|
Budget 2010-2011
Speech of Pranab Mukherjee
Minister of Finance
February 26, 2010
Madam Speaker,
I rise to present the Union Budget for 2010-11.
In 2009, when I presented the interim Budget in February and the regular
Budget in July in this august House, the Indian economy was facing grave
uncertainties. Growth had started decelerating and the business sentiment was
weak. The economy's capacity to sustain high growth was under serious threat
from the widespread economic slowdown in the developed world.
2. It was not clear to us, as also to the policy makers in many other
countries, how this crisis would eventually unfold. What would be its impact
on the growth momentum of the Indian economy? How soon will we be able to
turnaround the fortunes of our economy? The short term global outlook was
bleak and the consensus was that year 2009 would face the brunt of this crisis
across the world.
3. At home, there was added uncertainty on account of the delayed and
sub-normal south-west monsoon, which had undermined the kharif crop in the
country. There were concerns about production and prices of food items and
its possible repercussions on the growth of rural demand.
4. Today, as I stand before you, I can say with confidence that we have
weathered these crises well. Indian economy now is in a far better position
than it was a year ago. That is not to say that the challenges today are any
less than what they were nine months ago when UPA under the leadership of Mrs
Sonia Gandhi was elected back to power and Prime Minister Dr. Manmohan Singh
formed the Government for the second term.
5. The three challenges and the medium term perspective that I had outlined
in my last Budget Speech remain relevant, even today. These would continue to
engage the Indian policy-planners for the next few years.
6. The first challenge before us is to quickly revert to the high GDP
growth path of 9 per cent and then find the means to cross the 'double digit
growth barrier'. This calls for imparting a fresh momentum to the impressive
recovery in growth witnessed in the past few months. In this endeavour, I seek
Lord Indra's help to make the recovery more broad-based in the coming months.
7. Growth is only as important as what it enables us to do and be.
Therefore, the second challenge is to harness economic growth to consolidate
the recent gains in making development more inclusive. The thrust imparted to
the development of infrastructure in rural areas has to be pursued to achieve
the desired objectives within a fixed time frame.
8. We have to strengthen food security, improve education opportunities and
provide health facilities at the level of households, both in rural and urban
areas. These are issues that require significant resources, and we have to
find those resources.
9. The third challenge relates to the weaknesses in government systems,
structures and institutions at different levels of governance. Indeed, in the
coming years, if there is one factor that can hold us back in realising our
potential as a modern nation, it is the bottleneck of our public delivery
mechanisms. There have been many initiatives in this regard, in different
sectors, at different points of time. Some of them have been effective in
reforming the way the Government works in those areas. But we have a long way
to go before we can rest on this count.
10. The Union Budget cannot be a mere statement of Government accounts. It
has to reflect the Government's vision and signal the policies to come in
future.
11. With development and economic reforms, the focus of economic activity
has shifted towards the non-governmental actors, bringing into sharper focus
the role of Government as an enabler.
12. An enabling Government does not try to deliver directly to the citizens
everything that they need. Instead it creates an enabling ethos so that
individual enterprise and creativity can flourish. Government concentrates on
supporting and delivering services to the disadvantaged sections of the
society.
13. It is this broad conceptualization of the Budget that informs my speech
today. I would now begin by presenting a brief overview of the economy.
Overview of the Economy
14. Yesterday, I laid on the table of the House the Economic Survey, which
gives a detailed analysis of the economic situation of the country over the
past twelve months. I intend to highlight only a few salient features that
form the backdrop of this Budget.
15. The fiscal year 2009-10 was a challenging year for the Indian economy.
The significant deceleration in the second half of 2008-09, brought the real
GDP growth down to 6.7 per cent, from an average of over 9 per cent in the
preceding three years. We were among the first few countries in the world to
implement a broad-based counter-cyclic policy package to respond to the
negative fallout of the global slowdown. It included a substantial fiscal
expansion along with liberal monetary policy support.
16. The effectiveness of these policy measures became evident with fast
paced recovery. The economy stabilised in the first quarter of 2009-10 itself,
when it clocked a GDP growth of 6.1 per cent, as against 5.8 per cent in the
fourth quarter of the preceding year. It registered a strong rebound in the
second quarter, when the growth rate rose to 7.9 per cent. With the Advance
Estimates placing the likely growth for 2009-10 at 7.2 per cent, we are indeed
vindicated in our policy stand. The final figure may well turn out to be
higher when the third and fourth quarter GDP estimates for 2009-10 become
available.
