The Hindu : Karnataka / Mysore News : Cut in customs duty will hit PSUs: KIAMA

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Sunday, Mar 06, 2005

Karnataka

Karnataka - Mysore

Cut in customs duty will hit PSUs: KIAMA

By Our Staff Correspondent

MYSORE, MARCH 5. The KIADB Industrial Area Manufacturers' Association (KIAMA) said that the reduction in customs duty, announced in the Union Budget, will expose Public Sector Undertakings (PSUs) to stiff competition from foreign companies, thereby jeopardising the returns on Government investment.

In a press statement, the general secretary of KIAMA, K. Ravindra Prabhu, said the decrease in customs duty would burden the public sector enterprises. "Though the Budget seeks to give a boost to economy and rationalise the tax structure, some of the proposals may burden the public sector enterprises," he said.

Mr. Prabhu welcomed the allocation of Rs 1,200 crores for rural teledensity, a move that will boost connectivity and communication, besides taking information technology to the villages. The budgetary allocation for rural electrification will invariably lead to growth in demand for consumer durables. "But, the Budget is silent on power generation. When rural India is already facing an acute power shortage, further electrification without power generation will only worsen the existing situation," the KIAMA said.

It took exception to the Finance Minister's failure in announcing special incentives to the handloom sector.

Mr. Prabhu welcomed the Union Finance Minister's decision not to take credit from the sale of Government equity of public sector enterprises for financing fiscal deficit like the previous Government. The proceeds from the sale of Government equity of public sector enterprises will be credited in an investment fund, which will be used to provide capital for viable public sector enterprises.

The KIAMA welcomed the Government's decision to reduce corporate tax. "This is going to encourage investment sentiments and is likely to fuel the stock market and increase the flow of FDI," it said.

Cess on petrol, diesel

The cess on petrol and particularly diesel will burden the Small Scale Industries (SSIs), where diesel is used for captive generation. The cess on petroleum products will have an adverse effect on prices of all commodities, thereby pushing the rate of inflation higher.

Allocation for SSI

The KIAMA felt that the allocation for SSI development is meagre.

"There is no concrete policy to give a boost to this sector, which is a major contributor to exports and employment generation. Also, there is no proposal to attract investments for further expansion of this sector." Further, the deletion of 108 items from the list meant for SSIs will expose them to stiff competition with large and medium scale industries, Mr Prabhu said.

Similarly, there is no mention of any allocation to boost khadi and village industries, which provide employment on a massive scale to millions of rural people.

The sunset clause to Special Economic Zones is a retrograde step that is bound to have a negative impact on FDIs, the statement said.

Tax on perks

The decision to tax perks given to employees will only force employers to search for alternative avenues to substitute the perks, Mr. Prabhu said.

"On the whole, the budget has given enough scope for growth of medium and large scale industries.

The reform process has taken a backseat due to political compulsions," Mr. Prabhu added.

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