IMS Ghaziabad

Key Features of Budget 2012-2013 APPROACH TO THE BUDGET

• For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.
• GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years.
• India however remains front runner in economic growth in any cross-country comparison.
• Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure.
• Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.
• Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery.
• At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.
• Twelfth Five Year Plan to be launched with the aim of “faster, sustainable and more inclusive growth”. Five objectives identified to be addressed effectively in ensuing fiscal year.
• If India can build on its economic strength, it can be a source of stability for world economy and a safe destination for restless global capital.

OVERVIEW OF THE ECONOMY

• GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth.
• Headline inflation expected to moderate further in next few months and remain stable thereafter.
• Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation.
• Developments in India‟s external trade in the first half of current year have been encouraging. Diversification in export and import market achieved.
• Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate.
• India‟s GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent.
• Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.
• Introduction of amendments to the FRBM Act as part of Finance Bill, 2012.
• Concept of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are two important features of amendment to FRBM Act in the direction of expenditure reforms.
• Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending.
• “Medium-term Expenditure Framework” statement will set forth a three-year rolling target for expenditure indicators.
• Recommendations of the Expert Committees to streamline and reduce the number of centrally sponsored schemes and to address plan and non-plan classification to be kept in view while implementing Twelfth Plan.
• Central Plan Scheme Monitoring System to be expanded for better tracking and utilisation of funds.
SUBSIDIES
• Some subsidies, while being inevitable, may become undesirable if they compromise the macroeconomic fundamentals of economy.
• Subsidies related to administering the Food Security Act will be fully provided for. Endeavour to keep central subsidies under 2 per cent of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75 per cent of GDP.
• Based on recommendation of task force headed by Shri Nandan Nilekani, a mobile-based Fertilizer Management System has been designed to provide end- to-end information on movement of fertilisers and subsidies. Nation-wide roll out during 2012.
• All three public sector Oil Marketing Companies have launched LPG transparency portals to improve customer service and reduce leakage.
• Endeavour to scale up and roll out Aadhaar enabled payments for various government schemes in atleast 50 districts within next 6 months.