17. This recovery is very encouraging for it has come about despite a
negative growth in the agriculture sector. More importantly, it is the result
of a renewed momentum in the manufacturing sector and marks the rise of this
sector as the growth driver of the economy. The growth rate in manufacturing
in December 2009 was 18.5 per cent— the highest in the past two decades. There
are also signs of a turnaround in the merchandise exports with a positive
growth in November and December 2009 after a decline of about twelve
successive months. Export figures for January are also encouraging.
Significant private investment can now be expected to provide the engine for
sustaining a growth of 9 per cent per annum. With some luck, I hope to breach
the 10 per cent mark in not-too-distant a future.
18. A major concern during the second half of 2009-10 has been the
emergence of double digit food inflation. There was a momentum in food prices
since the flare-up of global commodity prices preceding the financial crisis
in 2008, but it was expected that the agriculture season beginning June 2009
would help in moderating the food inflation. However, the erratic monsoons and
drought like conditions in large parts of the country reinforced the supply
side bottlenecks in some of the essential commodities. This set in motion
inflationary expectations. Since December 2009, there have been indications of
these high food prices, together with the gradual hardening of the fuel
product prices, getting transmitted to other non-food items as well. The
inflation data for January seems to have confirmed this trend.
19. Government is acutely conscious of this situation and has set in motion
steps, in consultation with the State Chief Ministers, which should bring down
the inflation in the next few months and ensure that there is better
management of food security in the country.
CONSOLIDATING GROWTH
20. Managing a complex economy is a difficult task, more so when it is a
growing economy in a globalised world. And yet, choices have to be made and
they have to be well-timed.
21. After successfully managing the effects of the global slowdown, we need
to strengthen the domestic macroeconomic environment to help consolidate the
rebound in growth and sustain it over the medium term. We need to review the
stimulus imparted to the economy and move towards the preferred path of fiscal
consolidation that facilitated the remarkable growth in the pre-crisis five
year period. We need to make growth more broad-based and ensure that
supply-demand imbalances are better managed.
Fiscal Consolidation
22. The success of the fiscal stimulus in supporting domestic demand could
be traced to its composition. The approach of the Government was to increase
the disposable income in the hands of the people by effecting reductions in
indirect taxes and by expanding public expenditure on programmes like the
Mahatma Gandhi National Rural Employment Guarantee Scheme and rural
infrastructure. Now that the recovery has taken root, there is a need to
review public spending, mobilise resources and gear them towards building the
productivity of the economy.
23. In shaping the fiscal policy for 2010-11, I have acted on the
recommendations of the Thirteenth Finance Commission. It has recommended a
calibrated exit strategy from the expansionary fiscal stance of last two
years. The Commission has recommended a capping of the combined debt of the
Centre and the States at 68 per cent of the GDP to be achieved by 2014-15.
24. As a part of the fiscal consolidation process, it would be for the
first time that the Government would target an explicit reduction in its
domestic public debt-GDP ratio. I intend to bring out, within six months, a
status paper giving a detailed analysis of the situation and a road map for
curtailing the overall public debt. This would be followed by an annual report
on the subject.
Tax reforms
25. I am happy to inform the Honourable Members that the process for
building a simple tax system with minimum exemptions and low rates designed to
promote voluntary compliance, is now nearing completion. On the Direct Tax
Code the wide-ranging discussions with stakeholders have been concluded. I am
confident that the Government will be in a position to implement the Direct
Tax Code from April 1, 2011.
26. On Goods and Services Tax, we have been focusing on generating a wide
consensus on its design. In November, 2009 the Empowered Committee of the
State Finance Ministers placed the first discussion paper on GST in the public
domain. The Thirteenth Finance Commission has also made a number of
significant recommendations relating to GST, which will contribute to the
ongoing discussions. We are actively engaged with the Empowered Committee to
finalise the structure of GST as well as the modalities of its expeditious
implementation. It will be my earnest endeavour to introduce GST along with
the DTC in April, 2011.
People's ownership of PSUs
27. While presenting the Budget for 2009-10, I invited people to
participate in Government's disinvestment programme to share in the wealth and
prosperity of the Central Public Sector Undertakings.
