by C. Uday Bhaskar
July 26 marks 10 years after India won the limited but high-stakes Kargil War initiated by Pakistan. On this day in 1999, the Indian soldiers gave the country a significant victory - albeit at a heavy cost in life, limb and blood. More than 500 military personnel gave their lives and a grateful nation celebrated a Kargil Diwas (Day).
But regrettably a decade later, it is evident that the nation has learnt little by way of imbibing the right lessons. And this is not for lack of clear and objective recommendations based on a careful review of what caused Kargil and what went wrong as far as national security was concerned.
The Kargil Review Committee headed by veteran security analyst K. Subrahmanyam produced its report in record time and this was submitted to the Atal Bihari Vajpayee-led NDA government.
To its limited credit, the NDA constituted four separate task forces to make tangible recommendations to improve and restructure the following areas: management of the country's borders; internal security; intelligence gathering capabilities; and defence management.
These reports were then submitted to the NDA government and reviewed by a Group of Ministers. The earnest hope and crying national need was for these recommendations to have been discussed in some detail in parliament so as to obtain consensual political support and then be implemented progressively. The objective ought to have been to prevent another Kargil and create necessary national security capacity from the apex downwards.
Alas, little of the implementation took place during the NDA rule and even less so in the UPA's first tenure.
Consequently the nation had to face the ignominy of its parliament being attacked by terrorists in December 2001 and seven years later, undergo the trauma of the November 2008 Mumbai attacks - a veritable maritime Kargil.
In the interim, national security has become a political football and it was deplorable that in the run up to the 10th anniversary of the Kargil Diwas, some political representatives actually described this war as belonging to the NDA/BJP. The martyrs and their families and those wounded in the icy heights of the Kargil-Drass region have been predictably forgotten and ignored.
The lack of adequate capacity for national security - despite the rhetoric that is periodically heard - is best reflected in the kind of time and attention paid to this highest and most sacred national calling in the Indian parliament.
In 10 years, there has been no sustained or meaningful debate on the Kargil war and its lessons in any session of parliament. And to add insult to injury, in the same period, the Ministry of Defence has returned almost Rs.50,000 crore (over $10 billion) as money unspent from the amount allocated for acquisition and modernization of the Indian military inventory. Thus the reality is that in the post-Kargil decade, India's trans-border military capacity has shrunk - but no one in the political spectrum is particularly concerned.
In this period, the nature of the security challenges facing India has become more complex and tangled and today the external and internal security strands have coalesced into one opaque domain. The country is at war. On paper - in the budget documents - the country allocates over Rs.141,000 crore (nearly $30 billion) towards defence. Yet what is meaningfully spent is lesser and this when the military, para-military and police forces have equipment and related inventory that is veering towards block obsolescence.
Parliamentarians and senior political leaders must take the responsibility for this sorry state of affairs and embark on appropriate redress with purpose. Specific suggestions include convening a full 10-day session of both the houses that will discuss the Kargil recommendations and the GoM reports to evolve an all-party consensus for immediate action.
The Indian military is a credible and highly professional institution and when the chips are down - as they were in Kargil in 1999 - it was the young officers and their committed troops who plucked the chestnuts out of the fire. Ineptitude at the higher levels of national security management is a recurring leit motif from the 1962 war with China through Kargil to the 2008 Mumbai carnage.
Many inadequacies exist in the Indian national security apparatus despite the lessons of Kargil and this is a poor reflection on the Indian entity - both state and empowered civil society.
Parliament ought to demand that the government set up a Blue Ribbon commission that will draw the most eminent and capable national security professionals who have no political axe to grind to carry out an urgent review and outline time-bound remedial measures. And to be meaningful and not anodyne, they would have to be radical and far-reaching and not timid and tentative.
Finally, as regards the martyrs - those who died in Kargil for flag and country - and the many more who made the supreme sacrifice before 1999 and after - right into July this year - they warrant a national tribute.
This is not the time to open the arid debate about why the world's largest democracy does not have a national memorial for its 'fauj' but to make a modest suggestion.
Many Western nations who lost their young men in World War I (which incidentally includes India) mark Nov 11 as Poppy Day. A tradition has evolved wherein the common citizen lays a poppy flower on the tomb of the martyrs or pays tribute in a designated public space.
The average Indian need not wait for the state and its political representatives to decide whose war Kargil was. It was fought for India. Period.
Thus there may be a case to choose an Indian flower - why not the humble 'gainda' (marigold) - and offer it to the unknown and forgotten Indian martyr who willingly shed blood. Local communities can decide how best to remember the martyrs and their families in their midst and let them know that at least once a year.
'Your sacrifice is not forgotten'. The moment has come for 'Gainda' Day to lead the plethora of other dedicated 'days' that dot the Indian calendar.
(Uday Bhaskar is a well-known strategic analyst. He can be reached at cudayb@gmail.com)
Friday, August 7, 2009
Pakistan's Army: Living in a State of Strategic Denial
by C. Uday Bhaskar
A two-day international conference on genocide that concluded in Dhaka July 31 exhorted the UN to recognize the mass killings and rape that the Pakistan Army had unleashed in the torturous and tumultuous events that preceded the birth of Bangladesh in December 1971.
Legal experts from Germany, Vietnam, Hong Kong, Britain and Canada joined their Bangladeshi counterparts in issuing a declaration that noted: "The conference calls upon the media and the civil society at home and abroad to focus on the (1971) genocide in Bangladesh, and launch a campaign so that this is recognized in the UN as Genocide."
Furthermore, the conference urged the Bangladesh government to begin the process of trying the perpetrators as war criminals and to seek international support in this regard.
But the sad truth is that as in the past 37 years, this earnest plea is unlikely to elicit any meaningful response from the powers that be at the global table.
The US, with Richard Nixon in the White House and his ace assistant Henry Kissinger actually calling the shots in 1971, was culpable by turning a blind eye to the genocide and mass rape that enveloped then East Pakistan. To their credit, the US mission in Dhaka tried to report the carnage to the DC Beltway and the US media, including some mainstream papers reported the events as accurately as possible. But in vain. And in keeping with the dictum that major powers shape the historical narrative in a selective manner by engaging in astute exclusion, this enormity has since been successfully relegated to the distant back-burner of the global record.
Four decades later, except for the victims and their traumatized families, recall of the genocide in Bangladesh outside of that country is hazy. The Pakistan Army, which was the principal institution engaged in attacking and butchering its own citizens - albeit of Bengali ethnicity, has since sought to play down the scale of the bloodshed and rape.
The official Pakistani version refers to 26,000 killed over a year but this is at considerable variance with other estimates which range from 300,000 to a staggering three million killed and between 200,000 to 400,000 women raped.
Two other estimates are illustrative of the disparity that exists about these gory figures. "Statistics of Democide: Genocide and Mass Murder Since 1900" by R.J. Rummel places the deaths at 1.5 million and other literature on the subject avers that East Pakistan of 1971 ranks as having the highest concentration or density of genocide by way of the numbers killed, the time involved and the geographical area in question. Yet another book, "Against Our Will: Men, Women and Rape" by Susan Brownmiller estimates that the total number of women raped by Pakistan Army personnel along with their local support base - the 'razakars' - varies from 200,000 to 400,000. The majority of them were Muslim girls and women ranging from age eight to 70 plus.
These are appalling statistics by any yardstick and in a normative context, even one death or rape of a civilian non-combatant by any uniformed person is cause for the gravest concern. Paradoxically, where death becomes macro, cerebral distortions occur easily. In keeping with the Einstein formulation that in a stellar domain mass can deform space, it may be averred that where a whole state machinery is committed to mass killing, normal morality and ethics are warped and elite responsibility evaded. Most objective genocide studies point to this pattern.
However, the purpose of this comment is not to cast aspersions on the veracity of one study or the other - more qualified voices will have to address that - but to relate the events of 1971 with the current turmoil in Pakistan.
Currently, the Pakistan Army - which in the Zia years became the defender of the Islamic faith - is caught in deep strategic denial about its murky and blood-splattered past. The empirical reality is that this institution since the first war for Kashmir in October 1947 to Kargil of May 1999 has been tasked in covert operations that have used terror stoked by religious radicalism and sectarian xenophobia against the 'adversary' - whether the much reviled Hindu Indian or the fellow Pakistani, be it the Bengali Pakistani of 1971 or the Baluchi of current times.
Like Oscar Wilde's "Picture of Dorian Grey", the institutional face of the Pakistan Army is best exemplified by the chutzpah of General Pervez Musharraf is a visage of supreme confidence - now further bolstered by the nuclear firewall. But the ugly reality is of a once proud army - its track record in World War II as part of the erstwhile British Indian Army is lustrous - that has lost its moral compass. The result has been the ignominy of killing fellow citizens on an unprecedented scale and where arch enemy India has been engaged - not being able to acknowledge the deaths of its regular troops in battle or even claim their bodies. A la Lady Macbeth, this is a stain that cannot be wiped away.
The inflexible mindset of the Pakistan Army has to be radically altered and there is no historical precedent that this will occur by consensus and deep introspection. The military acquires its legitimacy to use proportionate force for a larger national objective from adherence to the rule of law and a distilled code of professional conduct. But when the deviant becomes the norm, the correlation between principle and power is subverted.
The Pakistan Army is caught in an inflexible mode of strategic denial about its past, which is why it appears both unable and unwilling to deal with its present internal security challenges. This is the 'truth' that President Asif Ali Zardari has been trying to reveal - but with limited success. The reverberations of the Dhaka genocide conference must be picked up by Pakistan's accomplished intellectuals - both in the media and academia - and a false narrative corrected. The army must finally confront its mea culpa moment through the bloody cross of East Pakistan.
(C. Uday Bhaskar is a well-known strategic analyst. He can be reached at cudayb@gmail.com)
A two-day international conference on genocide that concluded in Dhaka July 31 exhorted the UN to recognize the mass killings and rape that the Pakistan Army had unleashed in the torturous and tumultuous events that preceded the birth of Bangladesh in December 1971.
Legal experts from Germany, Vietnam, Hong Kong, Britain and Canada joined their Bangladeshi counterparts in issuing a declaration that noted: "The conference calls upon the media and the civil society at home and abroad to focus on the (1971) genocide in Bangladesh, and launch a campaign so that this is recognized in the UN as Genocide."
Furthermore, the conference urged the Bangladesh government to begin the process of trying the perpetrators as war criminals and to seek international support in this regard.
But the sad truth is that as in the past 37 years, this earnest plea is unlikely to elicit any meaningful response from the powers that be at the global table.
The US, with Richard Nixon in the White House and his ace assistant Henry Kissinger actually calling the shots in 1971, was culpable by turning a blind eye to the genocide and mass rape that enveloped then East Pakistan. To their credit, the US mission in Dhaka tried to report the carnage to the DC Beltway and the US media, including some mainstream papers reported the events as accurately as possible. But in vain. And in keeping with the dictum that major powers shape the historical narrative in a selective manner by engaging in astute exclusion, this enormity has since been successfully relegated to the distant back-burner of the global record.
Four decades later, except for the victims and their traumatized families, recall of the genocide in Bangladesh outside of that country is hazy. The Pakistan Army, which was the principal institution engaged in attacking and butchering its own citizens - albeit of Bengali ethnicity, has since sought to play down the scale of the bloodshed and rape.
The official Pakistani version refers to 26,000 killed over a year but this is at considerable variance with other estimates which range from 300,000 to a staggering three million killed and between 200,000 to 400,000 women raped.
Two other estimates are illustrative of the disparity that exists about these gory figures. "Statistics of Democide: Genocide and Mass Murder Since 1900" by R.J. Rummel places the deaths at 1.5 million and other literature on the subject avers that East Pakistan of 1971 ranks as having the highest concentration or density of genocide by way of the numbers killed, the time involved and the geographical area in question. Yet another book, "Against Our Will: Men, Women and Rape" by Susan Brownmiller estimates that the total number of women raped by Pakistan Army personnel along with their local support base - the 'razakars' - varies from 200,000 to 400,000. The majority of them were Muslim girls and women ranging from age eight to 70 plus.
These are appalling statistics by any yardstick and in a normative context, even one death or rape of a civilian non-combatant by any uniformed person is cause for the gravest concern. Paradoxically, where death becomes macro, cerebral distortions occur easily. In keeping with the Einstein formulation that in a stellar domain mass can deform space, it may be averred that where a whole state machinery is committed to mass killing, normal morality and ethics are warped and elite responsibility evaded. Most objective genocide studies point to this pattern.
However, the purpose of this comment is not to cast aspersions on the veracity of one study or the other - more qualified voices will have to address that - but to relate the events of 1971 with the current turmoil in Pakistan.
Currently, the Pakistan Army - which in the Zia years became the defender of the Islamic faith - is caught in deep strategic denial about its murky and blood-splattered past. The empirical reality is that this institution since the first war for Kashmir in October 1947 to Kargil of May 1999 has been tasked in covert operations that have used terror stoked by religious radicalism and sectarian xenophobia against the 'adversary' - whether the much reviled Hindu Indian or the fellow Pakistani, be it the Bengali Pakistani of 1971 or the Baluchi of current times.
Like Oscar Wilde's "Picture of Dorian Grey", the institutional face of the Pakistan Army is best exemplified by the chutzpah of General Pervez Musharraf is a visage of supreme confidence - now further bolstered by the nuclear firewall. But the ugly reality is of a once proud army - its track record in World War II as part of the erstwhile British Indian Army is lustrous - that has lost its moral compass. The result has been the ignominy of killing fellow citizens on an unprecedented scale and where arch enemy India has been engaged - not being able to acknowledge the deaths of its regular troops in battle or even claim their bodies. A la Lady Macbeth, this is a stain that cannot be wiped away.
The inflexible mindset of the Pakistan Army has to be radically altered and there is no historical precedent that this will occur by consensus and deep introspection. The military acquires its legitimacy to use proportionate force for a larger national objective from adherence to the rule of law and a distilled code of professional conduct. But when the deviant becomes the norm, the correlation between principle and power is subverted.
The Pakistan Army is caught in an inflexible mode of strategic denial about its past, which is why it appears both unable and unwilling to deal with its present internal security challenges. This is the 'truth' that President Asif Ali Zardari has been trying to reveal - but with limited success. The reverberations of the Dhaka genocide conference must be picked up by Pakistan's accomplished intellectuals - both in the media and academia - and a false narrative corrected. The army must finally confront its mea culpa moment through the bloody cross of East Pakistan.
(C. Uday Bhaskar is a well-known strategic analyst. He can be reached at cudayb@gmail.com)
Tuesday, August 4, 2009
Anand Model Should be Replicated for Inclusive Growth
Traditional growth models are the legacy of the industrialization era that started a couple of centuries ago. The approach meant leveraging lowest cost resources with an aim of maximizing benefits to the owners of the enterprise. It is apparent now that pursuing a growth model that brings prosperity to a few while leaving the majority out of the ambit of its benefits is only furthering the gap between the haves and have not. There is a need to change that for inclusive growth, and the 'Anand experience' provides an excellent model.
Verghese Kurien, the father of the 'white revolution' in India, innovated the concept of social business in this country through the 'Anand Model', a vertically integrated three-tier self-generative system for cooperative dairy development. He successfully established a commodity like milk as an instrument for socio-economic development. The impact that Anand Model was able to make is very similar to the economic theory canvassed by economist Jeffrey Sachs three decades later.
Sachs, professor of Sustainable Development at Columbia's School of International and Public Affairs, authored a seminal work "The End of Poverty" in 2005 in which he claimed the right policies and key interventions can eradicate extreme poverty (living on less than $1 per day) in 20 years. He suggests that an improved input significantly increases the income of subsistence farmers, thereby reducing poverty. He does not believe that increased aid is the only solution; he supports establishing credit and micro loan programmes that are lacking in impoverished areas.
Across the globe there is a realization that consistent economic growth has done precious little to reduce the actual extent of deprivation in the world. World Development Report 2008 mentions 850 million people as undernourished and chronically food insecure; leading to death of 2.8 million children and three million women annually in the developing world. The recent financial meltdown too has added about 200 million to the list of poor globally.
These facts highlight the need for a greater inclusiveness in the determination of growth processes to combat the increasing global poverty levels. No wonder that global leaders are refocusing their efforts to create a participatory base, encompassing every section of the society in the growth process. Inclusive growth implies an equitable distribution of resources and its accruing benefits for every section of the society.
Muhammad Yunus, the Nobel laureate from Bangladesh, purported the need for business models that recognize the multidimensional nature of human beings; 'Social Business' as he terms it provides everyone with a fair chance to unleash their energy and creativity. Designed to operate as a normal business enterprise with the exception of the principal of profit maximization, which is replaced with the principal of social benefit, he set about to make a change. He believes once a social objective driven project overcomes the gravitation of financial dependency, it is ready for space flight.
The success of an inclusive growth model in a developing economy will depend much on growth in the rural areas, especially in the agriculture sector. If you look at the agricultural sector in India, the conventional output in relation to the human resources deployed is actually reducing dramatically. In large parts the ailment to this section of our society can be addressed by enabling micro enterprises and businesses that create value added products and services. It is important to provision necessary inputs to the marginalized populace in the rural areas such as access to banking, micro credit and suitable technologies.
The Indian government had consistently provided policy support to agriculture and its sub-sectors, including recently while formulating the eleventh plan. Poor execution of public delivery models have seriously impaired the impact that these policies could have made. The Indian farmer seeks empowerment, access to right inputs and not merely largesse. If inclusive growth in India is to succeed there is a dire need to revisit the operating models at the lowest levels.
The classical intervention for inclusive growth has come through NGOs or through the corporate world itself. While the NGOs have been stymied by unavailability of adequate infrastructure the corporate intervention through Corporate Social Responsibility (CSR) is usually limited to its area of operation or in conflict with the overall goal of the business to maximize profit.
There is a case to consider the Anand Model as an operating national model due to its proven record. The approach provides for action at the grassroot levels as well as coalesces the inputs into capacities to provide global scale finished products, effectively providing an opportunity to create economic value at all the three levels of value chain.
However the Anand Model too has its limitations, those that have impaired its ability to emerge as an instrument of change across the nation. These are largely structural as well as political. The cooperative framework imposes limitations as it necessitates these entities to be administered by bureaucracy and state controlled archaic act and rules that impairs functional autonomy. Given its potential impact the guiding structure for the cooperatives shall need to be reviewed and structured to allow them to play the role of catalysts of inclusive growth.
