The following changes in the duties have been proposed in the Union budget 2010-11:
Central Excise duties partially rolled back and the standard rate on all non-petroleum products enhanced from 8% to 10% ad valorem.
The budget proposes to reduce surcharge on domestic companies to 7.5% from 10%.
Minimum Alternate Tax (MAT) to be increased to 18% of book profits from 15%.
Weighted deduction on expenditure incurred on in-house R&D enhanced from 150% to 200%. Also weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research increased from 125% to 175%.
The rate of service tax of 10% applicable since 24.02.2009 has been continued.
Clean Energy Cess has been levied at Rs 50 per tonne on both coal produced in India as well as imported coal.
Industry Expectations - Not fulfilled
None of the expectations were fulfilled by the industry
Budget Impact
The levy of clean energy cess on domestic and imported coal at Rs 50 per tonne can affect select players with captive thermal power plant, and also soda ash producers. The hike in excise duty is a pass through item for supplies to key user industries like paper, aluminium etc. So it has a neutral impact on the sector.
Stocks to watch
GHCL; Gujarat Alkali; Kanoria Chemicals
Outlook
Chlor Alkali industry growth is directly related to growth of economic activity in general. Although economic activity has slowed down due to global recession domestic demand still remains significant. Currently, the Electro Chemical Unit (ECU) realizations of caustic soda are very low, and retail soda ash prices have also come down. Major concern of Chlor alkali is power cost and usage of chlorine (produced as by product of Caustic Soda).
Most of Chlor alkali plants have built up their own captive plants. However benefits are taken away by various state level taxes. However no major announcements were made in the Union budget 2010-11. Overall Union Budget 2010-11 maintained status quo for the Chlor Alkali Industry.