28. Since then, ownership has been broad based in Oil India Limited, NHPC,
NTPC and Rural Electrification Corporation while the process is on for
National Mineral Development Corporation and Satluj Jal Vidyut Nigam. The
Government will raise about Rs.25,000 crore during the current year. Through
this process, I propose to raise a higher amount during the year 2010-11. The
proceeds will be utilised to meet the capital expenditure requirements of
social sector schemes for creating new assets.
29. Listing of Central Public Sector Undertakings improves corporate
governance, besides unlocking the value for all stakeholders—the government,
the company and the shareholders. Market capitalization of five companies
which have been listed since October, 2004 has increased by 3.8 times from the
book value of Rs.78,841 crore to Rs.2,98,929 crore.
30. The effective management of public expenditure by bringing it in line
with the Government's objectives is a part of the fiscal consolidation
process. This calls for proper targeting of subsidies and expenditure
adjustment.
Fertiliser subsidy
31. I had announced the intent of the Government for the fertiliser sector
in my Budget Speech of 2009. A Nutrient Based Subsidy policy for the
fertiliser sector has since been approved by the Government and will become
effective from April 1, 2010. This policy is expected to promote balanced
fertilization through new fortified products and focus on extension services
by the fertiliser industry. This will lead to an increase in agricultural
productivity and consequently better returns for the farmers. Over time, the
policy is expected to reduce volatility in the demand for fertiliser subsidy
in addition to containing the subsidy bill. Government will ensure that
nutrient based fertiliser prices for transition year 2010-11, will remain
around MRPs currently prevailing. The new system will move towards direct
transfer of subsidies to the farmers.
Petroleum and Diesel pricing policy
32. In the last Budget, the constitution of an Expert Group, to advise the
Government on a viable and sustainable system of pricing of petroleum
products, was announced. The Group headed by Shri Kirit Parikh has submitted
its recommendations to the Government. Decision on these recommendations will
be taken by my colleague, the Minister of Petroleum & Natural Gas, in due
course.
33. I am very happy to inform the Honourable Members that we have not only
adhered to the fiscal roadmap that I had presented as a part of the Budget
documents last year, but we have improved upon it. Except for meeting the
liabilities of the year 2008-09, we have not issued oil or fertiliser bonds. I
shall come to the numbers when I refer to the budget estimates a little later.
Improving Investment Environment
Foreign Direct Investment
34. Foreign Direct Investment (FDI) inflows during the year have been
steady in spite of the decline in global capital flows. India received FDI
equity inflows of US$ 20.9 billion during April-December, 2009 compared to US$
21.1 billion during the same period last year.
35. Government has taken a number of steps to simplify the FDI regime to
make it easily comprehensible to foreign investors. For the first time, both
ownership and control have been recognised as central to the FDI policy, and
methodology for calculation of indirect foreign investment in Indian companies
has been clearly defined. A consistent policy on downstream investment has
also been formulated. Another major initiative has been the complete
liberalization of pricing and payment of technology transfer fee, trademark,
brand name and royalty payments. These payments can now be made under the
automatic route.
36. Government also intends to make the FDI policy user-friendly by
consolidating all prior regulations and guidelines into one comprehensive
document. This would enhance clarity and predictability of our FDI policy to
foreign investors.
Financial Stability and Development Council
37. The financial crisis of 2008-09 has fundamentally changed the structure
of banking and financial markets the world over. With a view to strengthen and
institutionalise the mechanism for maintaining financial stability, Government
has decided to setup an apex-level Financial Stability and Development
Council. Without prejudice to the autonomy of regulators, this Council would
monitor macro prudential supervision of the economy, including the functioning
of large financial conglomerates, and address inter-regulatory coordination
issues. It will also focus on financial literacy and financial inclusion.
Banking Licences
38. The Indian banking system has emerged unscathed from the crisis. We
need to ensure that the banking system grows in size and sophistication to
meet the needs of a modern economy. Besides, there is a need to extend the
geographic coverage of banks and improve access to banking services. In this
context, I am happy to inform the Honourable Members that the RBI is
considering giving some additional banking licenses to private sector players.
Non Banking Financial Companies could also be considered, if they meet the
RBI's eligibility criteria.