Technology is driving mass awareness and exposing systemic inefficacy and socio-economic inequalities, in turn influencing public opinion. India today has a wonderful opportunity to lead the world in inclusive growth. Better infrastructure in conjunction with an inclusive growth enabled by all-pervasive technology has the potential to transform the lives of a billion people. But we need to act decisively and now. Napoleon Bonaparte had said, at a critical juncture: "Take time to deliberate but when the time for action arrives stop thinking and go for it; otherwise defeat is inevitable."
(The author is former executive director, National Dairy Development Board and past president Indian Dairy Association, who works for rural empowerment. He can be reached at banerjeeanimesh@rediffmail.com)
Verghese Kurien, the father of the 'white revolution' in India, innovated the concept of social business in this country through the 'Anand Model', a vertically integrated three-tier self-generative system for cooperative dairy development. He successfully established a commodity like milk as an instrument for socio-economic development. The impact that Anand Model was able to make is very similar to the economic theory canvassed by economist Jeffrey Sachs three decades later.
Sachs, professor of Sustainable Development at Columbia's School of International and Public Affairs, authored a seminal work "The End of Poverty" in 2005 in which he claimed the right policies and key interventions can eradicate extreme poverty (living on less than $1 per day) in 20 years. He suggests that an improved input significantly increases the income of subsistence farmers, thereby reducing poverty. He does not believe that increased aid is the only solution; he supports establishing credit and micro loan programmes that are lacking in impoverished areas.
Across the globe there is a realization that consistent economic growth has done precious little to reduce the actual extent of deprivation in the world. World Development Report 2008 mentions 850 million people as undernourished and chronically food insecure; leading to death of 2.8 million children and three million women annually in the developing world. The recent financial meltdown too has added about 200 million to the list of poor globally.
These facts highlight the need for a greater inclusiveness in the determination of growth processes to combat the increasing global poverty levels. No wonder that global leaders are refocusing their efforts to create a participatory base, encompassing every section of the society in the growth process. Inclusive growth implies an equitable distribution of resources and its accruing benefits for every section of the society.
Muhammad Yunus, the Nobel laureate from Bangladesh, purported the need for business models that recognize the multidimensional nature of human beings; 'Social Business' as he terms it provides everyone with a fair chance to unleash their energy and creativity. Designed to operate as a normal business enterprise with the exception of the principal of profit maximization, which is replaced with the principal of social benefit, he set about to make a change. He believes once a social objective driven project overcomes the gravitation of financial dependency, it is ready for space flight.
The success of an inclusive growth model in a developing economy will depend much on growth in the rural areas, especially in the agriculture sector. If you look at the agricultural sector in India, the conventional output in relation to the human resources deployed is actually reducing dramatically. In large parts the ailment to this section of our society can be addressed by enabling micro enterprises and businesses that create value added products and services. It is important to provision necessary inputs to the marginalized populace in the rural areas such as access to banking, micro credit and suitable technologies.
The Indian government had consistently provided policy support to agriculture and its sub-sectors, including recently while formulating the eleventh plan. Poor execution of public delivery models have seriously impaired the impact that these policies could have made. The Indian farmer seeks empowerment, access to right inputs and not merely largesse. If inclusive growth in India is to succeed there is a dire need to revisit the operating models at the lowest levels.
The classical intervention for inclusive growth has come through NGOs or through the corporate world itself. While the NGOs have been stymied by unavailability of adequate infrastructure the corporate intervention through Corporate Social Responsibility (CSR) is usually limited to its area of operation or in conflict with the overall goal of the business to maximize profit.
There is a case to consider the Anand Model as an operating national model due to its proven record. The approach provides for action at the grassroot levels as well as coalesces the inputs into capacities to provide global scale finished products, effectively providing an opportunity to create economic value at all the three levels of value chain.
However the Anand Model too has its limitations, those that have impaired its ability to emerge as an instrument of change across the nation. These are largely structural as well as political. The cooperative framework imposes limitations as it necessitates these entities to be administered by bureaucracy and state controlled archaic act and rules that impairs functional autonomy. Given its potential impact the guiding structure for the cooperatives shall need to be reviewed and structured to allow them to play the role of catalysts of inclusive growth.
Technology is driving mass awareness and exposing systemic inefficacy and socio-economic inequalities, in turn influencing public opinion. India today has a wonderful opportunity to lead the world in inclusive growth. Better infrastructure in conjunction with an inclusive growth enabled by all-pervasive technology has the potential to transform the lives of a billion people. But we need to act decisively and now. Napoleon Bonaparte had said, at a critical juncture: "Take time to deliberate but when the time for action arrives stop thinking and go for it; otherwise defeat is inevitable."
(The author is former executive director, National Dairy Development Board and past president Indian Dairy Association, who works for rural empowerment. He can be reached at banerjeeanimesh@rediffmail.com)
Pranab Mukherjee’s Union Budget speech 2009-2010
Madam Speaker,
I rise to present the Budget for 2009-10.
2. Just 140 days back, I had the privilege to present the Interim Budget for 2009-10. It is a rare honor that I have been called upon to present the regular budget after the new Government assumed office.
3. The Congress-led UPA Government has come back to power with a renewed mandate. As Prime Minister, Dr. Manmohan Singh, said recently “It is a mandate for continuity, stability and prosperity. It is a mandate for inclusive growth and equitable development.” It is a mandate that we accept with humility and a firm resolve to do all that we can for the welfare of this nation.
4. I am deeply conscious of the faith reposed by the people in our government and the responsibilities that come with it. I am sensitive to the great challenge of rising expectations of a young India . It reflects a population that is restless, yet engaged and is ready to seize the opportunities that it is presented with. There are new and powerful reasons for us to create, facilitate and sustain those opportunities.
5. In the Interim Budget for 2009-10, I had stated that the new Government would need to anchor its policies for 2009-10, in a medium term perspective that would have to:
(a) sustain a growth rate of at least 9 per cent per annum over an extended period of time;
(b) strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per year;
(c) reduce the proportion of people living below poverty line to less than half from current levels by 2014;
(d) ensure that Indian agriculture continues to grow at an annual rate of 4 per cent;
(e) increase the investment in infrastructure to more than 9 per cent of GDP by 2014;
(f) support Indian industry to meet the challenge of global competition and sustain the growth momentum in exports;
(g) strengthen and improve the economic regulatory framework in the country;
(h) expand the range and reach of social safety nets by providing direct assistance to vulnerable sections;
(i) strengthen the delivery mechanism for primary health care facilities with a view to improve the preventive and curative health care in the country;
(j) create a competitive, progressive and well regulated education system of global standards that meets the aspiration of all segments of the society; and
(k) move towards providing energy security by pursuing an Integrated Energy Policy.
6. The Government recognizes the challenges that this task entails, particularly at a time when the world is still struggling with an unprecedented financial crisis and an economic slowdown that has also affected India . While we are determined to convert our words into deeds, Members would appreciate that a single Budget Speech cannot solve all our problems, nor is the Union Budget the only instrument to do so. Yet, it is an important means to share the vision of the Government, particularly as we begin a new term. I propose to do just that for the next hour or so, as I dwell on the challenges and outline the approach of the government in the short term and medium term perspectives.
7. The first challenge is to lead the economy back to the high GDP growth rate of 9 per cent per annum at the earliest. Growth of income is important in itself, but it is as important for the resources that it brings in. These resources provide us with the means to bridge the critical gaps that remain in our development efforts, particularly with regard to the welfare of the vulnerable segments of our population.
8. The second challenge is to deepen and broaden the agenda for inclusive development; and to ensure that no individual, community or region is denied the opportunity to participate in and benefit from the development process.
9. The third challenge is to re-energize government and improve delivery mechanisms. Our institutions must provide high quality public services, security and the rule of law to all citizens with transparency and accountability.
Overview of the Economy
10. Madam Speaker, at the time of the presentation of the Interim Budget, I had given a detailed analysis of the economic situation. Without repeating myself, I would like to highlight that the development course charted by the UPA Government in the last five years has been possible due to a step up in the growth rate of the economy and improved revenue buoyancy. The principal growth driver in this period has been private investment, which has been predominantly funded by domestic resources. During the year 2008-09, there has been a dip in the growth rate of GDP from an average of over 9 per cent in the previous three fiscal years to 6.7 per cent. It has affected the pace of job creation in certain sectors of the economy and the investment sentiments of the business community. It has also resulted in considerably lower revenue growth for the government. Another feature of the year 2008-09 was a sharp rise in the wholesale price index to nearly 13% in August 2008 and an equally sharp fall close to 0% in March 2009. While a detailed analysis of the developments has been presented in the Economic Survey-2008-09, tabled in both houses of Parliament last Thursday, I draw your attention to a few aspects.
11. The structure of India ’s economy has changed rapidly in the last ten years. External trade and external capital flows are an important part of the economy and so is the contribution of the services sector to the GDP at well over 50 per cent. The share of merchandise trade (exports plus imports) as a proportion of GDP has more than doubled over the past decade to 38.9 per cent in 2008-09. Similarly, trade in goods and services taken together has also doubled to 47 per cent during this period. Gross capital flows rose to a peak of over 9 per cent of GDP in 2007-08 before falling in the wake of the global financial crisis. The significant increase in the inflow of foreign capital is important, not so much for bridging the domestic savings-investment gap, but for facilitating the intermediation of financial resources to meet the growing needs of the economy.
12. This growing integration of the Indian economy with the rest of the world has brought new opportunities and also new challenges. It has made the task of sustaining high growth more complex. Over the past month, we have critically evaluated Government’s efforts at both short term economic recovery as well as medium term economic growth. The economic recovery and growth is a cooperative effort of the Central and State Governments. That is why, for the first time, I held a meeting with Finance Ministers of States as part of the preparations for this Budget. I intend to make this an annual feature.
TOWARDS ECONOMIC REVIVAL
Short-term measures
13. To counter the negative fallout of the global slowdown on the Indian economy, the Government responded by providing three focused fiscal stimulus packages in the form of tax relief to boost demand and increased expenditure on public projects to create employment and public assets. The RBI took a number of monetary easing and liquidity enhancing measures to facilitate flow of funds from the financial system to meet the needs of productive sectors.
14. This fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in 2007-08 to 6.2 per cent of GDP in 2008-09. The difference between the actuals of 2007-08 and 2008-09 constituted the total fiscal stimulus. This fiscal stimulus at 3.5% of GDP at current market prices for 2008-09 amounts to Rs.1,86,000 crore.
15. These measures were effective in arresting the fall in growth rate of GDP in 2008-09 and we achieved a growth of 6.7 per cent. There are signs of revival in the domestic industry and the foreign investors have also returned to the Indian market in the last couple of months. It is possible that the two worst quarters since the global financial meltdown in September 2008 are behind us. While the global financial conditions have shown improvement over the recent months, uncertainties relating to the revival of the global economy remain. We cannot, therefore, afford to drop our guard. We have to continue our efforts to provide further stimulus to the economy.
16. Madam Speaker, what I unfold now are only the ‘First steps’. It will be my endeavour to make the process of budget formulation more participatory and a continuous exercise.
Infrastructure Development
17. To stimulate public investment in infrastructure, we had set up the India Infrastructure Finance Company Limited (IIFCL) as a special purpose vehicle for providing long term financial assistance to infrastructure projects. We will ensure that IIFCL is given greater flexibility to aggressively fulfil its mandate.
18. ‘Takeout financing’ is an accepted international practice of releasing long term funds for financing infrastructure projects. It can be used to effectively address the asset liability mismatch of commercial banks arising out of financing infrastructure projects and also to free up capital for financing new projects. IIFCL would, in consultation with banks, evolve a ‘takeout financing’ scheme which could facilitate incremental lending to the infrastructure sector.
19. Government has had some success in attracting private investment in a wide range of infrastructure sectors such as telecommunications, power generation, airports, ports, roads and even in railways through public private partnerships ( PPP ). To ensure that infrastructure projects do not face financing difficulties arising from the current downturn, as I indicated in my Interim Budget Speech, the Government has decided that IIFCL will refinance 60 per cent of commercial bank loans for PPP projects in critical sectors over the next fifteen to eighteen months. The IIFCL and Banks are now in a position to support projects involving a total investment of Rs.100 thousand crore in infrastructure. Combined with the steps we are taking to increase public investment in infrastructure, this will provide a big boost to such investment.
20. The investment in infrastructure for the growth of economy is critical. I have urged my colleagues in the Central and State Governments to remove policy, regulatory and institutional bottlenecks for speedy implementation of infrastructure projects. I, on my part, will ensure that sufficient funds are made available for this sector.
Highway and Railways
21. The allocation during the current year to National Highways Authority of India (NHAI) for the National Highways Development Programme (NHDP) is being stepped up by 23 per cent over the 2008-09 (BE). I have also increased the allocation for the Railways from Rs.10,800 crore made in the Interim Budget for 2009-10 to Rs.15,800 crore.
Urban Infrastructure
22. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been an important instrument for refocusing the attention of the State governments on the importance of urban infrastructure. In recognition of the role of JNNURM, the allocation for this scheme is being stepped up by 87 per cent to Rs.12,887 crore in the current budget. To improve the lot of the urban poor, I propose to enhance the allocation for housing and provision of basic amenities to urban poor to Rs.3,973 crore in the current year’s budget. This includes the provision for Rajiv Awas Yojana (RAY), a new scheme announced in the address of the President of India. This scheme, the parameters of which are being worked out, is intended to make the country slum free in the five year period.
Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)
23. To address the problem of flooding in Mumbai, Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA) was initiated in 2007. The entire estimated cost of the project at Rs.1,200 crore is being funded through Central assistance. A sum of Rs.500 crore has been released for this project upto
2008-09. I have enhanced the provision for this project from Rs.200 crore in Interim BE to Rs.500 crore to expedite the completion of the project.
Power
24. The Accelerated Power Development and Reform Programme (APDRP) is an important scheme for reducing the gap between power demand and supply. I propose to increase the allocation for this scheme to Rs.2,080 crore, a steep increase of 160 per cent above the allocation in the BE of 2008-09.
Gas
25. With the recent find of natural gas in the KG Basin on the Eastern offshore of the country, the indigenous production of Natural Gas is set to double with natural gas emerging as an important source of energy. LNG infrastructure in the country is also being expanded. Government proposes to develop a blueprint for long distance gas highways leading to a National Gas Grid. This would facilitate transportation of gas across the length and breadth of the country.
Assam Gas Cracker Project
26. The Assam Gas Cracker Project sanctioned in April 2006 is being executed at a cost of Rs.5,461 crore. The capital subsidy of Rs.2,138 crore for the project is to be provided by the Central Government. The outlay for this project is being stepped up suitably.
Agricultural Development
I now turn to Agricultural development.
27. Agriculture has been the mainstay of our economy with 60 per cent of our population deriving their sustenance from it. In the recent past, the sector has recorded a growth of about 4 per cent per annum with substantial increase in plan allocations and capital formation in the sector. Agriculture credit flow was Rs.2,87,000 crore in 2008-09. The target for agriculture credit flow for the year 2009-10 is being set at Rs.3,25,000 crore. To achieve this, I propose to continue the interest subvention scheme for short term crop loans to farmers for loans upto Rs.3 lakh per farmer at the interest rate of 7 per cent per annum. I am also happy to announce that, for this year, the Government shall pay an additional subvention of 1 per cent as an incentive to those farmers who repay their short term crop loans on schedule. Thus, the interest rate for these farmers will come down to 6 per cent per annum. For this, I am making an additional Budget provision of Rs.411 crore over Interim BE.
Debt Relief for farmers
28. The one-time bank loan waiver of nearly Rs.71,000 crore to cover an estimated 40 million farmers was one of the major highlights of the last Budget. Under the Agricultural Debt Waiver and Debt Relief Scheme (2008), farmers having more than two hectares of land were given time upto 30th June, 2009 to pay 75% of their overdues. Due to the late arrival of monsoon, I propose to extend this period by six months upto 31st December, 2009 .
29. It is learnt that in some regions of Maharashtra , a large number of farmers had taken loans from private money lenders and the loan waiver scheme did not cover them. The matter requires special attention. To examine the matter in greater detail and suggest the future course of action, I propose to set up a Taskforce.
Accelerated Irrigation Benefit Programme
30. I propose to provide an additional Rs.1,000 crore over Interim BE for the Accelerated Irrigation Benefit Programme (AIBP), marking an increase of 75 per cent over the allocation in 2008-09(BE). The allocation for the Rashtriya Krishi Vikas Yojna (RKVY) is also being stepped up by 30 per cent over Budget Estimates of 2008-09.
Restoring Export Growth
31. Our exporters by virtue of their close links to the external sector have borne the brunt of the global economic crisis. It is, therefore, appropriate that we continue to provide all possible assistance to our exporters to help them overcome the short term disadvantages. More specifically:
(a) An adjustment assistance scheme to provide enhanced Export Credit and Guarantee Corporation (ECGC) cover at 95 per cent to badly hit sectors had been initiated in December 2008 to mitigate the difficulties faced by the exporters. In view of the continuing contraction in exports, I propose to extend the benefits of this scheme up to March 2010.
(b) The Market Development Assistance Scheme provides support to exporters in developing new markets. With many traditional markets still under financial stress, greater effort is required to identify and develop new markets. I propose to enhance the allocation for this scheme by 148% over BE 2008-09 to Rs.124 crore.
(c) With a view to insulating the employment - oriented export sectors from the global meltdown, Government had provided an interest subvention of 2 per cent on pre-shipment credit for seven such sectors. These sectors are textiles including handlooms, handicrafts, carpets, leather, gems and jewellery, marine products and small and medium exporters. I propose to extend the interest subvention beyond the current deadline of September 30, 2009 to March 31, 2010 .
(d) Micro, Small and Medium Enterprises (MSMEs) have been affected by the slowdown in exports and the indirect effect of the global crisis on domestic demand. To support this sector, I propose to facilitate the flow of credit at reasonable rates, by providing a special fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank (SIDBI). This fund of Rs.4,000 crore will incentivize Banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs during the current financial year.
