Tata Steel managing director on the Union Budget 2006
February 28, 2006

We quote below the comments of our managing director on the Union Budget 2006.

“This year’s Budget has laid stress on continuity of policies for sustaining the growth momentum in the economy. Government’s current policies and programmes are yielding good results and the economy is on the growth path. The finance minister has tried to put his programme on ‘Auto pilot’, if I can borrow a term from the aviation industry. I am firmly of the view that the change should not be made just for the sake of change and I feel this Budget will provide stability. The corporate and the personal tax rates have not been changed and no new taxes have been introduced. The finance minister has taken cognizance of the hardships caused by fringe benefit tax (FBT) and has tried to address the issue in some way, although I feel it would have been much better if FBT was done away with, due to its complexities and potential for litigation. My view on MAT remains as before; there should be no tax, if by provisions of law, a corporate is not liable for tax otherwise. The containment of the fiscal deficit would keep the macro economic factors like exchange rate and interest rate under control, though high oil prices might have some effect on inflation rate.

While we have yet to assess the full impact of Budget, it appears marginally positive for the steel sector with the reduction in peak customs duty on non ferrous metals, ferro alloys, refractories and on minerals, and simplification of FBT.

De-blocking of coal blocks of 20 bn tonnes of coal is a welcome move. The Economic Survey had categorically pointed out that mining / coal sector has been lagging behind in the overall economic growth and hence some corrective measure is required for this sector. The finance minister has indicated that a comprehensive new policy on 'coal' is being framed and we
are hopeful that it will take care of the requirements of the steel industry too.

The focus on ultra mega power projects, increased outlay for national highways and rural roads as well as the allocation for the National Urban Renewal Mission will have positive impact on the infrastructure growth in the country and will give further impetus to the economy. The finance minister’s intention to move to full GST regime by 2010 is a welcome move. I am personally quite happy that the Government has intensified its effort to reach the benefits of growth to the general masses and underprivileged class.

We see this Budget as a step towards facilitating the economic growth in the country and rank it ‘7.5’ on a scale of ‘10’.”