Public Sector Bank Capitalisation
39. During 2008-09, the Government infused Rs.1900 crore as Tier-I capital
in four public sector banks to maintain a comfortable level of Capital to Risk
Weighted Asset Ratio. An additional sum of Rs.1200 crore is being infused now.
For the year 2010-11, I propose to provide a sum of Rs.16,500 crore to ensure
that the Public Sector Banks are able to attain a minimum 8 per cent Tier-I
capital by March 31, 2011.
Recapitalisation of Regional Rural Banks
40. Regional Rural Banks (RRBs) play an important role in providing credit
to rural economy. The capital of these banks is shared by the Central
Government, sponsor banks and State Governments. The banks were last
capitalised in
2006-07. I propose to provide further capital to strengthen the RRBs so
that they have adequate capital base to support increased lending to the rural
economy.
Corporate Governance
41. Improvement in corporate governance and regulation is an important part
of the overall investment environment in the country. Government has
introduced the Companies Bill, 2009 in the Parliament, which will replace the
existing Companies Act, 1956. The proposed new bill will address issues
related to regulation in corporate sector in the context of the changing
business environment.
Exports
42. Government has provided interest subvention of 2 per cent on
pre-shipment export credit up to March 31, 2010 for exports in certain
sectors. I propose to extend the interest subvention of 2 per cent for one
more year for exports covering handicrafts, carpets, handlooms and small and
medium enterprises.
Special Economic Zones (SEZs)
43. The SEZs have attracted significant flows of domestic and foreign
investments. In first three quarters of 2009-10 exports from SEZs recorded a
growth of 127 per cent over the corresponding period last year. Government is
committed to ensuring continued growth of SEZs to draw investments and boost
exports and employment.
Agriculture Growth
44. The agriculture sector occupies centre-stage in our resolve to promote
inclusive growth, enhance rural incomes and sustain food security. To spur the
growth in this sector, the Government intends to follow a four-pronged
strategy covering (a) agricultural production; (b) reduction in wastage of
produce;
(c) credit support to farmers; and (d) a thrust to the food processing
sector.
45. The first element of the strategy is to extend the green revolution to
the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand,
Eastern UP, West Bengal and Orissa, with the active involvement of Gram Sabhas
and the farming families. For the year 2010-11, I propose to provide Rs.400
crore for this initiative.
46. In the 60th year of the Republic, it is proposed to organise 60,000
"pulses and oil seed villages" in rain-fed areas during 2010-11 and provide an
integrated intervention for water harvesting, watershed management and soil
health, to enhance the productivity of the dry land farming areas. I propose
to provide Rs.300 crore for this purpose. This initiative will be an integral
part of the Rashtriya Krishi Vikas Yojana.
47. The gains already made in the green revolution areas have to be
sustained through conservation farming, which involves concurrent attention to
soil health, water conservation and preservation of biodiversity. I propose
an allocation of Rs.200 crore for launching this climate resilient agriculture
initiative.
48. The second element of the strategy relates to reduction of significant
wastages in storage as well as in the operations of the existing food supply
chains in the country. This needs to be addressed. As the Prime Minister has
said recently, "We need greater competition and therefore need to take a firm
view on opening up of the retail trade." It will help in bringing down the
considerable difference between the farm gate prices, wholesale prices and
retail prices.
49. There is wastage of grain procured for buffer stocks and public
distribution system due to acute shortage of storage capacity in the Food
Corporation of India. This deficit in the storage capacity is met through an
ongoing scheme for private sector participation where the FCI has been hiring
godowns from private parties for a guaranteed period of 5 years. This period
is now being extended to 7 years.
50. The third element of the strategy relates to improving the availability
of credit to farmers. I am happy to inform the Honourable Members that banks
have been consistently meeting the targets set for agriculture credit flow in
the past few years. For the year 2010-11, the target has been raised to
Rs.3,75,000 crore from Rs.3,25,000 crore in the current year.
51. The Debt Waiver and Debt Relief Scheme for Farmers was a major
initiative of the UPA Government. In view of the recent drought in some States
and the severe floods in some other parts of the country, I propose to extend
by six months the period for repayment of the loan amount by farmers from
December 31, 2009 to June 30, 2010.