(e) In February, 2009 the Print Media was given a stimulus package comprising waiver of 15% agency commission on DAVP advertisements and a 10% increase in the DAVP rates to be paid as a ‘special relief’ subject to documentary proof of loss of revenue in non-governmental advertisements. Since Print Media is still passing through difficult times, I have decided to extend the stimulus package for another six months from 30th June, 2009 to 31st December, 2009 .
Medium-term sustainability
32. The short term fiscal stimulus has to be balanced against long term prudence and fiscal sustainability objectives. To quote Kautilya, “In the interest of the prosperity of the country, a King shall be diligent in foreseeing the possibility of calamities, try to avert them before they arise, overcome those which happen, remove all obstructions to economic activity and prevent loss of revenue to the state”. I intend to take Kautilya’s advice and return to the FRBM target for fiscal deficit at the earliest and as soon as the negative effects of the global crisis on the Indian economy have been overcome. On the medium term fiscal perspective, I await the recommendations of the 13th Finance Commission.
33. To bring the fiscal deficit under control, we have to initiate institutional reform measures during the current year itself. This is essential for maintaining a stable balance of payments, moderate interest rates and steady flow of external capital for corporate investment. These measures have to encompass all aspects of the budget such as subsidies, taxes, expenditure and disinvestment.
Fertilizer subsidy
34. In the context of the nation’s food security, the declining response of agricultural productivity to increased fertilizer usage in the country is a matter of concern. To ensure balanced application of fertilizers, the Government intends to move towards a nutrient based subsidy regime instead of the current product pricing regime. It will lead to availability of innovative fertilizer products in the market at reasonable prices. This unshackling of the fertilizer manufacturing sector is expected to attract fresh investments in this sector. In due course it is also intended to move to a system of direct transfer of subsidy to the farmers.
Petroleum and Diesel pricing policy
35. Madam Speaker, Honorable Members are aware that global prices of oil and petroleum products had shot up to unprecedented levels in 2008-09. Most oil importing countries, including our neighbors, adjusted their domestic prices to reflect these global changes. Though prices have declined since then, they are already about double of the lows reached in the wake of the global financial crisis. It is important to recognize that, with almost three-quarters of our oil consumption met through imports, domestic prices of petrol and diesel have to be broadly in sync with global prices of these items. Government will set up an expert group to advise on a viable and sustainable system of pricing petroleum products. Details will be announced by my colleague, the Minister of Petroleum and Natural Gas.
Taxation
36. It is time that we complete the process that was started in 1991 for building a trust based, simple, neutral, tax system with almost no exemptions and low rates designed to promote voluntary compliance. The Income Tax Return Forms should be simple and user-friendly. I have asked the Department to work on SARAL-II forms for early introduction. We need a tax system which generates revenues on a sustained basis without use of coercive tax collection methods at the end of each year to meet targets. It is my intention to make a modest start in this direction in the current year and ensure that the process is completed in the next four years. At the end of this process, I hope the Finance Minister can credibly say that our tax collectors are like honey bees collecting nectar from the flowers without disturbing them, but spreading their pollen so that all flowers can thrive and bear fruit.
People’s ownership of PSUs
37. The Public Sector Undertakings are the wealth of the nation, and part of this wealth should rest in the hands of the people. While retaining at least 51 per cent Government equity in our enterprises, I propose to encourage people’s participation in our disinvestment programme. Here, I must state clearly that public sector enterprises such as banks and insurance companies will remain in the public sector and will be given all support, including capital infusion, to grow and remain competitive.
Financial sector
38. The financial sector is the life blood of any economy. Our Government’s approach to the banking and financial sector has been to ensure robust oversight and regulation while expanding financial access and deepening markets. The merit of this balanced approach has been borne out in the recent experience, as the turbulence in the world financial markets has left the Indian banking and financial sector relatively unaffected. Never before has Indira Gandhi’s bold decision to nationalize our banking system exactly 40 years ago - on 14th of July, 1969 - appeared as wise and visionary as it has over the past few months. Her approach continues to be our inspiration even as we introduce competition and new technology in this sector.
39. The average public float in Indian listed companies is less than 15 per cent. Deep non-manipulable markets require larger and diversified public shareholdings. This requirement should be uniformly applied to the private sector as well as listed public sector companies. I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies.
40. For a country like ours, with significant sections of unbanked population and regions, financial inclusion is vital for sustaining long term equitable development. As part of the financial inclusion drive, scheduled commercial banks have been opening ‘no frills’ accounts either with ‘nil’ or very low minimum balances. So far, these banks have opened 3.3 crore such accounts. The RBI has announced a further relaxation in its Branch Authorization Policy. Scheduled Commercial Banks are now allowed to set up off-site ATMs without prior approval, subject to reporting.
41. Despite the expansion of banking network in the country, there are still some areas that remain under-banked or unbanked. A sub-committee of State Level Bankers Committee ( SLB C) will identify such areas and formulate an action plan for providing banking facilities to all these areas in the next 3 years. I propose to set aside Rs.100 crore during the current year as one-time grant-in-aid to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks in the country.
42. The Government has established Competition Commission of India, an autonomous regulatory body to promote and sustain competition in markets, protect interests of consumers and to prevent practices having adverse effect on competition. An Appellate body headed by a retired judge of the Supreme Court has also been constituted.
43. The benefits of competition should now come to more sectors and their users and consumers. Now is the time for us to work on these aspects to eliminate supply bottlenecks, enhance productivity, reduce costs and improve quality of goods and services supplied to consumers.
Investment environment
44. Private sector investment has been affected by the global macro economic conditions. Our Government is committed to creating a facilitating environment in which a competitive private sector can thrive and play its rightful role in nation’s economic development. India ’s high growth of 8.5% per annum from 2004 to 2008 was fuelled in very large part by private investment. I look forward to working closely with industry and our vibrant entrepreneurial community to address their outstanding concerns.
TOWARDS INCLUSIVE DEVELOPMENT
45. Madam Speaker, the UPA government has gone for a paradigm shift for making the development process more inclusive. It involves creating entitlements backed by legal guarantee to provide basic amenities and opportunities for livelihood to vulnerable sections. ‘Aam Admi’ is now the focus of all our programmes and schemes.
National Rural Employment Guarantee Scheme (NREGS)
46. (i) It is widely acknowledged that the National Rural Employment Guarantee Act, (NREGA) first implemented in February 2006, has been a magnificent success. During 2008-09, NREGA provided employment opportunities for more than 4.47 crore households as against 3.39 crore households covered in 2007-08. We are committed to providing a real wage of Rs.100 a day as an entitlement under the NREGA. To increase the productivity of assets and resources under NREGA, convergence with other schemes relating to agriculture, forests, water resources, land resources and rural roads is being initiated. In the first stage, a total of 115 pilot districts have been selected for such convergence. Details of these measures and convergence guidelines will be announced by my colleague, the Minister of Rural Development. I propose an allocation of Rs.39,100 crore for the year 2009-10 for NREGA which marks an increase of 144% over 2008-09 Budget Estimates.
National Food Security Act (NFSA)
(ii) I am happy to announce that the work on National Food Security Act has begun in right earnest. This will ensure that every family living below the poverty line in rural or urban areas will be entitled by law to 25 kilos of rice or wheat per month at Rs.3 a kilo. The Government proposes to put the draft Food Security Bill on the website of the Department of Food and Public Distribution for public debate and consultations very soon.
Bharat Nirman
(iii) Bharat Nirman with its six schemes is an important initiative for bridging the gap between the rural and urban areas and improving the quality of life of people, particularly the poor, in the rural areas. I propose to step up the allocations for Bharat Nirman by 45 per cent in 2009-10 over the BE of 2008-09. The Pradhan Mantri Gram Sadak Yojana (PMGSY) is one of the most successful programmes under Bharat Nirman. I propose to step up the allocation for this programme by 59% over BE 2008-09 to Rs.12,000 crore. I also propose to allocate Rs.7,000 crore to Rajiv Gandhi Grameen Viduytikaran Yojana (RGGVY) which represents a 27 per cent increase over 2008-09 (BE).
(iv) The allocation for the Indira Awaas Yojana ( IAY) is proposed to be increased by 63 per cent to Rs.8,800 crore in Budget Estimates 2009-10. To broaden the pace of rural housing, I propose to allocate, from the shortfall in the priority sector lending of commercial banks, a sum of Rs.2,000 crore for Rural Housing Fund in the National Housing Bank (NHB). This will boost the resource base of NHB for their refinance operations in rural housing sector.
Pradhan Mantri Adarsh Gram Yojana (PMAGY)
(v) There are about 44,000 villages in which the population of Scheduled castes is above 50 per cent. A new scheme called Pradhan Mantri Adarsh Gram Yojana (PMAGY) is being launched this year on a pilot basis, for the integrated development of 1000 such villages. I propose an allocation of Rs.100 crore for this scheme. Each village would be able to avail gap funding of Rs.10 lakh over and above the allocations under Rural Development and Poverty Alleviation Schemes. On successful implementation of the pilot phase, the Yojana would be extended in coming years.
Empowerment of Weaker Sections
47. The Swarna Jayanti Gram Swarozgar Yojna (SGSY) is being restructured as the National Rural Livelihood Mission to make it universal in application, focused in approach and time bound for poverty eradication by 2014-15. Stress will be laid on the formation of women Self Help Groups (SHGs). Apart from providing capital subsidy at an enhanced rate, it is also proposed to provide interest subsidy to poor households for loans upto Rs. one lakh from banks.
48. The Women’s Self Help Group movement is bringing about a profound transformation in rural areas. There are today over 22 lakh such groups linked with banks. Our objective is to enroll at least 50% of all rural women in India as members of SHGs over the next five years and link these SHGs to banks.
49. The Rashtriya Mahila Kosh has been working towards the facilitation of credit support or micro finance to poor women and has developed a number of innovative schemes for their benefit. In recognition of its role as an instrument of socio-economic change and development, the corpus of the Kosh, which at present is Rs.100 crore, would be raised to Rs.500 crore, over the next few years.
Female literacy
50. The low level of female literacy continues to be a matter of grave concern. It has, therefore, been decided to launch a National Mission for Female Literacy, with focus on minorities, SC, ST and other marginalized groups. The aim will be to reduce by half, the current level of female illiteracy, in three years.
Integrated Child Development Services
51. Government is committed to universalization of the Integrated Child Development Services (ICDS) Scheme in the country. By March 2012, all services under ICDS would be extended, with quality, to every child under the age of six.
Student Loans to Weaker Sections
52. To enable students from economically weaker sections to access higher education, it is proposed to introduce a scheme to provide them full interest subsidy during the period of moratorium. It will cover loans taken by such students from scheduled banks to pursue any of the approved courses of study, in technical and professional streams, from recognized institutions in India . It is estimated that over 5 lakh students would avail of this benefit.
Welfare of Minorities
53. The Plan outlay of Ministry of Minority Affairs has been enhanced from Rs.1,000 crore in BE 2008-09 to Rs.1,740 crore in 2009-10, registering an increase of 74%. This includes Rs.990 crore for Multi-Sectoral Development Programme for Minorities in selected minority concentration districts, Grants-in-aid to Maulana Azad Education Foundation which is almost doubled, and provisions for National Minorities Development and Finance Corporation and Pre-Matric and Post-Matric Scholarships for Minorities. Allocations have also been made for the new schemes of National Fellowship for Students from the Minority Community and Grants-in-aid to Central Wakf Council for computerization of records of State Wakf Boards.
54. Aligarh Muslim University has decided to establish its campuses at Murshidabad in West Bengal and Malappuram in Kerala. I propose to make an allocation of Rs.25 crore each for these two campuses.
Welfare of workers in the unorganized sector
55. The unorganized or informal sector of our economy accounts for 92% of the employment and absorbs bulk of the annual increase in our labor force. The Unorganized Workers Social Security Bill, 2007 has now been passed by both Houses of Parliament. I have already initiated action to ensure that social security schemes for occupations like weavers, fishermen and women, toddy tappers, leather and handicraft workers, plantation labor, construction labor, mine workers, bidi workers, and rikshaw pullers are implemented at the earliest. Necessary financial allocations will be made for these schemes.
Employment Exchanges
56. I propose to launch a new project for modernization of the Employment Exchanges in public private partnership so that a job seeker can register on-line from anywhere and approach any employment exchange. Under the project, a national web portal with common software will be developed. This will contain all the data regarding availability of skilled persons on the one hand and requirements of skilled persons by the industry on the other. It will help youth get placed and enable industry to procure required skills on real time basis.
Handlooms
57. In the last Budget two mega handloom clusters at Varanasi and Sibsagar and two mega powerloom clusters at Erode and Bhiwandi were approved. They are under successful implementation. I propose to add one handloom mega cluster each in West Bengal and Tamil Nadu and one powerloom mega cluster in Rajasthan. These will help preserve the magnificent textile traditions in West Bengal and Tamil Nadu and generate thousands of jobs in Rajasthan. In addition, I propose to add new mega clusters for Carpets in Srinagar (J&K) and Mirzapur (UP).
Health
58. The National Rural Health Mission is an essential instrument for achieving our goal of Health for all. I propose an increase of Rs.2,057 crore over and above Rs.12,070 crore provided in the Interim Budget.
59. Rashtriya Swasthya Bima Yojana (RSBY) was operationalised last year. The initial response has been very good. More than 46 lakh BPL families in eighteen States and UTs have been issued biometric smart cards. This scheme empowers poor families by giving them freedom of choice for using health care services from an extensive list of hospitals including private hospitals. Government proposes to bring all BPL families under this scheme. An amount of Rs.350 crore, marking 40% increase over the previous allocation, is being provided in 2009-10 Budget Estimates.
Environment and Climate Change
60. The National Action Plan on Climate Change unveiled last year, outlines our strategy to adapt to Climate Change and enhance the ecological sustainability of our development path. Following this, eight national missions representing a multi-pronged, long term and integrated approach are being launched. I propose to provide necessary funds for these missions.
61. Our government has already set up a ‘National Ganga River Basin Authority’ (NGRBA). I propose increasing the budgetary outlay for the National River and Lake Conservation Plans to Rs.562 crore in 2009-10 from Rs.335 crore in 2008-09.
62. I propose to make a special one-time grant of Rs.100 crore to the Indian Council of Forestry Research and Education, Dehradun in recognition of its excellence in the field of research, education and extension. I also propose an allocation of Rs.15 crore each for the Botanical Survey of India and Zoological Survey of India. An additional amount of Rs.15 crore is being allocated to Geological Survey of India.
TOWARDS BUILDING ACCOUNTABLE INSTITUTIONS
Improving delivery of public services
63. As substantial resources, both public and private, are mobilized to fuel the growth of the economy and make it more inclusive in character, efficiency of delivery must become the focus of government programmes. The enactment of the Right to Information Act at the Centre and in many states has been an important and successful step in this direction, ushering in greater transparency and accountability in the public decision-making process.
64. The setting up of the Unique Identification Authority of India (UIDAI) is a major step in improving governance with regard to delivery of public services. This project is very close to my heart. I am happy to note that this project also marks the beginning of an era where the top private sector talent in India steps forward to take the responsibility for implementing projects of vital national importance. The UIDAI will set up an online data base with identity and biometric details of Indian residents and provide enrolment and verification services across the country. The first set of unique identity numbers will be rolled out in 12 to 18 months. I have proposed a provision of Rs.120 crore for this project.
National Security
65. For modernization of Police force in the States, an additional amount of Rs.430 crore is being proposed, over and above the provisions in the Interim Budget. The Government has also sanctioned special risk/hardship allowances to the personnel of Para Military Forces at par with Defence forces. Provisions for payment of these allowances are also being proposed in the Budget.
66. For strengthening Border Management, an additional amount of Rs.2,284 crore, over and above the provision in the Interim Budget, is being provided for construction of fences, roads, flood-lights on the international borders.
67. Significant augmentation in the strength of para-military forces is being done. This calls for more investment in creating the necessary infrastructure, particularly in the area of housing. The Government, therefore, proposes to launch a massive programme of housing to create 1 lakh dwelling units for Central Para-Military Forces personnel. This will not only contribute to the morale of the forces, but will also enable leveraging of government’s annual budgetary resources and create an innovative financing model.
One Rank One Pension for Ex-Servicemen (OROP)
68. Our country owes a deep debt of gratitude to our valiant ex-Servicemen. The Committee headed by the Cabinet Secretary on OROP has submitted its report and the recommendations of the Committee have been accepted. On the basis of these recommendations, the Government has decided to substantially improve the pension of pre 1.1.2006 defence pensioners below officer rank (PBOR) and bring pre 10.10.1997 pensioners on par with post 10.10.1997 pensioners. Both these decisions will be implemented from 1st July 2009 resulting in enhanced pension for more than 12 lakh jawans and JCOs. These measures will cost the exchequer more than Rs.2,100 crore annually. Certain pension benefits being extended to war wounded and other disabled pensioners are also being liberalized.
Education
69. The demographic advantage India has in terms of a large percentage of young population needs to be converted into a dynamic economic advantage by providing them the right education and skills. The provision for the scheme, ‘ Mission in Education through ICT,’ has been substantially increased to Rs.900 crore. Similarly, the provision for setting up and up-gradation of Polytechnics under the Skill Development Mission has been increased to Rs.495 crore. The government shall take forward its intent of having one Central University in each uncovered State and for this purpose I am allocating Rs.827 crore. I am also allocating Rs.2,113 crore for IITs and NITs, which includes a provision of Rs.450 crore for new IITs and NITs. The overall Plan budget for higher education is proposed to be increased by Rs.2,000 crore over Interim BE.
70. Union Territory of Chandigarh is the capital of Punjab and Haryana. The facilities at Punjab University , Chandigarh , need to be improved. I, therefore, propose to make an allocation of Rs.50 crore for this university. To enable the Union Territory Administration to provide better infrastructure to the people, I propose to suitably enhance the Plan allocation for Chandigarh during the current financial year.
Commonwealth Games 2010
71. The Commonwealth Games present the country with an opportunity to showcase our potential as an emerging Asian Power. I propose to substantially enhance the allocations for the Commonwealth Games from Rs.2,112 crore in the Interim Budget to Rs.3,472 crore in the Budget for 2009-10.