TAX REFORMS

• DTC Bill to be enacted at the earliest after expeditious examination of the report of the Parliamentary Standing Committee.
• Drafting of model legislation for the Centre and State GST in concert with States is under progress.
• GST network to be set up as a National Information Utility and to become operational by August 2012.
DISINVESTMENT POLICY
• Government has further evolved its approach to divestment of Central Public Sector Enterprises by allowing them a level playing field vis-à-vis the private sector in respect of practices like buy backs and listing at stock exchanges.
• For 2012-13, `30,000 crore to be raised through disinvestment. At least 51 per cent ownership and management control to remain with Government.
STRENGTHENING INVESTMENT ENVIRONMENT
Foreign Direct Investment
• Efforts to arrive at a broadbased consensus in consultation with the State Governments in respect of decision to allow FDI in multi-brand retail upto 51 per cent. Advance Pricing Agreement
• Provision regarding implementation of Advance Pricing Agreement to be introduced in Finance Bill, 2012.
Financial Sector
• Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50 per cent to new retail investors, who invest upto `50,000 directly in equities and whose annual income is below `10 lakh to be introduced. The scheme will have a lock-in period of 3 years.
Capital Market
• Various steps proposed to be taken for deepening the reforms in the Capital markets, including simplifying process of IPOs, allowing QFIs to access Indian Bond Market etc.
Legislative Reforms
• Official amendment to “The Pension Fund Regulatory and Development Authority Bill, 2011”, “The Banking Laws (Amendment) Bill, 2011” and “The Insurance Law (Amendment) Bill, 2008” to be moved in this session.
• Various Bills proposed to be moved in the Budget session of the Parliament to take forward the process of financial sector legislative reforms.
Capitalisation of Banks and Financial Holding Company
• To protect the financial health of Public Sector Banks and Financial Institutions, `15,888 crore proposed to be provided for capitalisation. Possibility of creating a financial holding company to raise resources to meet the capital requirments of PSU Banks under examination.
• A central “Know Your Customer” depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep.
Priority Sector Lending
• Revised guidelines on priority sector lending to be issued after stakeholder consultation.
Financial Inclusion
• Out of 73,000 identified habitations that were to be covered under “Swabhimaan” campaign by March, 2012, about 70,000 habitations have been covered. Rest likely to be covered by March 31, 2012.
• As a next step, Ultra Small Branches are being set up at these habitations.
• In 2012-13, “Swabhimaan” campaign to be extended to more habitations.
Regional Rural Banks
• Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions and have also joined the National Electronic Fund Transfer system.
• Proposal to extend the scheme of capitalisation of weak RRBs by another 2 years to enable States to contribute their share.
INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENT
• During Twelfth Plan period, investment in infrastructure to go up to `50 lakh crore with half of this, expected from private sector.
• More sectors added as eligible sectors for Viability Gap Funding under the scheme “Support to PPP in infrastructure”.
• Government has approved guidelines for establishing joint venture companies by defence PSUs in PPP mode.
• First Infrastructure Debt Fund with an initial size of `8,000 crore launched earlier this month.
• Tax free bonds of `60,000 crore to be allowed for financing infrastructure projects in 2012-13.
• A harmonised master list of infrastructure sector approved by the Government.
• IIFCL has put in place a structure for credit enhancement and take-out finance for easing access of credit to infrastructure projects.
National Manufacturing Policy
• National Manufacturing Policy announced with the objective of raising, within a decade, the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs.
Power and Coal
• Coal India Limited advised to sign fuel supply agreements with power plants, having long-term PPAs with DISCOMs and getting commissioned on or before March 31, 2015.
• External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects.
Transport: Roads and Civil Aviation
• Target of covering a length of 8,800 kilometre under NHDP next year.
• Allocation of the Road Transport and Highways Ministry enhanced by 14 per cent to `25,360 crore.
• ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project.
• Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users.
• ECB to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion.
• Proposal to allow foreign airlines to participate upto 49 per cent in the equity of an air transport undertaking under active consideration of the government.
Delhi Mumbai Industrial Corridor
• In September 2011 central assistance of `18,500 crore spread over 5 years approved. US $ 4.5 billion as Japanese participation in the project.
Housing Sector
• Various proposals to address the shortage of housing for low income groups in major cities and towns including allowing ECB for low cost housing projects and setting up of a credit guarantee trust fund etc.
Fertilisers
• Government has taken steps to finalise pricing and investment policies for urea to reduce India‟s import dependence in urea.
Textiles
• Government has announced a financial package of `3,884 crore for waiver of loans of handloom weavers and their cooperative societies.
• Two more mega handloom clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand to be set up.
• Three Weaver‟s Service Centres one each in Mizoram, Nagaland and Jharkhand to be set up for providing technical support to poor handloom weavers.
• `500 crore pilot scheme announced for promotion and application of Geo-textiles in the North Eastern Region.
• A powerloom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget allocation of `70 crore.
Micro, Small and Medium Enterprises
• 5,000 crore India Opportunities Venture Fund to be set up with SIDBI. T
• To enable greater access to finance by Small and Medium Enterprises (SME), two SME exchanges launched in Mumbai recently.
• Policy requiring Ministries and CPSEs to make a minimum of 20 per cent of their annual purchases from MSEs approved. Of this, 4 per cent earmarked for procurement from MSEs owned by SC/ST entrepreneurs.
AGRICULTURE
• Plan Outlay for Department of Agriculture and Co-operation increased by 18 per cent.
• Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to `9,217 crore in 2012-13.
• Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in increased production and productivity of paddy. Allocation for the scheme increased to `1,000 crore in 2012-13 from `400 crore in 2011-12.
• `300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY.
• Remaining activities to be merged into following missions in Twelfth Plan:
National Food Security Mission National Mission on Sustainable Agriculture including Micro Irrigation National Mission on Oilseeds and Oil Palm National Mission on Agricultural Extension and Technology National Horticultural Mission
National Mission for Protein Supplement
• `2,242 crore project launched with World Bank assistance to improve productivity in the dairy sector. `500 crore provided to broaden scope of production of fish to coastal aquaculture.
Agriculture Credit
• Target for agricultural credit raised by `1,00,000 crore to `5,75,000 crore in 2012-13.
• Interest subvention scheme for providing short term crop loans to farmers at 7 per cent interest per annum to be continued in 2012-13. Additional subvention of 3 per cent available for prompt paying farmers.
• Short term RRB credit refinance fund being set up to enhance the capacity of RRBs to disburse short term crop loans to small and marginal farmers.
• Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card which could be used at ATMs.
Agricultural Research
• A sum of `200 crore set aside for incentivising research with rewards.
Irrigation
• Structural changes in Accelerated Irrigation Benefit Programme (AIBP) being made to maximise flow of benefit from investments in irrigation projects.
• Allocation for AIBP in 2012-13 stepped up by 13 per cent to `14,242 crore.
• Irrigation and Water Resource Finance Company being operationalised to mobilise large resources to fund irrigation projects.
• A flood management project approved by Ganga Flood Control Commission at a cost of `439 crore for Kandi sub-division of Murshidabad District.
National Mission on Food Processing
• A new centrally sponsored scheme titled “National Mission on Food Processing” to be started in 2012-13 in co-operation with State Governments.
• Steps taken to create additional food grain storage capacity in the country.