52. In the last budget, I had provided an additional one per cent interest
subvention as an incentive to those farmers who repay their short-term crop
loans as per schedule. I propose to raise this subvention for timely repayment
of crop loans from one per cent to two per cent for 2010-11. Thus, the
effective rate of interest for such farmers will now be five per cent per
annum. Necessary provision in the Budget has been made.
53. The fourth element of the strategy aims at lending a further impetus to
the development of food processing sector by providing state-of-the art
infrastructure. In addition to the ten mega food park projects already being
set up, the Government has decided to set up five more such parks.
54. As a part of the farm to market initiative, External Commercial
Borrowings will henceforth be available for cold storage or cold room
facility, including for farm level pre-cooling, for preservation or storage of
agricultural and allied produce, marine products and meat. Changes in the
definition of infrastructure under the ECB policy are being made.
Infrastructure
55. Accelerated development of high quality physical infrastructure, such
as roads, ports, airports and railways is essential to sustain economic
growth. While addressing the policy gaps in this sector, I propose to maintain
the thrust for upgrading infrastructure in both rural and urban areas. In the
Budget for
2010-11, I have provided Rs.1,73,552 crore, which accounts for over 46 per
cent of the total plan allocations, for infrastructure development in the
country.
56. To make a visible impact in the road sector, Government has targeted
construction of national highways (NHs) at the pace of 20 km per day. To push
the pace of implementation, changes have been made in the policy framework,
especially in respect of projects being executed through public private
partnerships (PPPs). For the year 2010-11, I propose to raise the allocation
of road transport by over 13 per cent from Rs.17,520 crore to Rs.19,894 crore.
57. Honourable Members have already heard from the Railway Minister about
the large investments required to modernise and expand the network. I have
provided Rs.16,752 crore in the Budget for 2010-11 for Railways to lend her a
helping hand. This is about Rs.950 crore more than last year, when a
substantial increase was made in the budgetary support for Railways.
58. To complement the dedicated freight corridor, the Delhi-Mumbai
Industrial Corridor project has been taken up for integrated regional
development. Preparatory activities have been completed for creation of six
industrial investment nodes with eco-friendly world class infrastructure.
India Infrastructure Finance Company Limited
59. Government established the India Infrastructure Finance Company Limited
(IIFCL) to provide long term financial assistance to infrastructure projects.
Its disbursements are expected to touch Rs.9,000 crore by end March 2010 and
reach around Rs.20,000 crore by March 2011. IIFCL has also been authorised to
refinance bank lending to infrastructure projects. It has refinanced Rs.3,000
crore during the current year and is expected to more than double that amount
in 2010-11. The take-out financing scheme announced in the last Budget is
expected to initially provide finance for about Rs.25,000 crore in the next
three years.
Energy
60. Government accords the highest priority to capacity addition in the
power sector. The framework for induction of super critical technology in
large capacity power plants of National Thermal Power Corporation is now in
place. The Mega Power Policy has been modified and is now consistent with the
National Electricity Policy, 2005 and Tariff Policy, 2006. It will help in
lowering the cost of generation and the cost of power purchased by
distribution utilities. I have more than doubled the plan allocation for power
sector from Rs.2,230 crore in 2009-10 to Rs.5,130 crore in 2010-11. This does
not include allocations for RGGVY, which is a part of Bharat Nirman.
61. Coal is the mainstay of India's energy sector and 75 per cent of the
power generation is currently coal based. It is proposed to introduce a
competitive bidding process for allocating coal blocks for captive mining to
ensure greater transparency and increased participation in production from
these blocks.
62. Government proposes to take steps to set up a "Coal Regulatory
Authority" to create a level playing field in the coal sector. This would
facilitate resolution of issues like economic pricing of coal and benchmarking
of standards of performance.
63. The Jawaharlal Nehru National Solar Mission envisages establishing
India as a global leader in solar energy. An ambitious target of 20,000 MW of
solar power by the year 2022 has been set under the mission. I propose to
increase the plan outlay for the Ministry of New and Renewable Energy by 61
per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.
64. The Ladakh region of Jammu and Kashmir faces an extremely harsh climate
and suffers from energy deficiency. To address this problem, it is proposed to
set up solar, small hydro and micro power projects at a cost of about Rs.500
crore.
Environment and Climate change
65. To ameliorate the negative environmental consequences and increased
pollution levels associated with industrialisation and urbanisation, I propose
to take a number of proactive steps in the Budget 2010-11.