72. Madam Speaker, the Government is committed to ensure that Sri Lankan Tamils enjoy their rights and legitimate aspirations within the territorial sovereignty and framework of Sri Lanka ’s Constitution. The Ministry of External Affairs is working closely with the Sri Lankan Government in this regard. I propose to allocate Rs.500 crore for the rehabilitation of the internally displaced persons and reconstruction of the northern and eastern areas of Sri Lanka .
73. As Honorable Members are aware, Cyclone Aila struck the coast of West Bengal in the last week of May 2009. Extensive damage was caused to roads, houses and infrastructure. While immediate interim relief has been provided from the Calamity Relief Fund (CRF), it is proposed to draw up a programme for rebuilding the damaged infrastructure. For this purpose, I propose to allocate Rs.1,000 crore.
BUDGET ESTIMATES 2009-10
Madam Speaker, now I turn to the Budget Estimates for 2009-10.
74. The Budget Estimates 2009-10 provide for a total expenditure of Rs.10,20,838 crore consisting of Rs.6,95,689 crore towards Non Plan and Rs.3,25,149 crore towards Plan expenditure. The increase in Non Plan expenditure over BE 2008-09 is 37% whereas the increase in Plan expenditure is 34%. The total increase in expenditure in 2009-10 over BE 2008-09 is 36%.
75. The increase in Non Plan expenditure is mainly on account of the implementation of the Sixth Central Pay Commission recommendations, increased food subsidy and higher interest payment arising out of the larger fiscal deficit in 2008-09. Interest payments are estimated at Rs.2,25,511 crore constituting about 36% of Non Plan revenue expenditure in BE 2009-10. The total provision for subsidies are up from Rs.71,431 crore in BE 2008-09 to Rs.1,11,276 crore in BE 2009-10. The outlay on Defence has gone up from Rs.1,05,600 crore in BE 2008-09 to Rs.1,41,703 crore in BE 2009-10.
76. Honorable Members may recall that while presenting the Interim Budget 2009-10, I had stated that the Plan expenditure for 2009-10 may have to be increased further as a part of counter-cyclical measures to minimize the impact of global recession and economic slowdown. Against the backdrop of limited fiscal space because of reduction in CENVAT and Service Tax rates, Government have taken a conscious and bold decision to enhance the Gross Budgetary Support (GBS) for the Annual Plan 2009-10 by Rs.40,000 crore over Interim Budget 2009-10. Bulk of this enhanced GBS is directed towards public investment in infrastructure with special emphasis on rural infrastructure, raising growth potential and leading to income generation. Besides, the State Governments will be permitted to borrow additional 0.5% of their GSDP by relaxing the fiscal deficit target under FRBM from 3.5% to 4% of their GSDP. This will enable the State Governments to raise additional open market loans of about Rs.21,000 crore in the current year. In other words, the total additionality in Plan expenditure by Centre and the States put together would be Rs.61,000 crore over Interim Budget. I do believe that this fiscal expansion will go a long way in reversing the impact of economic slowdown and accelerate our growth revival in the medium term.
77. Madam Speaker, given the possibility of the economic downturn persisting in the current year, the gross tax receipts are budgeted at Rs.6,41,079 crore in BE 2009-10, compared to Rs.6,87,715 crore in BE 2008-09. The non tax revenue receipts are, however, likely to be better and are estimated at Rs.1,40,279 crore in BE 2009-10 compared to Rs.95,785 crore in BE 2008-09. The revenue deficit as a percentage of GDP is projected at 4.8% compared to 1% in BE 2008-09 and 4.6% as per provisional accounts of 2008-09. The fiscal deficit as a percentage of GDP is projected at 6.8% compared to 2.5% in BE 2008-09 and 6.2% as per provisional accounts 2008-09. This level of deficit is a matter of concern and Government will address this issue in right earnest to come back to the path of fiscal consolidation at the earliest.
78. Madam Speaker, before I turn to my tax proposals, I cannot resist the temptation of re-visiting Kautilya. He said and I quote, “Just as one plucks fruits from a garden as they ripen, so shall a King have revenue collected as it becomes due. Just as one does not collect unripe fruits, he shall avoid taking wealth that is not due because that will make the people angry and spoil the very sources of revenue.”
PART - B
TAX PROPOSALS
79. Madam Speaker, I shall now present my tax proposals.
80. As the House is aware, the thrust of reforms over the last few years, including the previous term of this Government, has been to improve the efficiency and equity of our tax system. This is sought to be achieved by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the base. These policy changes have been accompanied by requisite re-engineering of key business processes coupled with automation, both for direct and indirect taxes. On the direct tax side, a recent initiative for further improving efficiency is the setting up of a Centralized Processing Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns filed in entire Karnataka, will be processed.
81. These tax reform initiatives have produced impressive results. The Centre’s Tax- GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2 per cent in 2003-04. The healthy growth in tax revenues over the last five years is essentially attributable to growth in direct taxes. Further, the share of direct taxes in the Centre’s tax revenues has increased to 56 per cent in 2008-09 from 41 per cent in 2003-04, reflecting a sharp improvement in the equity of our tax system. The Government is committed to furthering this process of tax reform.
82. In the course of preparation of this budget, I have had the opportunity to interact with large number of stakeholders and receive valuable inputs. Most suggestions were for structural changes in the tax system. Tax reform, like all reforms, is a process and not an event. Therefore, I propose to pursue structural changes in direct taxes by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April, 2010 .
83. The Direct Taxes Code, along with a Discussion Paper, will be released to the public for debate. Based on the inputs received, the Government will finalize the Direct Taxes Code Bill for introduction in this House sometime during the Winter Session.
84. To further enhance efficiency in tax administration, I intend to merge the two Authorities for Advance Rulings on Direct and Indirect Taxes by amending the relevant Acts. This will enable the Authority for Advance Rulings set up under Section 245-O of the Income Tax Act, 1961 to also function as the Authority for Advance Rulings for Indirect Taxes.
85. I have been informed that the Empowered Committee of State Finance Ministers has made considerable progress in preparing the roadmap and the design of the GST. Officials from the Central Government have also been associated in this exercise. I am glad to inform the House that, through their collaborative efforts, they have reached an agreement on the basic structure in keeping with the principles of fiscal federalism enshrined in the Constitution. I compliment the Empowered Committee of State Finance Ministers for their untiring efforts. The broad contour of the GST Model is that it will be a dual GST comprising of a Central GST and a State GST. The Centre and the States will each legislate, levy and administer the Central GST and State GST, respectively. I will reinforce the Central Government’s catalytic role to facilitate the introduction of GST by 1st April, 2010 after due consultations with all stakeholders.
DIRECT TAXES
86. I shall now deal with direct taxes.
87. Madam Speaker, there have been demands by the corporate sector for reduction in tax rates. However, tax rates are determined by the size of the tax base; if the tax base is higher, the tax rates can be lower. The Income Tax Act is riddled with a plethora of tax exemptions which substantially erode the tax base. The extent of this erosion is presented to this House in the form of a Revenue Foregone Statement. The growth in the direct tax revenue foregone is relatively higher than the growth in the direct tax revenues. Accordingly, I do not propose to make any change in the Corporate Tax rates.
88. With a view to providing interim relief to small and marginal taxpayers and senior citizens, I propose to increase the personal income tax exemption limit by Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens. Similarly I also propose to raise the exemption limit by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh for women tax payers and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers. Further, I also propose to increase the deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability to Rs.1 lakh from the present limit of Rs.75,000.
89. In the past, surcharges on direct taxes have generally been levied to meet the revenue needs arising from natural calamities. The Government has set up the National Calamity Contingency Fund to build up resources to meet emergency situations. As a corollary, surcharge on direct taxes should be removed. However, this has to be balanced with the revenue needs of the Government. Therefore, in the first instance, I propose to phase out the surcharge on various direct taxes by eliminating the surcharge of 10 per cent on personal income tax.
90. Deduction in respect of export profits is available under sections 10A and 10B of the Income-tax Act. The deduction under these sections would not be available beyond the financial year 2009-2010. In order to tide over the slowdown in exports, I propose to extend the sun-set clauses for these tax holidays by one more year i.e. for the financial year 2010-11.
91. The Finance Act, 2005 introduced the Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees. This tax has been perceived as imposing considerable compliance burden. Empathizing with these sentiments, I propose to abolish the Fringe Benefit Tax.
92. The competitive ability of an economy rests on its progress in the area of Research and Development (R&D). In order to incentivize the corporate sector to undertake R&D work, I propose to extend the scope of the current provision of weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses except for a small negative list.
93. Under the present scheme of the Income Tax Act, tax exemptions are largely profit-linked. Such incentives are inherently inefficient and liable to misuse. Therefore, it is proposed to incentivize businesses by providing investment-linked tax exemptions. To begin with, I propose to extend investment- linked tax incentives to the businesses of setting up and operating ‘cold chain’, warehousing facilities for storing agricultural produce and the business of laying and operating cross country natural gas or crude or petroleum oil pipeline network for distribution on common carrier principle. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments will be fully allowable as deduction.
94. Minimum Alternate Tax (MAT) was introduced to address inequity in taxation of corporate taxpayers. In the quest for greater equity, I propose to increase the rate of MAT to 15 per cent of book profits from the present rate of 10 per cent. However, to grant relief to corporate taxpayers, I also propose to extend the period allowed to carry forward the tax credit under MAT from seven years to ten years.
95. The New Pension System (NPS) is an important milestone in the development of a sustainable, efficient, voluntary and defined contribution pension system in India . While the NPS will continue to be subjected to the Exempt-Exempt-Taxed (EET) method of tax treatment of savings, it is proposed to provide necessary fiscal support to the NPS for the establishment of this much needed social security system. Accordingly, I propose to exempt the income of the NPS Trust from income tax and any dividend paid to this Trust from Dividend Distribution Tax. Similarly, all purchase and sale of equity shares and derivatives by the NPS Trust will also be exempt from the Securities Transaction Tax. I also propose to enable self employed persons to participate in the NPS and avail of the tax benefits available thereto.
96. In order to further improve the investment climate in the country, we need to facilitate the resolution of tax disputes faced by foreign companies within a reasonable time frame. This is particularly relevant for such companies in the Information Technology (IT) sector. I, therefore, propose to create an alternative dispute resolution mechanism within the Income Tax Department for the resolution of transfer pricing disputes. To reduce the impact of judgemental errors in determining transfer price in international transactions, it is proposed to empower the Central Board of Direct Taxes (CBDT) to formulate ‘safe harbor’ rules.
97. The Finance Act, 2008 introduced the Commodity Transaction Tax (CTT) to be levied on taxable commodities transactions entered in a recognized association. The Prime Minister’s Economic Advisory Council has recommended abolition of the CTT. I, therefore, propose to abolish the Commodity Transaction Tax.
98. The House will agree that it is desirable to bring about transparency in the funding of political parties in the country. With a view to reforming the system of funding of political parties, I propose to provide that donations to electoral trusts shall be allowed as a 100 per cent deduction in the computation of the income of the donor. For this purpose, Electoral Trusts will be such trusts as are set up as pass-through vehicles for routing the donations to political parties and are approved by CBDT.
99. Section 80E of the Income-tax Act provides for a deduction in respect of interest on loans taken for pursuing higher education in specified fields of study. I propose to extend the scope of this provision to cover all fields of study, including vocational studies, pursued after completion of schooling.
100. Anonymous donations to charitable institutions are presently liable to tax so as to prevent unaccounted money being routed to such entities in the garb of anonymous donations. However, some organizations are facing genuine problems in complying with the procedural requirements. In order to mitigate the practical difficulties being faced by such charitable organizations, I propose to grant relief to such organizations by not taxing anonymous donations received to the extent of 5 per cent of their total income or a sum of Rs.1 lakh, whichever is higher.
101. To facilitate the business operations of all small taxpayers and reduce their compliance burden, I propose to expand the scope of presumptive taxation to all small businesses with a turnover upto Rs.40 lakh. All such taxpayers will have the option to declare their income from business at the rate of 8 per cent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, I also propose to allow them to pay their entire tax liability from business at the time of filing their return by exempting them from paying advance tax. This new scheme will come into effect from the financial year 2010-11.
102. Madam Speaker, in the context of the geo-political environment, it is necessary for us to create our own facilities for energy security. Accordingly, I propose to extend the tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, also to natural gas. This tax benefit will be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the New Exploration Licensing Policy-VIII round of bidding. Further, I also propose to retrospectively amend the provisions of the said section to provide that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract.
103. Under the present provisions of section 2 (15) of the Income Tax Act, “charitable purpose” includes relief of the poor, education, medical relief, and the “advancement of any other object of general public utility”. However, the “advancement of any other object of general public utility” cannot involve the carrying on of any activity in the nature of trade, commerce or business. I propose to provide the same tax treatment to trusts engaged in preserving and improving our environment (including watersheds, forests and wildlife) and preserving our monuments or places or objects of artistic or historic interest, as is available to trusts engaged in providing relief of the poor, education and medical relief.
INDIRECT TAXES
104. Madam Speaker, I turn to my main proposals on indirect taxes.
105. I will first take up customs duties.
106. Although our domestic industry has weathered the impact of the global financial crisis and the resultant slowdown with resilience, it is yet to fully find its feet. Manufacturing growth, which had turned negative in October 2008 on a year-on-year basis and remained in that zone till March this year, appears to be barely turning the corner. However, the global scenario remains worrisome and it is my view that the paramount need is to provide industry with a stable framework. My proposals on indirect taxes seek to achieve this by maintaining the overall rate structure for customs and central excise duties as well as service tax. I must hasten to add that I have not hesitated to act where distortions provide a compelling reason or where relief would provide a healing touch.
107. Full exemption from basic customs duty was provided to Set Top Boxes in 2006 to enable their free import for the smooth introduction of the Conditional Access System (CAS). Now that production capacity has come up in the country, I propose to impose a nominal basic customs duty of 5 per cent on such Set Top Boxes to encourage domestic value addition.
108. The electronic hardware industry has a strong potential for creating employment especially in the SME sector. I intend to reduce the basic customs duty on LCD panels from 10 per cent to 5 per cent to support indigenous production of LCD televisions.
109. Full exemption from CVD of 4 per cent was available to accessories, parts and components imported for the manufacture of mobile phones till the 30th of June, 2009 . I propose to reintroduce this exemption for another year.
110. For reasons that are apparent, industry sectors having an export-orientation have been adversely impacted by the demand compression in global markets. Presently, exporters of leather products, textile garments, footwear as well as sports goods are permitted to import raw materials, consumables etc. upto 3 per cent of the fob value of their exports free of duty. I propose to add a few more items to these lists. Full exemption from basic customs duty is being provided to rough corals for encouraging value-addition and export.
111. It is imperative that the contribution of new and renewable energy sources of power is enhanced if we have to successfully combat the phenomena of global warming and climate change. I am reducing the basic customs duty on permanent magnets - a critical component for Wind Operated Electricity Generators - from 7.5 per cent to 5 per cent.
112. On influenza vaccine and nine specified life saving drugs used for the treatment of breast cancer, hepatitis-B, rheumatic arthritis etc. and on bulk drugs used for the manufacture of such drugs, I propose to reduce the customs duty from 10 per cent to 5 per cent. They will also be totally exempt from excise duty and countervailing duty.
113. Customs duty will also be reduced from 7.5 per cent to 5 per cent on two specified life saving devices used in treatment of heart conditions. These devices will be fully exempt from excise duty and CVD also.
114. Gold bars currently attract customs duty at the specific rate of Rs.100 per ten grams while other forms of gold (excluding jewellery) are chargeable to a duty of Rs.250 per ten grams. These rates were fixed in 2004 and have not been reviewed even as the price of gold has increased manifold. I propose to partially restore the incidence by increasing these rates to Rs.200 per ten grams and Rs.500 per ten grams respectively. Along the same lines, the customs duty on silver (excluding jewellery) will be increased from Rs.500 per kg to Rs.1,000 per kg. These revised rates would also apply to gold and silver, including ornaments that are not studded, when imported by a bona fide passenger as baggage.
115. I will now come to central excise duties.
116. Hon’ble Members are aware that the Government announced a series of fiscal stimulus packages, one of the key elements of which was the sharp reduction in the ad valorem rates of Central Excise duty for non-petroleum products by 4 percentage points across the board on 7th of December 2008 and by another 2 percentage points in the mean CENVAT rate on the 24th of February, 2009.
117. One of the consequences of these cuts was that pure cotton textiles came to be fully exempted from excise duty. We have received representations that full exemption prevents manufacturers from availing of export rebate of the duty paid from CENVAT credit. I propose to rectify this situation by restoring the erstwhile optional rate of 4 per cent for cotton textiles beyond the fiber stage.
118. Ever since the revamp of the excise duty structure on textiles by my distinguished predecessor in the 2004 budget, a differential in rates has been maintained between the cotton sector and the manmade sector. In keeping with the integrity of the earlier structure, I propose to restore the rate of 8 per cent Central Excise duty on manmade fiber and yarn on a mandatory basis and on stages beyond fiber and yarn at that rate on optional basis. These changes, together with duty changes on intermediates, would imply that the duty on all types of manmade fiber and yarn and their intermediates would be the same, easing the problem of credit accumulation.
119. Wool waste and cotton waste are chargeable to basic customs duty of 15 per cent. These are used in the manufacture of cheaper varieties of textile articles such as blankets and rugs. As a measure of relief to this sector, I propose to reduce the basic customs duty on these items to 10 per cent.
120. With the Government’s proclaimed objective of introducing a Goods and Services Tax (GST) both at the national and State level, some more steps in that direction are necessary. One measure that would facilitate the process is the further convergence of central excise duty rates to a mean rate - currently 8 per cent. I have reviewed the list of items currently attracting the rate of 4 per cent, the only rate below the mean rate. There is a case for enhancing the rate on many items appearing in this list to 8 per cent, which I propose to do, with the following major exceptions:
• food items; and
• drugs, pharmaceuticals and medical equipment.
Some of the other items on which I propose to retain the rate of 4 per cent are:
• paper, paperboard & their articles;
• items of mass consumption such as pressure cookers, cheaper electric bulbs, low-priced footwear, water filters/purifiers, CFL etc.;
• power driven pumps for handling water; and
• paraxylene.
The details are available in the relevant notifications.
121. Bio-diesel, obtained from vegetable oils and used for blending with petro-diesel, is currently exempt from excise duty. I now propose to fully exempt petro-diesel blended with bio-diesel from excise duty.
