. There are multiple takeaways from the budget that is aimed at boosting consumption, skill development and highlights concerted efforts in the direction of creating improved living standards in the country. The reduction in tax rate for income tax slab of Rs 2.5 lakh to Rs 5 lakh and from 5 percent to 10 percent will give rise to the disposable income of individuals and boost consumption.

Similarly, the subventions offered for the MSME sector in the form of tax rebate, reduction in income tax for SMEs with annual turnover up to Rs 50 crore, as well as, the extension of the pro t linked deduction period available to the startups to three years out of seven years will provide a stimulus to employment generation. Agriculture, which is a key contributor to the country’s GDP, has received multiple sops; which is heartening. The decision to increase credit to farmers, with 60 days interest waiver, increase in NABARD fund, science-driven farming is being promoted with soil cards, micro-irrigation funds and mini labs in Krishi Vigyan Kendra will provide an impetus to the food productivity of the country. Also, the decision to install bio-toilets in railways is also a step in the right direction.

The polymer industry will receive a boost from the proposed additional strategic crude oil reserves. Similarly, the proposed reduction in the basic customs duty on LNG from 5 to 2.5 percent will provide a respite to the petrochemicals sector. The thrust on the ‘Housing for All’ scheme continues with the budget. The decision to give it an infrastructure status as well as interest subvention for housing loans and reduced lending rates by banks post-demonetisation is a welcome move.

The target of providing 1 crore houses for the houseless with a budget of Rs 27,000 crore, spells good news for the sector. However, if the FM would have linked its affordable housing scheme with the agenda of making India an energy efficient nation, it would have served the greater good of scripting a brighter, better future of the nation. 

Ajay Durrani, Country President, India and Managing Director, Covestro (India) Pvt Ltd

From the chemical sector point of view, the announcements relating to agriculture, like easing the credit availability and the Krishi Vigyan labs should add an impetus to the agrochemicals sector. This will aid farmers with access to products and technology on improving their yields and towards more sustainable practices.

Sudhir Shenoy, CEO of Dow Chemical International Pvt Ltd (Dow India)

Integration of the public-sector oil majors into a single entity company is a big move in the right direction. Also, cutting corporate tax to 25 percent for the MSMEs is a boost for the segment. Further, the reduction of customs duty on petroleum is a good move, which will benefit the petrochemical sector a lot.

Nikunj Dhanuka, MD & CEO, IG Petrochemicals Ltd

To give a further boost to India’s speciality chemical industry, the Union Budget for 2017 needs to factor three important recommendations:

• Lowering bilateral trade barriers between India and other Asian nations like South Korea, Japan, Taiwan, and others
• Incentivising research & development activities to encourage launch of innovative products and thus place India as a leader in innovation
• Offering credits to chemical manufacturers that demonstrate exemplary corporate citizenship by exhibiting sustainability and lower carbon footprint

Dr Deepak Parikh, Region Head (India) Clariant.

A lot has been said about the inverted duty structures. Incentivising direct investment by optimising duty structures will further improve ease of doing business and create a level playing field in the chemical industry. A higher tax on the finished good than on components and raw materials and incentives on localising manufacturing of critical raw materials will certainly encourage local manufacturing. 

Sudhir Shenoy, CEO of Dow Chemical International Pvt Ltd (Dow India)

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