"The increase in concessional import duties on capital goods is expected to push modernisation costs for tyre companies. This will act as a deterrant to the overall growth of tyre companies which are currently reeling under recessionary conditions," Atma chairman OS Kanwar said in a statement.

Concessional import duty on capital goods has been hiked from 22 per cent to 25 per cent in this year's budget.

"Despite the removal of the special customs duty of 5 per cent, the cost of import of a few raw materials had gone up for the tyre industry. By introducing a 10 per cent surcharge on customs duty, the government has diluted some of the benefits that would have accrued from the abolition of the special customs duty," Kanwar said.

The only silver lining, said Kanwar,is that the customs duty on a few of the raw materials like butyl rubber, PBR and SBR has come down post-budget.

Kanwar, who is also the managing director of tyre major Apollo Tyres, welcomed the restoration of 100 per cent Modvat credit, which he said would reduce the manufacturing cost for tyre companies.

The Atma chief pointed out that customs duty on tyres, other than aircraft tyres, has decreased from 45 per cent to 40 per cent. "This is in sharp contrast to the increase in customs duty on natural rubber, nylon tyre yarn and carbon black," he said.

The concessional import duty of 35 per cent from South Korea has also come down to 33 per cent, Kanwar said.

The customs duty on natural rubber has gone up from the existing 25 per cent to 27.5 per cent. The earlier rate also included the basic rate of 20 per cent and a special customs duty of 5 per cent. Post-budget, the basic rate has changed to 25 per cent while a 10 per cent surcharge has been added on to the basic duty.

On nylon tyre yarn, thecustoms duty has gone up from 30 per cent to 38.5 per cent. However, the duty on nylon tyre cord fabric remains unchanged at 40 per cent.

Kanwar said that with hike in import duties of raw materials, tyre companies could go in for a change in their raw material product mix "so as to avoid any major burden that may arise out of their existing imports." He said that the 4 per cent freight hike in the railway budget would give an added thrust to the movement of goods traffic by road transportation.

He pointed out that the measures to boost the housing sector would get translated into a spurt in construction activity, which would in turn have a spin-off effect on the road transportation sector and eventually the tyre industry.