122. In order to encourage the use of this environment friendly fuel and augment its availability in the country, I also propose to reduce basic customs duty on bio-diesel from 7.5 per cent to 2.5 per cent - at par with petro-diesel. With these proposals I hope to see a smile on the faces of the green brigade!
123. My other proposals on central excise duties seek to address distortions that the manufacturing industry has been complaining about.
124. The IT industry has pointed out that it is facing difficulties in the assessment of software which involves transfer of the right to use after the levy of service tax on IT software service. To resolve the matter, I propose to exempt the value attributable to the transfer of the right to use packaged software from excise duty and CVD.
125. The construction industry has represented that they are facing difficulties on account of withdrawal of exemption on goods manufactured at site. I propose to restore full exemption to such goods, including pre-fabricated concrete slabs or blocks, when used for further construction at site.
126. A specific component was added to the ad valorem duty of 24 per cent applicable to large cars and utility vehicles in June last year. In the case of vehicles of engine capacity below 2000 cc, this component was Rs.15,000/- per unit while for vehicles of higher engine capacity it was Rs.20,000/- per unit. These rates are now being unified at the lower level of Rs.15,000/- per unit.
127. Petrol driven trucks provide a useful means of transport within cities and across short distances. These are chargeable to excise duty of 20 per cent. I propose to reduce excise duty on these trucks to 8 per cent to equate the duty with similar vehicles run on diesel.
128. Madam Speaker, I fear that my proposals relating to gold and silver on the customs side would somewhat dent my popularity with women. I propose to salvage this by fully exempting branded jewellery from excise duty.
129. I now turn to my proposals on service tax.
130. It is an international practice to zero-rate exports. To achieve this objective, a scheme was announced in 2007, granting refund of service tax paid on certain taxable services used after the clearance of export goods from the factory. For some time now, the exporting community has been expressing dissatisfaction over the difficulties faced in obtaining such refunds. Several procedural simplifications attempted in the past have also not yielded satisfactory results. The solution seems to lie in placing greater trust on the claims filed by the exporters. Keeping this in view, I propose to make the following changes in the scheme:
• Services received by exporters from goods transport agents and commission agents, where the liability to pay service tax is ab initio on the exporter, would be exempted from service tax. Thus, there would be no need for the exporter to first pay the tax and later claim refund.
• For other services received by exporters, the exemption would be operated through the existing refund mechanism based on self-certification of the documents where such refund is below 0.25 per cent of fob value, and certification of documents by a Chartered Accountant for value of refund exceeding the above limit.
131. The Export Promotion Councils and the Federation of Indian Export Organizations (FIEO) provide a valuable service in augmenting our export effort. I propose to exempt them from the levy of service tax on the membership and other fees collected by them till 31st March, 2010 .
132. In the goods transport sector, service tax is currently levied on transport of goods by road, by air, through pipelines and in containers. However, goods carried by Indian railways or those carried as coastal cargo or through inland waterways are not charged to service tax. In order to provide a level playing field in the goods transport sector, I propose to extend the levy of service tax to these modes of goods transport. The new levy is not likely to impact the prices of essential commodities or goods for mass consumption, as suitable exemptions would be provided.
133. As the Hon’ble Members are aware, services provided by chartered accountants, cost accountants, and company secretaries as well as by engineering and management consultants are presently charged to service tax. Although there is a school of thought that legal consultants do not provide any service to their client, I hold my distinguished predecessor in high esteem and disagree! As such, I propose to extend service tax on advice, consultancy or technical assistance provided in the field of law. This tax would not be applicable in case the service provider or the service receiver is an individual.
134. Vehicles having ‘Stage Carriage Permits’ and run by State undertakings are exempted from service tax. However, transportation of passengers undertaken by private enterprises in vehicles having ‘Contract Carriage Permits’ is, subjected to service tax. In order to bring parity in tax treatment, I propose to exempt such transportation also from the levy of service tax.
135. In July, 2008 goods transport agents (GTA) went on strike with several demands. One of the demands that was accepted by the government was to exempt certain services, such as packing, cargo handling and warehousing, provided to GTAs en route, from service tax. For this purpose an exemption notification was issued. It was also demanded by goods transport agents that the proceedings already initiated against such service providers should be dropped. The Government has accepted this genuine demand. Therefore, I propose to make certain legislative changes required to fulfill this promise.
136. Copies of notifications giving effect to the changes in customs, central excise and service tax will be laid on the Table of the House in due course.
137. My tax proposals on direct taxes are revenue neutral. On indirect taxes, they are estimated to yield a net gain of Rs.2,000 crore for a full year.
CONCLUSION
138. As we begin this five year journey, the road ahead will not be easy. We will have to manage uncertainties and there will be as many problems as there would be solutions. Mahatma Gandhi said and I quote, “Democracy is the art and science of mobilizing the entire physical, economic and spiritual resources of various sections of the people in the service of the common good of all.” This is precisely what we will have to do. With strong hearts, enlightened minds and willing hands, we will have to overcome all odds and remove all obstacles to create a brave new India of our dreams.
139. Madam Speaker, with these words I commend the budget to the House.
July 6, 2009
I rise to present the Budget for 2009-10.
2. Just 140 days back, I had the privilege to present the Interim Budget for 2009-10. It is a rare honor that I have been called upon to present the regular budget after the new Government assumed office.
3. The Congress-led UPA Government has come back to power with a renewed mandate. As Prime Minister, Dr. Manmohan Singh, said recently “It is a mandate for continuity, stability and prosperity. It is a mandate for inclusive growth and equitable development.” It is a mandate that we accept with humility and a firm resolve to do all that we can for the welfare of this nation.
4. I am deeply conscious of the faith reposed by the people in our government and the responsibilities that come with it. I am sensitive to the great challenge of rising expectations of a young India . It reflects a population that is restless, yet engaged and is ready to seize the opportunities that it is presented with. There are new and powerful reasons for us to create, facilitate and sustain those opportunities.
5. In the Interim Budget for 2009-10, I had stated that the new Government would need to anchor its policies for 2009-10, in a medium term perspective that would have to:
(a) sustain a growth rate of at least 9 per cent per annum over an extended period of time;
(b) strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per year;
(c) reduce the proportion of people living below poverty line to less than half from current levels by 2014;
(d) ensure that Indian agriculture continues to grow at an annual rate of 4 per cent;
(e) increase the investment in infrastructure to more than 9 per cent of GDP by 2014;
(f) support Indian industry to meet the challenge of global competition and sustain the growth momentum in exports;
(g) strengthen and improve the economic regulatory framework in the country;
(h) expand the range and reach of social safety nets by providing direct assistance to vulnerable sections;
(i) strengthen the delivery mechanism for primary health care facilities with a view to improve the preventive and curative health care in the country;
(j) create a competitive, progressive and well regulated education system of global standards that meets the aspiration of all segments of the society; and
(k) move towards providing energy security by pursuing an Integrated Energy Policy.
6. The Government recognizes the challenges that this task entails, particularly at a time when the world is still struggling with an unprecedented financial crisis and an economic slowdown that has also affected India . While we are determined to convert our words into deeds, Members would appreciate that a single Budget Speech cannot solve all our problems, nor is the Union Budget the only instrument to do so. Yet, it is an important means to share the vision of the Government, particularly as we begin a new term. I propose to do just that for the next hour or so, as I dwell on the challenges and outline the approach of the government in the short term and medium term perspectives.
7. The first challenge is to lead the economy back to the high GDP growth rate of 9 per cent per annum at the earliest. Growth of income is important in itself, but it is as important for the resources that it brings in. These resources provide us with the means to bridge the critical gaps that remain in our development efforts, particularly with regard to the welfare of the vulnerable segments of our population.
8. The second challenge is to deepen and broaden the agenda for inclusive development; and to ensure that no individual, community or region is denied the opportunity to participate in and benefit from the development process.
9. The third challenge is to re-energize government and improve delivery mechanisms. Our institutions must provide high quality public services, security and the rule of law to all citizens with transparency and accountability.
Overview of the Economy
10. Madam Speaker, at the time of the presentation of the Interim Budget, I had given a detailed analysis of the economic situation. Without repeating myself, I would like to highlight that the development course charted by the UPA Government in the last five years has been possible due to a step up in the growth rate of the economy and improved revenue buoyancy. The principal growth driver in this period has been private investment, which has been predominantly funded by domestic resources. During the year 2008-09, there has been a dip in the growth rate of GDP from an average of over 9 per cent in the previous three fiscal years to 6.7 per cent. It has affected the pace of job creation in certain sectors of the economy and the investment sentiments of the business community. It has also resulted in considerably lower revenue growth for the government. Another feature of the year 2008-09 was a sharp rise in the wholesale price index to nearly 13% in August 2008 and an equally sharp fall close to 0% in March 2009. While a detailed analysis of the developments has been presented in the Economic Survey-2008-09, tabled in both houses of Parliament last Thursday, I draw your attention to a few aspects.
11. The structure of India ’s economy has changed rapidly in the last ten years. External trade and external capital flows are an important part of the economy and so is the contribution of the services sector to the GDP at well over 50 per cent. The share of merchandise trade (exports plus imports) as a proportion of GDP has more than doubled over the past decade to 38.9 per cent in 2008-09. Similarly, trade in goods and services taken together has also doubled to 47 per cent during this period. Gross capital flows rose to a peak of over 9 per cent of GDP in 2007-08 before falling in the wake of the global financial crisis. The significant increase in the inflow of foreign capital is important, not so much for bridging the domestic savings-investment gap, but for facilitating the intermediation of financial resources to meet the growing needs of the economy.
12. This growing integration of the Indian economy with the rest of the world has brought new opportunities and also new challenges. It has made the task of sustaining high growth more complex. Over the past month, we have critically evaluated Government’s efforts at both short term economic recovery as well as medium term economic growth. The economic recovery and growth is a cooperative effort of the Central and State Governments. That is why, for the first time, I held a meeting with Finance Ministers of States as part of the preparations for this Budget. I intend to make this an annual feature.
TOWARDS ECONOMIC REVIVAL
Short-term measures
13. To counter the negative fallout of the global slowdown on the Indian economy, the Government responded by providing three focused fiscal stimulus packages in the form of tax relief to boost demand and increased expenditure on public projects to create employment and public assets. The RBI took a number of monetary easing and liquidity enhancing measures to facilitate flow of funds from the financial system to meet the needs of productive sectors.
14. This fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in 2007-08 to 6.2 per cent of GDP in 2008-09. The difference between the actuals of 2007-08 and 2008-09 constituted the total fiscal stimulus. This fiscal stimulus at 3.5% of GDP at current market prices for 2008-09 amounts to Rs.1,86,000 crore.
15. These measures were effective in arresting the fall in growth rate of GDP in 2008-09 and we achieved a growth of 6.7 per cent. There are signs of revival in the domestic industry and the foreign investors have also returned to the Indian market in the last couple of months. It is possible that the two worst quarters since the global financial meltdown in September 2008 are behind us. While the global financial conditions have shown improvement over the recent months, uncertainties relating to the revival of the global economy remain. We cannot, therefore, afford to drop our guard. We have to continue our efforts to provide further stimulus to the economy.
16. Madam Speaker, what I unfold now are only the ‘First steps’. It will be my endeavour to make the process of budget formulation more participatory and a continuous exercise.
Infrastructure Development
17. To stimulate public investment in infrastructure, we had set up the India Infrastructure Finance Company Limited (IIFCL) as a special purpose vehicle for providing long term financial assistance to infrastructure projects. We will ensure that IIFCL is given greater flexibility to aggressively fulfil its mandate.
18. ‘Takeout financing’ is an accepted international practice of releasing long term funds for financing infrastructure projects. It can be used to effectively address the asset liability mismatch of commercial banks arising out of financing infrastructure projects and also to free up capital for financing new projects. IIFCL would, in consultation with banks, evolve a ‘takeout financing’ scheme which could facilitate incremental lending to the infrastructure sector.
19. Government has had some success in attracting private investment in a wide range of infrastructure sectors such as telecommunications, power generation, airports, ports, roads and even in railways through public private partnerships ( PPP ). To ensure that infrastructure projects do not face financing difficulties arising from the current downturn, as I indicated in my Interim Budget Speech, the Government has decided that IIFCL will refinance 60 per cent of commercial bank loans for PPP projects in critical sectors over the next fifteen to eighteen months. The IIFCL and Banks are now in a position to support projects involving a total investment of Rs.100 thousand crore in infrastructure. Combined with the steps we are taking to increase public investment in infrastructure, this will provide a big boost to such investment.
20. The investment in infrastructure for the growth of economy is critical. I have urged my colleagues in the Central and State Governments to remove policy, regulatory and institutional bottlenecks for speedy implementation of infrastructure projects. I, on my part, will ensure that sufficient funds are made available for this sector.
Highway and Railways
21. The allocation during the current year to National Highways Authority of India (NHAI) for the National Highways Development Programme (NHDP) is being stepped up by 23 per cent over the 2008-09 (BE). I have also increased the allocation for the Railways from Rs.10,800 crore made in the Interim Budget for 2009-10 to Rs.15,800 crore.
Urban Infrastructure
22. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been an important instrument for refocusing the attention of the State governments on the importance of urban infrastructure. In recognition of the role of JNNURM, the allocation for this scheme is being stepped up by 87 per cent to Rs.12,887 crore in the current budget. To improve the lot of the urban poor, I propose to enhance the allocation for housing and provision of basic amenities to urban poor to Rs.3,973 crore in the current year’s budget. This includes the provision for Rajiv Awas Yojana (RAY), a new scheme announced in the address of the President of India. This scheme, the parameters of which are being worked out, is intended to make the country slum free in the five year period.
Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)
23. To address the problem of flooding in Mumbai, Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA) was initiated in 2007. The entire estimated cost of the project at Rs.1,200 crore is being funded through Central assistance. A sum of Rs.500 crore has been released for this project upto
2008-09. I have enhanced the provision for this project from Rs.200 crore in Interim BE to Rs.500 crore to expedite the completion of the project.
Power
24. The Accelerated Power Development and Reform Programme (APDRP) is an important scheme for reducing the gap between power demand and supply. I propose to increase the allocation for this scheme to Rs.2,080 crore, a steep increase of 160 per cent above the allocation in the BE of 2008-09.
Gas
25. With the recent find of natural gas in the KG Basin on the Eastern offshore of the country, the indigenous production of Natural Gas is set to double with natural gas emerging as an important source of energy. LNG infrastructure in the country is also being expanded. Government proposes to develop a blueprint for long distance gas highways leading to a National Gas Grid. This would facilitate transportation of gas across the length and breadth of the country.
Assam Gas Cracker Project
26. The Assam Gas Cracker Project sanctioned in April 2006 is being executed at a cost of Rs.5,461 crore. The capital subsidy of Rs.2,138 crore for the project is to be provided by the Central Government. The outlay for this project is being stepped up suitably.
Agricultural Development
I now turn to Agricultural development.
27. Agriculture has been the mainstay of our economy with 60 per cent of our population deriving their sustenance from it. In the recent past, the sector has recorded a growth of about 4 per cent per annum with substantial increase in plan allocations and capital formation in the sector. Agriculture credit flow was Rs.2,87,000 crore in 2008-09. The target for agriculture credit flow for the year 2009-10 is being set at Rs.3,25,000 crore. To achieve this, I propose to continue the interest subvention scheme for short term crop loans to farmers for loans upto Rs.3 lakh per farmer at the interest rate of 7 per cent per annum. I am also happy to announce that, for this year, the Government shall pay an additional subvention of 1 per cent as an incentive to those farmers who repay their short term crop loans on schedule. Thus, the interest rate for these farmers will come down to 6 per cent per annum. For this, I am making an additional Budget provision of Rs.411 crore over Interim BE.
Debt Relief for farmers
28. The one-time bank loan waiver of nearly Rs.71,000 crore to cover an estimated 40 million farmers was one of the major highlights of the last Budget. Under the Agricultural Debt Waiver and Debt Relief Scheme (2008), farmers having more than two hectares of land were given time upto 30th June, 2009 to pay 75% of their overdues. Due to the late arrival of monsoon, I propose to extend this period by six months upto 31st December, 2009 .
29. It is learnt that in some regions of Maharashtra , a large number of farmers had taken loans from private money lenders and the loan waiver scheme did not cover them. The matter requires special attention. To examine the matter in greater detail and suggest the future course of action, I propose to set up a Taskforce.
Accelerated Irrigation Benefit Programme
30. I propose to provide an additional Rs.1,000 crore over Interim BE for the Accelerated Irrigation Benefit Programme (AIBP), marking an increase of 75 per cent over the allocation in 2008-09(BE). The allocation for the Rashtriya Krishi Vikas Yojna (RKVY) is also being stepped up by 30 per cent over Budget Estimates of 2008-09.
Restoring Export Growth
31. Our exporters by virtue of their close links to the external sector have borne the brunt of the global economic crisis. It is, therefore, appropriate that we continue to provide all possible assistance to our exporters to help them overcome the short term disadvantages. More specifically:
(a) An adjustment assistance scheme to provide enhanced Export Credit and Guarantee Corporation (ECGC) cover at 95 per cent to badly hit sectors had been initiated in December 2008 to mitigate the difficulties faced by the exporters. In view of the continuing contraction in exports, I propose to extend the benefits of this scheme up to March 2010.
(b) The Market Development Assistance Scheme provides support to exporters in developing new markets. With many traditional markets still under financial stress, greater effort is required to identify and develop new markets. I propose to enhance the allocation for this scheme by 148% over BE 2008-09 to Rs.124 crore.
(c) With a view to insulating the employment - oriented export sectors from the global meltdown, Government had provided an interest subvention of 2 per cent on pre-shipment credit for seven such sectors. These sectors are textiles including handlooms, handicrafts, carpets, leather, gems and jewellery, marine products and small and medium exporters. I propose to extend the interest subvention beyond the current deadline of September 30, 2009 to March 31, 2010 .
(d) Micro, Small and Medium Enterprises (MSMEs) have been affected by the slowdown in exports and the indirect effect of the global crisis on domestic demand. To support this sector, I propose to facilitate the flow of credit at reasonable rates, by providing a special fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank (SIDBI). This fund of Rs.4,000 crore will incentivize Banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs during the current financial year.