INCLUSION
Scheduled Castes and Tribal Sub Plans
• Allocation for Scheduled Castes Sub Plan at `37,113 crore in BE 2012-13 represents an increase of 18 per cent over BE 2011-12.
• Allocation for Tribal Sub Plan at `21,710 crore in BE 2012-13 represents an increase of 17.6 per cent.
Food Security
• National Food Security Bill, 2011 is before Parliamentary Standing Committee.
• A national information utility for computerisation of PDS is being created. To become operational by December, 2012.
Multi-sectoral Nutrition Augmentation Programme
• A multi-sectoral programme to address maternal and child malnutrition in selected 200 high burden districts is being rolled out during 2012-13.
• Allocation of `15,850 crore made for Integrated Child Development Service (ICDS) scheme, representing an increase of 58 per cent over BE 2011-12.
• `11,937 crore allocated for National Programme of Mid Day Meals in schools.
• An allocation of `750 crore proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, SABLA.
Rural Development and Panchayati Raj
• Budgetary allocation for rural drinking water and sanitation increased from `11,000 crore to `14,000 crore representing an increase of over 27 per cent.
• Allocation for PMGSY increased by 20 per cent to Rs.24,000 crore to improve connectivity.
• Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat Sashaktikaran Abhiyan.
• Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced allocation of `12,040 crore in 2012-13, representing an increase of 22 per cent over the BE 2011-12.
Rural Infrastructure Development Fund (RIDF)
• Allocation under RIDF enhanced to `20,000 crore. `5,000 crore earmarked exclusively for creating warehousing facilities.
EDUCATION
• For 2012-13, `25,555 crore provided for RTE-SSA representing an increase of 21.7 per cent over 2011-12.
• 6,000 schools proposed to be set up at block level as model schools in Twelfth Plan.
• `3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an increase of 29 per cent over BE 2011-12.
• To ensure better flow of credit to students, a Credit Guarantee Fund proposed to be set up
HEALTH
• No new case of polio reported in last one year.
• Existing vaccine units to be modernised and new integrated vaccine unit to be set up in Chennai.
• Scope of „Accredited Social Health Activist‟ – „ASHA‟ is being enlarged. This will also enhance their remuneration.
• Allocation for NRHM proposed to be increased from `18,115 crore in 2011-12 to `20,822 crore in 2012-13.
• National Urban Health Mission is being launched.
• Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more Government medical colleges.

