rediff.com: Budget 2000 Impact


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March 1, 2000

Overall impact: Neutral

Positive features

Reduction in excise duty on tyres for original equipment (OE) sector from 30 per cent to 16 per cent. Also, no special excise duty will be levied on the same. This could have a positive impact on margins, provided tyre manufacturers are able to retain the benefit rather than having to share it with their OE customers.
Excise duty reduced from 24 per cent to 16 per cent (CENVAT) on cellular rubber, tread rubber and rubber articles. This will bring down tyre manufacturing costs.
Import duty on nylon tyre cord fabric, styrene butadiene rubber (SBR), polybutadeine rubber (PBR) and butyl rubber reduced to 35 per cent from 40 per cent. Though synthetic rubber (such as SBR and PBR) are used to a lesser extent than natural rubber to manufacture tyres in India, the reduction in their import duties will help reduce input costs to that extent.

Negative features

Import duty on new tyres reduced from 40 per cent to 35 per cent. This could have some negative impact on the domestic tyre manufacturers. However, it must be pointed out that most tyre imports into India are from South Korea and these enjoy a concessional import duty rate of 33 per cent.
Excise duty for tyres for the replacement market has been effectively increased from 30 per cent to 32 per cent (16% CENVAT + 16% Special Excise Duty). This could exert some downward pressure on margins in this segment.
Import duty on natural rubber increased to 35 per cent from 25 per cent. Since the domestic tyre industry is largely dependent on natural rubber, tyre manufacturing costs are expected to increase to this extent.

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BUDGET IMPACT

The first cut

SECTOR IMPACT:

Automobiles