(e) In February, 2009 the Print Media was given a stimulus package comprising waiver of 15% agency commission on DAVP advertisements and a 10% increase in the DAVP rates to be paid as a ‘special relief’ subject to documentary proof of loss of revenue in non-governmental advertisements. Since Print Media is still passing through difficult times, I have decided to extend the stimulus package for another six months from 30th June, 2009 to 31st December, 2009 .
Medium-term sustainability
32. The short term fiscal stimulus has to be balanced against long term prudence and fiscal sustainability objectives. To quote Kautilya, “In the interest of the prosperity of the country, a King shall be diligent in foreseeing the possibility of calamities, try to avert them before they arise, overcome those which happen, remove all obstructions to economic activity and prevent loss of revenue to the state”. I intend to take Kautilya’s advice and return to the FRBM target for fiscal deficit at the earliest and as soon as the negative effects of the global crisis on the Indian economy have been overcome. On the medium term fiscal perspective, I await the recommendations of the 13th Finance Commission.
33. To bring the fiscal deficit under control, we have to initiate institutional reform measures during the current year itself. This is essential for maintaining a stable balance of payments, moderate interest rates and steady flow of external capital for corporate investment. These measures have to encompass all aspects of the budget such as subsidies, taxes, expenditure and disinvestment.
Fertilizer subsidy
34. In the context of the nation’s food security, the declining response of agricultural productivity to increased fertilizer usage in the country is a matter of concern. To ensure balanced application of fertilizers, the Government intends to move towards a nutrient based subsidy regime instead of the current product pricing regime. It will lead to availability of innovative fertilizer products in the market at reasonable prices. This unshackling of the fertilizer manufacturing sector is expected to attract fresh investments in this sector. In due course it is also intended to move to a system of direct transfer of subsidy to the farmers.
Petroleum and Diesel pricing policy
35. Madam Speaker, Honorable Members are aware that global prices of oil and petroleum products had shot up to unprecedented levels in 2008-09. Most oil importing countries, including our neighbors, adjusted their domestic prices to reflect these global changes. Though prices have declined since then, they are already about double of the lows reached in the wake of the global financial crisis. It is important to recognize that, with almost three-quarters of our oil consumption met through imports, domestic prices of petrol and diesel have to be broadly in sync with global prices of these items. Government will set up an expert group to advise on a viable and sustainable system of pricing petroleum products. Details will be announced by my colleague, the Minister of Petroleum and Natural Gas.
Taxation
36. It is time that we complete the process that was started in 1991 for building a trust based, simple, neutral, tax system with almost no exemptions and low rates designed to promote voluntary compliance. The Income Tax Return Forms should be simple and user-friendly. I have asked the Department to work on SARAL-II forms for early introduction. We need a tax system which generates revenues on a sustained basis without use of coercive tax collection methods at the end of each year to meet targets. It is my intention to make a modest start in this direction in the current year and ensure that the process is completed in the next four years. At the end of this process, I hope the Finance Minister can credibly say that our tax collectors are like honey bees collecting nectar from the flowers without disturbing them, but spreading their pollen so that all flowers can thrive and bear fruit.
People’s ownership of PSUs
37. The Public Sector Undertakings are the wealth of the nation, and part of this wealth should rest in the hands of the people. While retaining at least 51 per cent Government equity in our enterprises, I propose to encourage people’s participation in our disinvestment programme. Here, I must state clearly that public sector enterprises such as banks and insurance companies will remain in the public sector and will be given all support, including capital infusion, to grow and remain competitive.
Financial sector
38. The financial sector is the life blood of any economy. Our Government’s approach to the banking and financial sector has been to ensure robust oversight and regulation while expanding financial access and deepening markets. The merit of this balanced approach has been borne out in the recent experience, as the turbulence in the world financial markets has left the Indian banking and financial sector relatively unaffected. Never before has Indira Gandhi’s bold decision to nationalize our banking system exactly 40 years ago - on 14th of July, 1969 - appeared as wise and visionary as it has over the past few months. Her approach continues to be our inspiration even as we introduce competition and new technology in this sector.
39. The average public float in Indian listed companies is less than 15 per cent. Deep non-manipulable markets require larger and diversified public shareholdings. This requirement should be uniformly applied to the private sector as well as listed public sector companies. I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies.
40. For a country like ours, with significant sections of unbanked population and regions, financial inclusion is vital for sustaining long term equitable development. As part of the financial inclusion drive, scheduled commercial banks have been opening ‘no frills’ accounts either with ‘nil’ or very low minimum balances. So far, these banks have opened 3.3 crore such accounts. The RBI has announced a further relaxation in its Branch Authorization Policy. Scheduled Commercial Banks are now allowed to set up off-site ATMs without prior approval, subject to reporting.
41. Despite the expansion of banking network in the country, there are still some areas that remain under-banked or unbanked. A sub-committee of State Level Bankers Committee ( SLB C) will identify such areas and formulate an action plan for providing banking facilities to all these areas in the next 3 years. I propose to set aside Rs.100 crore during the current year as one-time grant-in-aid to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks in the country.
42. The Government has established Competition Commission of India, an autonomous regulatory body to promote and sustain competition in markets, protect interests of consumers and to prevent practices having adverse effect on competition. An Appellate body headed by a retired judge of the Supreme Court has also been constituted.
43. The benefits of competition should now come to more sectors and their users and consumers. Now is the time for us to work on these aspects to eliminate supply bottlenecks, enhance productivity, reduce costs and improve quality of goods and services supplied to consumers.
Investment environment
44. Private sector investment has been affected by the global macro economic conditions. Our Government is committed to creating a facilitating environment in which a competitive private sector can thrive and play its rightful role in nation’s economic development. India ’s high growth of 8.5% per annum from 2004 to 2008 was fuelled in very large part by private investment. I look forward to working closely with industry and our vibrant entrepreneurial community to address their outstanding concerns.
TOWARDS INCLUSIVE DEVELOPMENT
45. Madam Speaker, the UPA government has gone for a paradigm shift for making the development process more inclusive. It involves creating entitlements backed by legal guarantee to provide basic amenities and opportunities for livelihood to vulnerable sections. ‘Aam Admi’ is now the focus of all our programmes and schemes.
National Rural Employment Guarantee Scheme (NREGS)
46. (i) It is widely acknowledged that the National Rural Employment Guarantee Act, (NREGA) first implemented in February 2006, has been a magnificent success. During 2008-09, NREGA provided employment opportunities for more than 4.47 crore households as against 3.39 crore households covered in 2007-08. We are committed to providing a real wage of Rs.100 a day as an entitlement under the NREGA. To increase the productivity of assets and resources under NREGA, convergence with other schemes relating to agriculture, forests, water resources, land resources and rural roads is being initiated. In the first stage, a total of 115 pilot districts have been selected for such convergence. Details of these measures and convergence guidelines will be announced by my colleague, the Minister of Rural Development. I propose an allocation of Rs.39,100 crore for the year 2009-10 for NREGA which marks an increase of 144% over 2008-09 Budget Estimates.
National Food Security Act (NFSA)
(ii) I am happy to announce that the work on National Food Security Act has begun in right earnest. This will ensure that every family living below the poverty line in rural or urban areas will be entitled by law to 25 kilos of rice or wheat per month at Rs.3 a kilo. The Government proposes to put the draft Food Security Bill on the website of the Department of Food and Public Distribution for public debate and consultations very soon.
Bharat Nirman
(iii) Bharat Nirman with its six schemes is an important initiative for bridging the gap between the rural and urban areas and improving the quality of life of people, particularly the poor, in the rural areas. I propose to step up the allocations for Bharat Nirman by 45 per cent in 2009-10 over the BE of 2008-09. The Pradhan Mantri Gram Sadak Yojana (PMGSY) is one of the most successful programmes under Bharat Nirman. I propose to step up the allocation for this programme by 59% over BE 2008-09 to Rs.12,000 crore. I also propose to allocate Rs.7,000 crore to Rajiv Gandhi Grameen Viduytikaran Yojana (RGGVY) which represents a 27 per cent increase over 2008-09 (BE).
(iv) The allocation for the Indira Awaas Yojana ( IAY) is proposed to be increased by 63 per cent to Rs.8,800 crore in Budget Estimates 2009-10. To broaden the pace of rural housing, I propose to allocate, from the shortfall in the priority sector lending of commercial banks, a sum of Rs.2,000 crore for Rural Housing Fund in the National Housing Bank (NHB). This will boost the resource base of NHB for their refinance operations in rural housing sector.
Pradhan Mantri Adarsh Gram Yojana (PMAGY)
(v) There are about 44,000 villages in which the population of Scheduled castes is above 50 per cent. A new scheme called Pradhan Mantri Adarsh Gram Yojana (PMAGY) is being launched this year on a pilot basis, for the integrated development of 1000 such villages. I propose an allocation of Rs.100 crore for this scheme. Each village would be able to avail gap funding of Rs.10 lakh over and above the allocations under Rural Development and Poverty Alleviation Schemes. On successful implementation of the pilot phase, the Yojana would be extended in coming years.
Empowerment of Weaker Sections
47. The Swarna Jayanti Gram Swarozgar Yojna (SGSY) is being restructured as the National Rural Livelihood Mission to make it universal in application, focused in approach and time bound for poverty eradication by 2014-15. Stress will be laid on the formation of women Self Help Groups (SHGs). Apart from providing capital subsidy at an enhanced rate, it is also proposed to provide interest subsidy to poor households for loans upto Rs. one lakh from banks.
48. The Women’s Self Help Group movement is bringing about a profound transformation in rural areas. There are today over 22 lakh such groups linked with banks. Our objective is to enroll at least 50% of all rural women in India as members of SHGs over the next five years and link these SHGs to banks.
49. The Rashtriya Mahila Kosh has been working towards the facilitation of credit support or micro finance to poor women and has developed a number of innovative schemes for their benefit. In recognition of its role as an instrument of socio-economic change and development, the corpus of the Kosh, which at present is Rs.100 crore, would be raised to Rs.500 crore, over the next few years.
Female literacy
50. The low level of female literacy continues to be a matter of grave concern. It has, therefore, been decided to launch a National Mission for Female Literacy, with focus on minorities, SC, ST and other marginalized groups. The aim will be to reduce by half, the current level of female illiteracy, in three years.
Integrated Child Development Services
51. Government is committed to universalization of the Integrated Child Development Services (ICDS) Scheme in the country. By March 2012, all services under ICDS would be extended, with quality, to every child under the age of six.
Student Loans to Weaker Sections
52. To enable students from economically weaker sections to access higher education, it is proposed to introduce a scheme to provide them full interest subsidy during the period of moratorium. It will cover loans taken by such students from scheduled banks to pursue any of the approved courses of study, in technical and professional streams, from recognized institutions in India . It is estimated that over 5 lakh students would avail of this benefit.
Welfare of Minorities
53. The Plan outlay of Ministry of Minority Affairs has been enhanced from Rs.1,000 crore in BE 2008-09 to Rs.1,740 crore in 2009-10, registering an increase of 74%. This includes Rs.990 crore for Multi-Sectoral Development Programme for Minorities in selected minority concentration districts, Grants-in-aid to Maulana Azad Education Foundation which is almost doubled, and provisions for National Minorities Development and Finance Corporation and Pre-Matric and Post-Matric Scholarships for Minorities. Allocations have also been made for the new schemes of National Fellowship for Students from the Minority Community and Grants-in-aid to Central Wakf Council for computerization of records of State Wakf Boards.
54. Aligarh Muslim University has decided to establish its campuses at Murshidabad in West Bengal and Malappuram in Kerala. I propose to make an allocation of Rs.25 crore each for these two campuses.
Welfare of workers in the unorganized sector
55. The unorganized or informal sector of our economy accounts for 92% of the employment and absorbs bulk of the annual increase in our labor force. The Unorganized Workers Social Security Bill, 2007 has now been passed by both Houses of Parliament. I have already initiated action to ensure that social security schemes for occupations like weavers, fishermen and women, toddy tappers, leather and handicraft workers, plantation labor, construction labor, mine workers, bidi workers, and rikshaw pullers are implemented at the earliest. Necessary financial allocations will be made for these schemes.
Employment Exchanges
56. I propose to launch a new project for modernization of the Employment Exchanges in public private partnership so that a job seeker can register on-line from anywhere and approach any employment exchange. Under the project, a national web portal with common software will be developed. This will contain all the data regarding availability of skilled persons on the one hand and requirements of skilled persons by the industry on the other. It will help youth get placed and enable industry to procure required skills on real time basis.
Handlooms
57. In the last Budget two mega handloom clusters at Varanasi and Sibsagar and two mega powerloom clusters at Erode and Bhiwandi were approved. They are under successful implementation. I propose to add one handloom mega cluster each in West Bengal and Tamil Nadu and one powerloom mega cluster in Rajasthan. These will help preserve the magnificent textile traditions in West Bengal and Tamil Nadu and generate thousands of jobs in Rajasthan. In addition, I propose to add new mega clusters for Carpets in Srinagar (J&K) and Mirzapur (UP).
Health
58. The National Rural Health Mission is an essential instrument for achieving our goal of Health for all. I propose an increase of Rs.2,057 crore over and above Rs.12,070 crore provided in the Interim Budget.
59. Rashtriya Swasthya Bima Yojana (RSBY) was operationalised last year. The initial response has been very good. More than 46 lakh BPL families in eighteen States and UTs have been issued biometric smart cards. This scheme empowers poor families by giving them freedom of choice for using health care services from an extensive list of hospitals including private hospitals. Government proposes to bring all BPL families under this scheme. An amount of Rs.350 crore, marking 40% increase over the previous allocation, is being provided in 2009-10 Budget Estimates.
Environment and Climate Change
60. The National Action Plan on Climate Change unveiled last year, outlines our strategy to adapt to Climate Change and enhance the ecological sustainability of our development path. Following this, eight national missions representing a multi-pronged, long term and integrated approach are being launched. I propose to provide necessary funds for these missions.
61. Our government has already set up a ‘National Ganga River Basin Authority’ (NGRBA). I propose increasing the budgetary outlay for the National River and Lake Conservation Plans to Rs.562 crore in 2009-10 from Rs.335 crore in 2008-09.
62. I propose to make a special one-time grant of Rs.100 crore to the Indian Council of Forestry Research and Education, Dehradun in recognition of its excellence in the field of research, education and extension. I also propose an allocation of Rs.15 crore each for the Botanical Survey of India and Zoological Survey of India. An additional amount of Rs.15 crore is being allocated to Geological Survey of India.
TOWARDS BUILDING ACCOUNTABLE INSTITUTIONS
Improving delivery of public services
63. As substantial resources, both public and private, are mobilized to fuel the growth of the economy and make it more inclusive in character, efficiency of delivery must become the focus of government programmes. The enactment of the Right to Information Act at the Centre and in many states has been an important and successful step in this direction, ushering in greater transparency and accountability in the public decision-making process.
64. The setting up of the Unique Identification Authority of India (UIDAI) is a major step in improving governance with regard to delivery of public services. This project is very close to my heart. I am happy to note that this project also marks the beginning of an era where the top private sector talent in India steps forward to take the responsibility for implementing projects of vital national importance. The UIDAI will set up an online data base with identity and biometric details of Indian residents and provide enrolment and verification services across the country. The first set of unique identity numbers will be rolled out in 12 to 18 months. I have proposed a provision of Rs.120 crore for this project.
National Security
65. For modernization of Police force in the States, an additional amount of Rs.430 crore is being proposed, over and above the provisions in the Interim Budget. The Government has also sanctioned special risk/hardship allowances to the personnel of Para Military Forces at par with Defence forces. Provisions for payment of these allowances are also being proposed in the Budget.
66. For strengthening Border Management, an additional amount of Rs.2,284 crore, over and above the provision in the Interim Budget, is being provided for construction of fences, roads, flood-lights on the international borders.
67. Significant augmentation in the strength of para-military forces is being done. This calls for more investment in creating the necessary infrastructure, particularly in the area of housing. The Government, therefore, proposes to launch a massive programme of housing to create 1 lakh dwelling units for Central Para-Military Forces personnel. This will not only contribute to the morale of the forces, but will also enable leveraging of government’s annual budgetary resources and create an innovative financing model.
One Rank One Pension for Ex-Servicemen (OROP)
68. Our country owes a deep debt of gratitude to our valiant ex-Servicemen. The Committee headed by the Cabinet Secretary on OROP has submitted its report and the recommendations of the Committee have been accepted. On the basis of these recommendations, the Government has decided to substantially improve the pension of pre 1.1.2006 defence pensioners below officer rank (PBOR) and bring pre 10.10.1997 pensioners on par with post 10.10.1997 pensioners. Both these decisions will be implemented from 1st July 2009 resulting in enhanced pension for more than 12 lakh jawans and JCOs. These measures will cost the exchequer more than Rs.2,100 crore annually. Certain pension benefits being extended to war wounded and other disabled pensioners are also being liberalized.
Education
69. The demographic advantage India has in terms of a large percentage of young population needs to be converted into a dynamic economic advantage by providing them the right education and skills. The provision for the scheme, ‘ Mission in Education through ICT,’ has been substantially increased to Rs.900 crore. Similarly, the provision for setting up and up-gradation of Polytechnics under the Skill Development Mission has been increased to Rs.495 crore. The government shall take forward its intent of having one Central University in each uncovered State and for this purpose I am allocating Rs.827 crore. I am also allocating Rs.2,113 crore for IITs and NITs, which includes a provision of Rs.450 crore for new IITs and NITs. The overall Plan budget for higher education is proposed to be increased by Rs.2,000 crore over Interim BE.
70. Union Territory of Chandigarh is the capital of Punjab and Haryana. The facilities at Punjab University , Chandigarh , need to be improved. I, therefore, propose to make an allocation of Rs.50 crore for this university. To enable the Union Territory Administration to provide better infrastructure to the people, I propose to suitably enhance the Plan allocation for Chandigarh during the current financial year.
Commonwealth Games 2010
71. The Commonwealth Games present the country with an opportunity to showcase our potential as an emerging Asian Power. I propose to substantially enhance the allocations for the Commonwealth Games from Rs.2,112 crore in the Interim Budget to Rs.3,472 crore in the Budget for 2009-10.