EMPLOYMENT AND SKILL DEVELOPMENT
• MGNREGS has had a positive impact on livelihood security.
• Need to bring about greater synergy between MGNREGA and agriculture and allied rural livelihoods.
• Allocation of `3915 crore made for National Rural Livelihood Mission representing an increase of 34 per cent.
• To ease access to bank credit, corpus for „Women‟s SHG‟s Development Fund‟ enlarged.
• Proposal to establish Bharat Livelihoods Foundation of India through Aajeevika scheme.
• Allocation for Prime Minister‟s Employment Generation Programme increased by 23 per cent to `1,276 crore in 2012-13.
Skill Development
• Projects approved by National Skill Development Corporation expected to train 6.2 crore persons at the end of 10 years.
• `1,000 crore allocated for National Skill Development Fund in 2012-13.
• To improve the flow of institutional credit for skill development, a separate Credit Guarantee Fund to be set up.
• “Himayat” scheme introduced in J&K to provide skill training to 1 lakh youth in next 5 years. Entire cost to be borne by Centre.
SOCIAL SECURITY AND THE NEEDS OF WEAKER SECTIONS
• Allocation under NSAP raised by 37 per cent to `8,447 crore in 2012-13.
• In the ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme for BPL beneficiaries, pension amount to be raised from `200 to `300 per month.
• Lump sum grant on the death of primary breadwinner of a BPL family, in the age group 18-64 years, doubled to `20,000.
• To enhance access under SWAVALAMBAN scheme, LIC appointed as an Aggregator and all Public Sector Banks appointed as Points of Presence (PoP) and Aggregators.
• Special grant provided to various universities and academic instiutions.
Security
• A provision of `1,93,407 crore made for Defence services including `79,579 crore for capital expenditure. Any further requirement to be met.
• `1,185 crore proposed to be allocated for construction of nearly 4,000 residential quarters for Central Armed Police Forces. `3,280 crore proposed to be allocated for construction of office building of Central Armed Police Forces.
• Scheme to create National Population Register likely to be completed within next 2 years
GOVERNANCE
UID-Aadhaar
• Enrolment of 20 crore persons completed under UID mission. Adequate funds to be allocated to complete enrolment of another 40 crore persons.
Black Money
• Proposal to lay a White Paper on Black Money in current session of Parliament. Public
Procurement Legislation
• Bill regarding Public Procurement Legislation to be introduced in the Budget Session of the Parliament.
• Legislative measures for strengthening anti-corruption framework are at various stages of enactment.
BUDGET ESTIMATES 2012-13
• Gross Tax Receipts estimated at `10,77,612 crore.
• Net Tax to Centre estimated at `7,71,071 crore.
• Non-tax Revenue Receipts estimated at `1,64,614 crore.
• Non-debt Capital Receipts estimated at `41,650 crore.
• Temporary arrangement to use disinvestment proceeds for capital expenditure in social sector schemes extended for one more year.
• Total expenditure for 2012-13 budgeted at `14,90,925 crore.
• Plan expenditure for 2012-13 at `5,21,025 crore is 18 per cent higher than BE 2011-12. This is higher than 15 per cent projected in Approach to the Twelfth Plan.
• 99 per cent of the total plan outlay met in the Eleventh Plan.
• Non-plan expenditure estimated at `9,69,900 crore.
• `3,65,216 crore estimated to be transferred to States including direct transfers to States and district level implementing agencies.
• Entire amount of subsidy is given in cash and not as bonds in lieu of subsidies.
• Fiscal deficit at 5.9 per cent of GDP in RE 2011-12.
• Fiscal deficit at 5.1 per cent of GDP in BE 2012-13.
• Net market borrowing required to finance the deficit to be `4.79 lakh crore in 2012-13.
• Central Government debt at 45.5 per cent of GDP in 2012-13 as compared to Thirteenth Finance Commission target of 50.5 per cent.
• Effective Revenue Deficit to be 1.8 per cent of GDP in 2012-13.
PART B — TAX PROPOSALS DIRECT TAXES
• Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST.
• DTC rates proposed to be introduced for personal income tax.
• Exemption limit for the general category of individual taxpayers proposed to be enhanced from `1,80,000 to `2,00,000 giving tax relief of `2,000.
• Upper limit of 20 per cent tax slab proposed to be raised from `8 lakh to `10 lakh.
• Proposal to allow individual tax payers, a deduction of upto `10,000 for interest from savings bank accounts.
• Proposal to allow deduction of upto `5,000 for preventive health check up.
• Senior citizens not having income from business proposed to be exempted from payment of advance tax.
• To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors.
• Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.
• Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013.
• Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent.
• New sectors to be added for the purposes of investment linked deduction.
• Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an in- house facility for a further period of 5 years beyond March 31, 2012.
• Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.

• Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years.
• Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from `60 lakhs to `1 crore.
• Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.  Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.
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•  Reduction in securities transaction tax by 20 per cent on cash delivery transactions.  Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions.  Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme.  Measures proposed to deter the generation and use of unaccounted money.  A net revenue loss of `4,500 crore estimated as a result of Direct Tax proposals.

INDIRECT TAXES Service Tax

•  Sevice tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST.  Overwhelming response to the new concept of taxing services based on negative list.  Proposal to tax all services except those in the negative list comprising of 17 heads.  Exemption from service tax is proposed for some sectors.  Service tax law to be shorter by nearly 40 per cent.  Number of alignment made to harmonise Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction.  Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.  Utilization of input tax credit permitted in number of services to reduce cascading of taxes.
•  Place of Supply Rules for determining the location of service to be put in public domain for stakeholders‟ comments.  Study team to examine the possibility of common tax code for Central Excise and Service Tax.  New scheme announced for simplification of refunds.  Rules pertaining to point of taxation are being rationalised.  To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent to 12 per cent, with corresponding changes in rates for individual services.  Proposals from service tax expected to yield additional revenue of `18,660 crore.

Other proposals for Indirect Taxes

• Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions.
•  Excise duty on large cars also proposed to be enhanced.  No change proposed in the peak rate of customs duty of 10 per cent on non- agricultural goods.  To stimulate investment relief proposals for specific sectors – especially those under stress. Agriculture and Related Sectors  Basic customs duty reduced for certain agricultural equipment and their parts;  Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto March 31, 2015.
• Infrastructure  Proposal for full exemption from basic customs duty and a concessional CVD of 1 per cent to steam coal till 31st March, 2014.  Full exemption from basic duty provided to certain fuels for power generation. Mining  Full exemption from basic customs duty to coal mining project imports.
•  Basic custom duty proposed to be reduced for machinery and instruments needed for surveying and prospecting for minerals. Railways  Basic custom duty proposed to be reduced for equipments required for installation of train protection and warning system and upgradation of track structure for high speed trains. Roads  Full exemption from import duty on certain categories of specified equipment needed for road construction, tunnel boring machines and parts of their assembly.

Civil Aviation

• Tax concessions proposed for parts of aircraft and testing equipment for third- party maintenance, repair and overhaul of civilian aircraft. Manufacturing  Relief proposed to be extended to sectors such as steel, textiles, branded ready- made garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanised units.

Health and Nutrition

• Proposal to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to 6 specified life saving drugs/vaccines.  Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children.  Basic customs duty and excise duty reduced on Iodine.  Basic customs duty reduced on Probiotics. Environment  Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects.  Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles.
•  Proposal to increase basic customs duty on imports of gold and other precious metals.

Additional resource mobilization

• Proposals to increase excise duty on „demerit‟ goods such as certain cigarettes, hand-rolled bidis, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco.  Cess on crude petroleum oil produced in India revised to `4,500 per metric tonne.  Basic customs duty proposed to be enhanced for certain categories of completely built units of large cars/MUVs/SUVs.

Rationalization measures

•  Excise duty rationalised for packaged cement, whether manufactured by mini- cement plants or others.  Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to include unbranded jewellery. Operations simplified and measures taken to minimise impact on small artisans and goldsmiths.  Branded Silver jewellery exempted from excise duty.
•  Chassis for building of commercial vehicle bodies to be charged excise duty at an ad valorem rate instead of mixed rate.  Import of foreign-going vessels to be exempted from CVD of 5 per cent retrospectively.  Duty-free allowances increased for eligible passengers and for children of upto 10 years.  Proposals relating to Customs and Central excise to result in net revenue gain of `27,280 crore.  Indirect taxes estimated to result in net revenue gain of `45,940 crore.  Net gain of `41,440 crore in the Budget due to various taxation proposals.