72. Madam Speaker, the Government is committed to ensure that Sri Lankan Tamils enjoy their rights and legitimate aspirations within the territorial sovereignty and framework of Sri Lanka ’s Constitution. The Ministry of External Affairs is working closely with the Sri Lankan Government in this regard. I propose to allocate Rs.500 crore for the rehabilitation of the internally displaced persons and reconstruction of the northern and eastern areas of Sri Lanka .
73. As Honorable Members are aware, Cyclone Aila struck the coast of West Bengal in the last week of May 2009. Extensive damage was caused to roads, houses and infrastructure. While immediate interim relief has been provided from the Calamity Relief Fund (CRF), it is proposed to draw up a programme for rebuilding the damaged infrastructure. For this purpose, I propose to allocate Rs.1,000 crore.
BUDGET ESTIMATES 2009-10
Madam Speaker, now I turn to the Budget Estimates for 2009-10.
74. The Budget Estimates 2009-10 provide for a total expenditure of Rs.10,20,838 crore consisting of Rs.6,95,689 crore towards Non Plan and Rs.3,25,149 crore towards Plan expenditure. The increase in Non Plan expenditure over BE 2008-09 is 37% whereas the increase in Plan expenditure is 34%. The total increase in expenditure in 2009-10 over BE 2008-09 is 36%.
75. The increase in Non Plan expenditure is mainly on account of the implementation of the Sixth Central Pay Commission recommendations, increased food subsidy and higher interest payment arising out of the larger fiscal deficit in 2008-09. Interest payments are estimated at Rs.2,25,511 crore constituting about 36% of Non Plan revenue expenditure in BE 2009-10. The total provision for subsidies are up from Rs.71,431 crore in BE 2008-09 to Rs.1,11,276 crore in BE 2009-10. The outlay on Defence has gone up from Rs.1,05,600 crore in BE 2008-09 to Rs.1,41,703 crore in BE 2009-10.
76. Honorable Members may recall that while presenting the Interim Budget 2009-10, I had stated that the Plan expenditure for 2009-10 may have to be increased further as a part of counter-cyclical measures to minimize the impact of global recession and economic slowdown. Against the backdrop of limited fiscal space because of reduction in CENVAT and Service Tax rates, Government have taken a conscious and bold decision to enhance the Gross Budgetary Support (GBS) for the Annual Plan 2009-10 by Rs.40,000 crore over Interim Budget 2009-10. Bulk of this enhanced GBS is directed towards public investment in infrastructure with special emphasis on rural infrastructure, raising growth potential and leading to income generation. Besides, the State Governments will be permitted to borrow additional 0.5% of their GSDP by relaxing the fiscal deficit target under FRBM from 3.5% to 4% of their GSDP. This will enable the State Governments to raise additional open market loans of about Rs.21,000 crore in the current year. In other words, the total additionality in Plan expenditure by Centre and the States put together would be Rs.61,000 crore over Interim Budget. I do believe that this fiscal expansion will go a long way in reversing the impact of economic slowdown and accelerate our growth revival in the medium term.
77. Madam Speaker, given the possibility of the economic downturn persisting in the current year, the gross tax receipts are budgeted at Rs.6,41,079 crore in BE 2009-10, compared to Rs.6,87,715 crore in BE 2008-09. The non tax revenue receipts are, however, likely to be better and are estimated at Rs.1,40,279 crore in BE 2009-10 compared to Rs.95,785 crore in BE 2008-09. The revenue deficit as a percentage of GDP is projected at 4.8% compared to 1% in BE 2008-09 and 4.6% as per provisional accounts of 2008-09. The fiscal deficit as a percentage of GDP is projected at 6.8% compared to 2.5% in BE 2008-09 and 6.2% as per provisional accounts 2008-09. This level of deficit is a matter of concern and Government will address this issue in right earnest to come back to the path of fiscal consolidation at the earliest.
78. Madam Speaker, before I turn to my tax proposals, I cannot resist the temptation of re-visiting Kautilya. He said and I quote, “Just as one plucks fruits from a garden as they ripen, so shall a King have revenue collected as it becomes due. Just as one does not collect unripe fruits, he shall avoid taking wealth that is not due because that will make the people angry and spoil the very sources of revenue.”
PART - B
TAX PROPOSALS
79. Madam Speaker, I shall now present my tax proposals.
80. As the House is aware, the thrust of reforms over the last few years, including the previous term of this Government, has been to improve the efficiency and equity of our tax system. This is sought to be achieved by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the base. These policy changes have been accompanied by requisite re-engineering of key business processes coupled with automation, both for direct and indirect taxes. On the direct tax side, a recent initiative for further improving efficiency is the setting up of a Centralized Processing Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns filed in entire Karnataka, will be processed.
81. These tax reform initiatives have produced impressive results. The Centre’s Tax- GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2 per cent in 2003-04. The healthy growth in tax revenues over the last five years is essentially attributable to growth in direct taxes. Further, the share of direct taxes in the Centre’s tax revenues has increased to 56 per cent in 2008-09 from 41 per cent in 2003-04, reflecting a sharp improvement in the equity of our tax system. The Government is committed to furthering this process of tax reform.
82. In the course of preparation of this budget, I have had the opportunity to interact with large number of stakeholders and receive valuable inputs. Most suggestions were for structural changes in the tax system. Tax reform, like all reforms, is a process and not an event. Therefore, I propose to pursue structural changes in direct taxes by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April, 2010 .
83. The Direct Taxes Code, along with a Discussion Paper, will be released to the public for debate. Based on the inputs received, the Government will finalize the Direct Taxes Code Bill for introduction in this House sometime during the Winter Session.
84. To further enhance efficiency in tax administration, I intend to merge the two Authorities for Advance Rulings on Direct and Indirect Taxes by amending the relevant Acts. This will enable the Authority for Advance Rulings set up under Section 245-O of the Income Tax Act, 1961 to also function as the Authority for Advance Rulings for Indirect Taxes.
85. I have been informed that the Empowered Committee of State Finance Ministers has made considerable progress in preparing the roadmap and the design of the GST. Officials from the Central Government have also been associated in this exercise. I am glad to inform the House that, through their collaborative efforts, they have reached an agreement on the basic structure in keeping with the principles of fiscal federalism enshrined in the Constitution. I compliment the Empowered Committee of State Finance Ministers for their untiring efforts. The broad contour of the GST Model is that it will be a dual GST comprising of a Central GST and a State GST. The Centre and the States will each legislate, levy and administer the Central GST and State GST, respectively. I will reinforce the Central Government’s catalytic role to facilitate the introduction of GST by 1st April, 2010 after due consultations with all stakeholders.
DIRECT TAXES
86. I shall now deal with direct taxes.
87. Madam Speaker, there have been demands by the corporate sector for reduction in tax rates. However, tax rates are determined by the size of the tax base; if the tax base is higher, the tax rates can be lower. The Income Tax Act is riddled with a plethora of tax exemptions which substantially erode the tax base. The extent of this erosion is presented to this House in the form of a Revenue Foregone Statement. The growth in the direct tax revenue foregone is relatively higher than the growth in the direct tax revenues. Accordingly, I do not propose to make any change in the Corporate Tax rates.
88. With a view to providing interim relief to small and marginal taxpayers and senior citizens, I propose to increase the personal income tax exemption limit by Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens. Similarly I also propose to raise the exemption limit by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh for women tax payers and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers. Further, I also propose to increase the deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability to Rs.1 lakh from the present limit of Rs.75,000.
89. In the past, surcharges on direct taxes have generally been levied to meet the revenue needs arising from natural calamities. The Government has set up the National Calamity Contingency Fund to build up resources to meet emergency situations. As a corollary, surcharge on direct taxes should be removed. However, this has to be balanced with the revenue needs of the Government. Therefore, in the first instance, I propose to phase out the surcharge on various direct taxes by eliminating the surcharge of 10 per cent on personal income tax.
90. Deduction in respect of export profits is available under sections 10A and 10B of the Income-tax Act. The deduction under these sections would not be available beyond the financial year 2009-2010. In order to tide over the slowdown in exports, I propose to extend the sun-set clauses for these tax holidays by one more year i.e. for the financial year 2010-11.
91. The Finance Act, 2005 introduced the Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees. This tax has been perceived as imposing considerable compliance burden. Empathizing with these sentiments, I propose to abolish the Fringe Benefit Tax.
92. The competitive ability of an economy rests on its progress in the area of Research and Development (R&D). In order to incentivize the corporate sector to undertake R&D work, I propose to extend the scope of the current provision of weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses except for a small negative list.
93. Under the present scheme of the Income Tax Act, tax exemptions are largely profit-linked. Such incentives are inherently inefficient and liable to misuse. Therefore, it is proposed to incentivize businesses by providing investment-linked tax exemptions. To begin with, I propose to extend investment- linked tax incentives to the businesses of setting up and operating ‘cold chain’, warehousing facilities for storing agricultural produce and the business of laying and operating cross country natural gas or crude or petroleum oil pipeline network for distribution on common carrier principle. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments will be fully allowable as deduction.
94. Minimum Alternate Tax (MAT) was introduced to address inequity in taxation of corporate taxpayers. In the quest for greater equity, I propose to increase the rate of MAT to 15 per cent of book profits from the present rate of 10 per cent. However, to grant relief to corporate taxpayers, I also propose to extend the period allowed to carry forward the tax credit under MAT from seven years to ten years.
95. The New Pension System (NPS) is an important milestone in the development of a sustainable, efficient, voluntary and defined contribution pension system in India . While the NPS will continue to be subjected to the Exempt-Exempt-Taxed (EET) method of tax treatment of savings, it is proposed to provide necessary fiscal support to the NPS for the establishment of this much needed social security system. Accordingly, I propose to exempt the income of the NPS Trust from income tax and any dividend paid to this Trust from Dividend Distribution Tax. Similarly, all purchase and sale of equity shares and derivatives by the NPS Trust will also be exempt from the Securities Transaction Tax. I also propose to enable self employed persons to participate in the NPS and avail of the tax benefits available thereto.
96. In order to further improve the investment climate in the country, we need to facilitate the resolution of tax disputes faced by foreign companies within a reasonable time frame. This is particularly relevant for such companies in the Information Technology (IT) sector. I, therefore, propose to create an alternative dispute resolution mechanism within the Income Tax Department for the resolution of transfer pricing disputes. To reduce the impact of judgemental errors in determining transfer price in international transactions, it is proposed to empower the Central Board of Direct Taxes (CBDT) to formulate ‘safe harbor’ rules.
97. The Finance Act, 2008 introduced the Commodity Transaction Tax (CTT) to be levied on taxable commodities transactions entered in a recognized association. The Prime Minister’s Economic Advisory Council has recommended abolition of the CTT. I, therefore, propose to abolish the Commodity Transaction Tax.
98. The House will agree that it is desirable to bring about transparency in the funding of political parties in the country. With a view to reforming the system of funding of political parties, I propose to provide that donations to electoral trusts shall be allowed as a 100 per cent deduction in the computation of the income of the donor. For this purpose, Electoral Trusts will be such trusts as are set up as pass-through vehicles for routing the donations to political parties and are approved by CBDT.
99. Section 80E of the Income-tax Act provides for a deduction in respect of interest on loans taken for pursuing higher education in specified fields of study. I propose to extend the scope of this provision to cover all fields of study, including vocational studies, pursued after completion of schooling.
100. Anonymous donations to charitable institutions are presently liable to tax so as to prevent unaccounted money being routed to such entities in the garb of anonymous donations. However, some organizations are facing genuine problems in complying with the procedural requirements. In order to mitigate the practical difficulties being faced by such charitable organizations, I propose to grant relief to such organizations by not taxing anonymous donations received to the extent of 5 per cent of their total income or a sum of Rs.1 lakh, whichever is higher.
101. To facilitate the business operations of all small taxpayers and reduce their compliance burden, I propose to expand the scope of presumptive taxation to all small businesses with a turnover upto Rs.40 lakh. All such taxpayers will have the option to declare their income from business at the rate of 8 per cent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, I also propose to allow them to pay their entire tax liability from business at the time of filing their return by exempting them from paying advance tax. This new scheme will come into effect from the financial year 2010-11.
102. Madam Speaker, in the context of the geo-political environment, it is necessary for us to create our own facilities for energy security. Accordingly, I propose to extend the tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, also to natural gas. This tax benefit will be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the New Exploration Licensing Policy-VIII round of bidding. Further, I also propose to retrospectively amend the provisions of the said section to provide that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract.
103. Under the present provisions of section 2 (15) of the Income Tax Act, “charitable purpose” includes relief of the poor, education, medical relief, and the “advancement of any other object of general public utility”. However, the “advancement of any other object of general public utility” cannot involve the carrying on of any activity in the nature of trade, commerce or business. I propose to provide the same tax treatment to trusts engaged in preserving and improving our environment (including watersheds, forests and wildlife) and preserving our monuments or places or objects of artistic or historic interest, as is available to trusts engaged in providing relief of the poor, education and medical relief.
INDIRECT TAXES
104. Madam Speaker, I turn to my main proposals on indirect taxes.
105. I will first take up customs duties.
106. Although our domestic industry has weathered the impact of the global financial crisis and the resultant slowdown with resilience, it is yet to fully find its feet. Manufacturing growth, which had turned negative in October 2008 on a year-on-year basis and remained in that zone till March this year, appears to be barely turning the corner. However, the global scenario remains worrisome and it is my view that the paramount need is to provide industry with a stable framework. My proposals on indirect taxes seek to achieve this by maintaining the overall rate structure for customs and central excise duties as well as service tax. I must hasten to add that I have not hesitated to act where distortions provide a compelling reason or where relief would provide a healing touch.
107. Full exemption from basic customs duty was provided to Set Top Boxes in 2006 to enable their free import for the smooth introduction of the Conditional Access System (CAS). Now that production capacity has come up in the country, I propose to impose a nominal basic customs duty of 5 per cent on such Set Top Boxes to encourage domestic value addition.
108. The electronic hardware industry has a strong potential for creating employment especially in the SME sector. I intend to reduce the basic customs duty on LCD panels from 10 per cent to 5 per cent to support indigenous production of LCD televisions.
109. Full exemption from CVD of 4 per cent was available to accessories, parts and components imported for the manufacture of mobile phones till the 30th of June, 2009 . I propose to reintroduce this exemption for another year.
110. For reasons that are apparent, industry sectors having an export-orientation have been adversely impacted by the demand compression in global markets. Presently, exporters of leather products, textile garments, footwear as well as sports goods are permitted to import raw materials, consumables etc. upto 3 per cent of the fob value of their exports free of duty. I propose to add a few more items to these lists. Full exemption from basic customs duty is being provided to rough corals for encouraging value-addition and export.
111. It is imperative that the contribution of new and renewable energy sources of power is enhanced if we have to successfully combat the phenomena of global warming and climate change. I am reducing the basic customs duty on permanent magnets - a critical component for Wind Operated Electricity Generators - from 7.5 per cent to 5 per cent.
112. On influenza vaccine and nine specified life saving drugs used for the treatment of breast cancer, hepatitis-B, rheumatic arthritis etc. and on bulk drugs used for the manufacture of such drugs, I propose to reduce the customs duty from 10 per cent to 5 per cent. They will also be totally exempt from excise duty and countervailing duty.
113. Customs duty will also be reduced from 7.5 per cent to 5 per cent on two specified life saving devices used in treatment of heart conditions. These devices will be fully exempt from excise duty and CVD also.
114. Gold bars currently attract customs duty at the specific rate of Rs.100 per ten grams while other forms of gold (excluding jewellery) are chargeable to a duty of Rs.250 per ten grams. These rates were fixed in 2004 and have not been reviewed even as the price of gold has increased manifold. I propose to partially restore the incidence by increasing these rates to Rs.200 per ten grams and Rs.500 per ten grams respectively. Along the same lines, the customs duty on silver (excluding jewellery) will be increased from Rs.500 per kg to Rs.1,000 per kg. These revised rates would also apply to gold and silver, including ornaments that are not studded, when imported by a bona fide passenger as baggage.
115. I will now come to central excise duties.
116. Hon’ble Members are aware that the Government announced a series of fiscal stimulus packages, one of the key elements of which was the sharp reduction in the ad valorem rates of Central Excise duty for non-petroleum products by 4 percentage points across the board on 7th of December 2008 and by another 2 percentage points in the mean CENVAT rate on the 24th of February, 2009.
117. One of the consequences of these cuts was that pure cotton textiles came to be fully exempted from excise duty. We have received representations that full exemption prevents manufacturers from availing of export rebate of the duty paid from CENVAT credit. I propose to rectify this situation by restoring the erstwhile optional rate of 4 per cent for cotton textiles beyond the fiber stage.
118. Ever since the revamp of the excise duty structure on textiles by my distinguished predecessor in the 2004 budget, a differential in rates has been maintained between the cotton sector and the manmade sector. In keeping with the integrity of the earlier structure, I propose to restore the rate of 8 per cent Central Excise duty on manmade fiber and yarn on a mandatory basis and on stages beyond fiber and yarn at that rate on optional basis. These changes, together with duty changes on intermediates, would imply that the duty on all types of manmade fiber and yarn and their intermediates would be the same, easing the problem of credit accumulation.
119. Wool waste and cotton waste are chargeable to basic customs duty of 15 per cent. These are used in the manufacture of cheaper varieties of textile articles such as blankets and rugs. As a measure of relief to this sector, I propose to reduce the basic customs duty on these items to 10 per cent.
120. With the Government’s proclaimed objective of introducing a Goods and Services Tax (GST) both at the national and State level, some more steps in that direction are necessary. One measure that would facilitate the process is the further convergence of central excise duty rates to a mean rate - currently 8 per cent. I have reviewed the list of items currently attracting the rate of 4 per cent, the only rate below the mean rate. There is a case for enhancing the rate on many items appearing in this list to 8 per cent, which I propose to do, with the following major exceptions:
• food items; and
• drugs, pharmaceuticals and medical equipment.
Some of the other items on which I propose to retain the rate of 4 per cent are:
• paper, paperboard & their articles;
• items of mass consumption such as pressure cookers, cheaper electric bulbs, low-priced footwear, water filters/purifiers, CFL etc.;
• power driven pumps for handling water; and
• paraxylene.
The details are available in the relevant notifications.
121. Bio-diesel, obtained from vegetable oils and used for blending with petro-diesel, is currently exempt from excise duty. I now propose to fully exempt petro-diesel blended with bio-diesel from excise duty.