Dr Simmi Agrawal

The global airport retail market is set to expand by leaps and bounds, led by robust growth in Asia Pacific and the Middle East and Africa. According to Datamonitor Retail, the global airport retail market will grow by more than 60% to worth US$44.1 billion by 2015.

Low cost airlines such as Malaysia’s Air Asia and India’s Spice Jet and IndiGo have made air travel more affordable to the expanding young urban population in the Asia Pacific region. This combined with ambitious investment in new infrastructure has helped increase footfall in the region and therefore boost retail sales.

Beauty sales are the fastest growing category within retail, and its growth will be driven by strong demand in Asia. This sector is predicted to grow by more than 80%, while growth in alcohol and tobacco is expected to be moderate.

India offers phenomenal opportunities for air retailers. It is fast becoming a key market in global airport retailing with investment from international airport operators that include Swiss-based Nuance Group and Britain’s Alpha Airports Group, now owned by Italy’s Autogrill, DFS Group, Dufry Group and Gebr Heinemann. Domestic majors like Shoppers’ Stop, Pantaloons and the Oberoi Group are also in the fray to run retail services at the airport. Various projects are undertaken by CafÈ Coffee Day, currently operating at almost all the airports.

In addition to this retail space, Bengaluru International Airport now operates an F&B spread. HMS Host operates a Kingfisher Sports Bar and restaurant, delicacies from ITC’s Kitchens of India range and Lily CafÈ from Paris in the international departure section. It has also imbued a concept of authentic Indian food. The F&B business will be managed by HMS Host at the domestic and international departures.

Characteristics of airport retailing

Greater convenience, broader variety, better value and customer service are now given top priority in airport retailing. Obviously, some of the goods and services offered in airports will not be appropriate for every airport. For instance, the variety will depend on the number of passengers travelling through the airport and the percentage of vacationers or business travelers. It can also vary depending on if the airport manages international or domestic passengers.

In brief, it depends on the geographic, demographic and economic specificity of the region where the airport is located. Besides the regional aspect, airport retailers must also meet the unique shopping patterns and specific needs of air travelers, which can be defined through the following elements:

1. 1.      Time:

Speed of service and quick or preferably no-lines of customers needing attention/waiting to buy.

1. Convenience:

Importance of store layout, access and location (air travelers’ mobility can be seriously limited because they are carrying handbags, briefcases, garment bags, etc), business hours should also conform to travel time.

1. Appearance and cleanliness:

Appealing window/store displays to attract browsing travelers.

1. Product variety and quality:

Airport retailing consists of retail duty-free, travel value shops, food and beverages and services (banking, money exchange and communications). Air travelers look to buy forgotten items, last-minute gifts and supplies like business equipment or refreshing and relaxing-themed products like cosmetics and skin-care products. Entertainment should also be provided to passengers experiencing flight delays or long waiting periods between flights. Special attention should be given to the weight/size/packing of products as these factors often play a major part in buying decision. Air travelers are considered part of the world’s most affluent consumers and, therefore, are more willing to pay the price of quality goods and services.

A New Dimension

Many retailers may think of airport retailing as just a market diversification strategy, but this perception may lead to negative results if the airport environment is not taken into consideration. Just because a concept works in a mall does not mean it will work in an airport. The best airport business proposals are the ones that include a thoughtful, thorough analysis of the product; how it appeals to the target airport shopper and how the business will be visually merchandised and managed. Major differences between airport and mall shoppers include the following:

• Airport shoppers may have higher stress levels due to travel anxieties and unfamiliarity with the airport .The customer demographic in the airport is more affluent than at malls due to the influx of business and international travelers.
• Due to the fast-paced environment of the airport, many shoppers are not in the proper mindset to browse
• Product sizes and quantities are major concerns for airport shoppers
• Airport shoppers frequently buy gifts for those at home, so the gift market is the primary product category they seek.

Prof Vijendra dhyani

Associate Prof – Marketing