122. In order to encourage the use of this environment friendly fuel and augment its availability in the country, I also propose to reduce basic customs duty on bio-diesel from 7.5 per cent to 2.5 per cent - at par with petro-diesel. With these proposals I hope to see a smile on the faces of the green brigade!
123. My other proposals on central excise duties seek to address distortions that the manufacturing industry has been complaining about.
124. The IT industry has pointed out that it is facing difficulties in the assessment of software which involves transfer of the right to use after the levy of service tax on IT software service. To resolve the matter, I propose to exempt the value attributable to the transfer of the right to use packaged software from excise duty and CVD.
125. The construction industry has represented that they are facing difficulties on account of withdrawal of exemption on goods manufactured at site. I propose to restore full exemption to such goods, including pre-fabricated concrete slabs or blocks, when used for further construction at site.
126. A specific component was added to the ad valorem duty of 24 per cent applicable to large cars and utility vehicles in June last year. In the case of vehicles of engine capacity below 2000 cc, this component was Rs.15,000/- per unit while for vehicles of higher engine capacity it was Rs.20,000/- per unit. These rates are now being unified at the lower level of Rs.15,000/- per unit.
127. Petrol driven trucks provide a useful means of transport within cities and across short distances. These are chargeable to excise duty of 20 per cent. I propose to reduce excise duty on these trucks to 8 per cent to equate the duty with similar vehicles run on diesel.
128. Madam Speaker, I fear that my proposals relating to gold and silver on the customs side would somewhat dent my popularity with women. I propose to salvage this by fully exempting branded jewellery from excise duty.
129. I now turn to my proposals on service tax.
130. It is an international practice to zero-rate exports. To achieve this objective, a scheme was announced in 2007, granting refund of service tax paid on certain taxable services used after the clearance of export goods from the factory. For some time now, the exporting community has been expressing dissatisfaction over the difficulties faced in obtaining such refunds. Several procedural simplifications attempted in the past have also not yielded satisfactory results. The solution seems to lie in placing greater trust on the claims filed by the exporters. Keeping this in view, I propose to make the following changes in the scheme:
• Services received by exporters from goods transport agents and commission agents, where the liability to pay service tax is ab initio on the exporter, would be exempted from service tax. Thus, there would be no need for the exporter to first pay the tax and later claim refund.
• For other services received by exporters, the exemption would be operated through the existing refund mechanism based on self-certification of the documents where such refund is below 0.25 per cent of fob value, and certification of documents by a Chartered Accountant for value of refund exceeding the above limit.
131. The Export Promotion Councils and the Federation of Indian Export Organizations (FIEO) provide a valuable service in augmenting our export effort. I propose to exempt them from the levy of service tax on the membership and other fees collected by them till 31st March, 2010 .
132. In the goods transport sector, service tax is currently levied on transport of goods by road, by air, through pipelines and in containers. However, goods carried by Indian railways or those carried as coastal cargo or through inland waterways are not charged to service tax. In order to provide a level playing field in the goods transport sector, I propose to extend the levy of service tax to these modes of goods transport. The new levy is not likely to impact the prices of essential commodities or goods for mass consumption, as suitable exemptions would be provided.
133. As the Hon’ble Members are aware, services provided by chartered accountants, cost accountants, and company secretaries as well as by engineering and management consultants are presently charged to service tax. Although there is a school of thought that legal consultants do not provide any service to their client, I hold my distinguished predecessor in high esteem and disagree! As such, I propose to extend service tax on advice, consultancy or technical assistance provided in the field of law. This tax would not be applicable in case the service provider or the service receiver is an individual.
134. Vehicles having ‘Stage Carriage Permits’ and run by State undertakings are exempted from service tax. However, transportation of passengers undertaken by private enterprises in vehicles having ‘Contract Carriage Permits’ is, subjected to service tax. In order to bring parity in tax treatment, I propose to exempt such transportation also from the levy of service tax.
135. In July, 2008 goods transport agents (GTA) went on strike with several demands. One of the demands that was accepted by the government was to exempt certain services, such as packing, cargo handling and warehousing, provided to GTAs en route, from service tax. For this purpose an exemption notification was issued. It was also demanded by goods transport agents that the proceedings already initiated against such service providers should be dropped. The Government has accepted this genuine demand. Therefore, I propose to make certain legislative changes required to fulfill this promise.
136. Copies of notifications giving effect to the changes in customs, central excise and service tax will be laid on the Table of the House in due course.
137. My tax proposals on direct taxes are revenue neutral. On indirect taxes, they are estimated to yield a net gain of Rs.2,000 crore for a full year.
CONCLUSION
138. As we begin this five year journey, the road ahead will not be easy. We will have to manage uncertainties and there will be as many problems as there would be solutions. Mahatma Gandhi said and I quote, “Democracy is the art and science of mobilizing the entire physical, economic and spiritual resources of various sections of the people in the service of the common good of all.” This is precisely what we will have to do. With strong hearts, enlightened minds and willing hands, we will have to overcome all odds and remove all obstacles to create a brave new India of our dreams.
139. Madam Speaker, with these words I commend the budget to the House.
July 6, 2009
Iran’s Democracy
We don’t have to look far to find who’s behind the stolen election in Iran. One man alone has the authority to pull it off. State thugs gun down an innocent young woman in plain daylight on the streets of Tehran? It’s his doing. The killing is blamed on the protesters themselves? Him again. The family is denied permission to hold a funeral in the mosque? Him. The body is nabbed and spirited out of sight. Him. Black mourning cloth out front of the family’s home is ripped down? Him. The family is ousted from their home and every trace of them is eliminated? That bears his signature as well – the way he micromanages every tiny detail. What we’ve seen writ large all across Iran – college computers smashed by government thugs, a whole people muffled and denied expression, each telling detail of the whole big canvas – is a picture of the heart of the spiritual leader of Iran.
It reminds me of an ancient Islamic tale. The great Ayatollahs in a city of old found out that at exactly 12 noon on a given day God would make his appearance in a certain square of the marketplace. On that day they had all the vendors driven from that square, had it swept clean and covered in priceless rugs, and then crowded in all around the edge of the square, every one of them in their turbans and official garb, and waited. The moment the clock struck 12 noon, some common person stumbled in from the street. The moment his dusty boots soiled the expensive carpet, the grand Ayatollah stood up and lashed out in anger, “How dare you desecrate the spot where God himself is to appear!”
The simple man looked up at the Ayatollah in surprise. “I am greater than God,” he replied.
“NOBODY is greater than God!” thundered the furious Ayatollah. "Who do you think you are?" he demanded.
“I am nobody,” the man replied. He turned and retreated back from whence he came. In an instant he was lost in the crowd on the street.
The Iranian Islamic Revolution is based on a truth – the authority of God can reside in one person – but represents a flawed understanding of that truth; because it is not for man to choose who that person is. This can only be done by God.
We have all, by the mere fact of being here, been chosen by God in a sense. But there may be, at any given moment in the whole world, only one person who speaks and acts with the true authority of God. The hitch is that nobody can really know who that person is – for this instant it’s one individual; the next it’s another. The democratic component of Iran’s system is not just a cosmetic covering. It’s the essence of the Islamic Revolution.
The only sin committed by the protesters in Iran who have been beaten, shot at, and now effectively driven from the streets – is that they have a higher and truer concept of God than the Ayatollah, a concept that includes freedom, justice, fairness, and truth.
It’s a failure of Iran’s system of government that a lying, cheating, and small-minded leader presumes to speak for a God that is truthful, broadminded, and honest. The true word of God is left no outlet except through the people’s voice. The protests we see aren’t against God and they aren’t against Islam. They aren’t against Iran and they aren’t against the government. They’re against a small-hearted impostor who has too puny an idea of religion and God and has attempted by brute force to impose this on an ancient, pious, and great people.
If the other Ayatollahs let him get away with this, the Iranian Islamic Revolution will have failed.
It reminds me of an ancient Islamic tale. The great Ayatollahs in a city of old found out that at exactly 12 noon on a given day God would make his appearance in a certain square of the marketplace. On that day they had all the vendors driven from that square, had it swept clean and covered in priceless rugs, and then crowded in all around the edge of the square, every one of them in their turbans and official garb, and waited. The moment the clock struck 12 noon, some common person stumbled in from the street. The moment his dusty boots soiled the expensive carpet, the grand Ayatollah stood up and lashed out in anger, “How dare you desecrate the spot where God himself is to appear!”
The simple man looked up at the Ayatollah in surprise. “I am greater than God,” he replied.
“NOBODY is greater than God!” thundered the furious Ayatollah. "Who do you think you are?" he demanded.
“I am nobody,” the man replied. He turned and retreated back from whence he came. In an instant he was lost in the crowd on the street.
The Iranian Islamic Revolution is based on a truth – the authority of God can reside in one person – but represents a flawed understanding of that truth; because it is not for man to choose who that person is. This can only be done by God.
We have all, by the mere fact of being here, been chosen by God in a sense. But there may be, at any given moment in the whole world, only one person who speaks and acts with the true authority of God. The hitch is that nobody can really know who that person is – for this instant it’s one individual; the next it’s another. The democratic component of Iran’s system is not just a cosmetic covering. It’s the essence of the Islamic Revolution.
The only sin committed by the protesters in Iran who have been beaten, shot at, and now effectively driven from the streets – is that they have a higher and truer concept of God than the Ayatollah, a concept that includes freedom, justice, fairness, and truth.
It’s a failure of Iran’s system of government that a lying, cheating, and small-minded leader presumes to speak for a God that is truthful, broadminded, and honest. The true word of God is left no outlet except through the people’s voice. The protests we see aren’t against God and they aren’t against Islam. They aren’t against Iran and they aren’t against the government. They’re against a small-hearted impostor who has too puny an idea of religion and God and has attempted by brute force to impose this on an ancient, pious, and great people.
If the other Ayatollahs let him get away with this, the Iranian Islamic Revolution will have failed.
Nepal: Back to the Brink of Political Anarchy
Nepal continued its unfortunate tryst with political instability with the latest incident of removal of Chief of the Army Staff, General Rukmangad Katawal by the government termed as unconstitutional by those opposing the same. Clashes have reportedly broken out in the streets of Kathmandu between Maoist supporters and the Nepal Congress. The decision has also not received support from key parties in the coalition, Communist Party of Nepal-Unified Marxist Leninist (UML), Madhesi Janadhikar Forum (MJF), Sadbhavana Party and Communist Party of Nepal (United).
Chief of Army Staff General Katawal, as per some reports has refused to accept the decision as unconstitutional. President Dr. Ram Baran Yadav will now have to either hold the hands of the government or send it for endorsement by the Parliament, in which case the Maoists are likely to lose with only 229 members in a 600 plus Assembly. This in turn may lead to serious derailment of the peace process.
The genesis of the decision to sack the Army Chief is the conflict between the Defence Minister Ram Bahadur Thapa aka Badal and the Army Chief Katawal. The first stage in the controversy was recruitment in Nepal Army in November 2008. This was ordered to be halted by the Defence Minister stating that it was in violation of the comprehensive peace accord. Since the Nepal Army was filling up existing vacancies, the Army Chief clarified that this had a precedence and went ahead to complete the recruiting process. The Maoist People’s Liberation Army (PLA) in turn also started recruitment. The Supreme Court ruled that the PLA should halt recruitment and the Nepal Army not to do so in the future. This irked the Ministry of Defence extending the strained relations between the Chief of Army Staff and the Defence Minister.
The second crisis came up over extension of the terms of eight brigadier generals which was rejected by the Ministry of Defence though recommended by the Chief of Army Staff. The matter is now with the Supreme Court with the generals reinstated for the time being on court orders. The Army Chief explained the reinstatement to avoid violation of a court decree. It is suspected that the Ministry of Defence did not give extension to the Brigadier Generals to facilitate promotion of PLA commanders directly to these ranks.
The third incident of confrontation was over participation in the national games. With the PLA entering the fray, the Nepal Army reportedly withdrew from the games making the political hierarchy livid with rage as per reports in Nepali media. A build up of these incidents infuriated the Prime Minister and the Defence Minister while Maoist cadres built up pressure within the Party calling for a decisive action to remove the Chief of the Army Staff who was then put on notice. The Army Chief responded to the notice explaining his case.
Underlying the conflict as per Prashat Jha, Contributing Editor, Himal Southasian Magazine and Columnist, Nepali Times, Kathmandu is the power struggle within the Army. Writing in the SAIR edition of 27 April 2009 he says that General Kul Bahadur Khadka will take over as the Chief if Katawal is removed now while if he retires as per normal schedule in September, General Chhatraman Singh Gurung will be the Army Chief. Reports indicate that General Khadka has promised Maoists full integration of PLA cadres including those who are ineligible.
The plan submitted by General Kul Bahadur is reported to have included integration of the 19,000 Maoist combatants in the Army with a number of PLA commander’s as Nanda Kishor Pun “Pasang” promoted to the rank of Major General and others as Brigadiers. On 29 April however the Army issued a statement denying a rift in its senior most officers and indicated that all three generals were together in the crisis affecting its relationship with the Maoist hierarchy.
On the other hand, Prime Minister Pushpa Kamal Dahal assured President Ram Baran Yadav that the Army integration process will be completed by July 15. Dahal called on Yadav at the latter's office in Shital Niwas to brief him on political developments and his recent visit to Norway and Finland. “I told him the Army integration process will be completed by mid-July as the Army Integration Special Technical Committee (AISTC) has started work,” Dahal told the media after the meeting. The eight-member AISTC formed on March 27, started work from the Maoist Cantonment Site in Nawalparasi where they held discussions with combatants on integration and their preferences in accordance with the he Army Integration Special Committee's (AISC) terms of reference. Given the present relationship and state of affairs between the Maoists and the Nepal Army, this appears highly unlikely.
The Nepal government’s differences against its adversaries are also causing a serious concern about its ability to deliver governance. While the Maoists have succeeded in winning three more seats in the bye elections, the support by the people whether it is coercive or obtained democratically remains to be seen. There is thus a concern that the level of stability that is require to draft a constitution in time and hold elections may not be there at present.
Given the precarious state of polity, it is not expected that any consensus will emerge in the near future, but Nepal has the tradition of surviving only from the brinks of a political catastrophe. Hopefully this will be the case this time around as well though the preliminary indications are that saner counsel is unlikely to prevail unless the international community intervenes.
Chief of Army Staff General Katawal, as per some reports has refused to accept the decision as unconstitutional. President Dr. Ram Baran Yadav will now have to either hold the hands of the government or send it for endorsement by the Parliament, in which case the Maoists are likely to lose with only 229 members in a 600 plus Assembly. This in turn may lead to serious derailment of the peace process.
The genesis of the decision to sack the Army Chief is the conflict between the Defence Minister Ram Bahadur Thapa aka Badal and the Army Chief Katawal. The first stage in the controversy was recruitment in Nepal Army in November 2008. This was ordered to be halted by the Defence Minister stating that it was in violation of the comprehensive peace accord. Since the Nepal Army was filling up existing vacancies, the Army Chief clarified that this had a precedence and went ahead to complete the recruiting process. The Maoist People’s Liberation Army (PLA) in turn also started recruitment. The Supreme Court ruled that the PLA should halt recruitment and the Nepal Army not to do so in the future. This irked the Ministry of Defence extending the strained relations between the Chief of Army Staff and the Defence Minister.
The second crisis came up over extension of the terms of eight brigadier generals which was rejected by the Ministry of Defence though recommended by the Chief of Army Staff. The matter is now with the Supreme Court with the generals reinstated for the time being on court orders. The Army Chief explained the reinstatement to avoid violation of a court decree. It is suspected that the Ministry of Defence did not give extension to the Brigadier Generals to facilitate promotion of PLA commanders directly to these ranks.
The third incident of confrontation was over participation in the national games. With the PLA entering the fray, the Nepal Army reportedly withdrew from the games making the political hierarchy livid with rage as per reports in Nepali media. A build up of these incidents infuriated the Prime Minister and the Defence Minister while Maoist cadres built up pressure within the Party calling for a decisive action to remove the Chief of the Army Staff who was then put on notice. The Army Chief responded to the notice explaining his case.
Underlying the conflict as per Prashat Jha, Contributing Editor, Himal Southasian Magazine and Columnist, Nepali Times, Kathmandu is the power struggle within the Army. Writing in the SAIR edition of 27 April 2009 he says that General Kul Bahadur Khadka will take over as the Chief if Katawal is removed now while if he retires as per normal schedule in September, General Chhatraman Singh Gurung will be the Army Chief. Reports indicate that General Khadka has promised Maoists full integration of PLA cadres including those who are ineligible.
The plan submitted by General Kul Bahadur is reported to have included integration of the 19,000 Maoist combatants in the Army with a number of PLA commander’s as Nanda Kishor Pun “Pasang” promoted to the rank of Major General and others as Brigadiers. On 29 April however the Army issued a statement denying a rift in its senior most officers and indicated that all three generals were together in the crisis affecting its relationship with the Maoist hierarchy.
On the other hand, Prime Minister Pushpa Kamal Dahal assured President Ram Baran Yadav that the Army integration process will be completed by July 15. Dahal called on Yadav at the latter's office in Shital Niwas to brief him on political developments and his recent visit to Norway and Finland. “I told him the Army integration process will be completed by mid-July as the Army Integration Special Technical Committee (AISTC) has started work,” Dahal told the media after the meeting. The eight-member AISTC formed on March 27, started work from the Maoist Cantonment Site in Nawalparasi where they held discussions with combatants on integration and their preferences in accordance with the he Army Integration Special Committee's (AISC) terms of reference. Given the present relationship and state of affairs between the Maoists and the Nepal Army, this appears highly unlikely.
The Nepal government’s differences against its adversaries are also causing a serious concern about its ability to deliver governance. While the Maoists have succeeded in winning three more seats in the bye elections, the support by the people whether it is coercive or obtained democratically remains to be seen. There is thus a concern that the level of stability that is require to draft a constitution in time and hold elections may not be there at present.
Given the precarious state of polity, it is not expected that any consensus will emerge in the near future, but Nepal has the tradition of surviving only from the brinks of a political catastrophe. Hopefully this will be the case this time around as well though the preliminary indications are that saner counsel is unlikely to prevail unless the international community intervenes.
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