National Clean Energy Fund (NCEF)
66. There are many areas of the country where pollution levels have reached
alarming proportions. While we must ensure that the principle of "polluter
pays" remains the basic guiding criteria for pollution management, we must
also give a positive thrust to development of clean energy. I propose to
establish a National Clean Energy Fund for funding research and innovative
projects in clean energy technologies. I shall outline the mode of funding for
this initiative in Part B of my speech.
Effluent Treatment Plant, Tirupur
67. The textile cluster for knitwear in Tirupur in Tamil Nadu is a major
contributor to the country's hosiery exports. I propose to provide a one-time
grant of Rs.200 crore to the Government of Tamil Nadu towards the cost of
installation of a zero liquid discharge system at Tirupur to sustain this
industry, which provides livelihood to lakhs of persons, without undermining
the environment.
Special Golden Jubilee Package for Goa
68. I propose to provide a sum of Rs.200 crore as a Special Golden Jubilee
package for Goa to preserve the natural resources of the State by restoring
Goa's beaches which are prone to erosion, and increasing its green cover
through sustainable forestry.
National Ganga River Basin Authority (NGRBA)
69. The "Mission Clean Ganga 2020" under the National Ganga River Basin
Authority (NGRBA) with the objective that no untreated municipal sewage or
industrial effluent will be discharged into the national river has already
been initiated. I propose to double the allocation for NGRBA in 2010-11 to
Rs.500 crore.
70. I am happy to inform the Honourable Members that schemes on bank
protection works along river Bhagirathi and river Ganga-Padma in parts of
Murshidabad and Nadia district of West Bengal have been included in the
Centrally Sponsored Flood Management Programme. I also propose to provide
budgetary support for drainage scheme of Kaliaghai-Kapaleswari Baghai basin in
the district of Purba and Paschim Midnapore, and Master Plan of Kandi
sub-division in Murshidabad, West Bengal.
71. Recognising the need for developing an alternate port facility in West
Bengal, it is proposed to develop a project at Sagar Island. Necessary funds
will be provided in due course.
INCLUSIVE DEVELOPMENT
72. For the UPA Government, inclusive development is an act of faith. In
the last five years, our Government has created entitlements backed by legal
guarantees for an individual's right to information and her right to work.
This has been followed-up with the enactment of the right to education in
2009-10. As the next step, we are now ready with the draft Food Security Bill
which will be placed in the public domain very soon. To fulfil these
commitments the spending on social sector has been gradually increased to
Rs.1,37,674 crore which now stands at 37 per cent of the total plan outlay in
2010-11. Another 25 per cent of the plan allocations are devoted to the
development of rural infrastructure. With growth and the opportunities that it
generates, we hope to further strengthen the process of inclusive development.
Education
73. The Right of Children to Free and Compulsory Education Act, 2009
creates a framework for legal entitlements for all children in the age group
of 6 to 14 years to education of good quality, based on principles of equity
and
non-discrimination. In recent years, Sarva Shiksha Abhiyan (SSA) has made
significant contribution in improving enrolment and infrastructure for
elementary education. About 98 per cent of habitations are now covered by
primary schools. I propose to increase the plan allocation for school
education from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11. In
addition, States will have access to Rs.3,675 crore for elementary education
under the Thirteenth Finance Commission grants for 2010-11.
Health
74. An Annual Health Survey to prepare the District Health Profile of all
Districts shall be conducted in 2010-11. The findings of the Survey should be
of immense benefit to major public health initiatives particularly the
National Rural Health Mission, which has successfully addressed the gaps in
the delivery of critical health services in rural areas.
75. I propose to increase the plan allocation for the Ministry of Health
and Family Welfare, from Rs.19,534 crore to Rs.22,300 crore for 2010-11.
Financial Inclusion
76. To reach the benefits of banking services to the 'Aam Aadmi', the
Reserve Bank of India had set up a High Level Committee on the Lead Bank
Scheme. After careful assessment of the recommendations of this Committee, and
in further consultation with the RBI, it has been decided to provide
appropriate Banking facilities to habitations having population in excess of
2000 by March, 2012. It is also proposed to extend insurance and other
services to the targeted beneficiaries. These services will be provided using
the Business Correspondent and other models with appropriate technology back
up. By this arrangement, it is proposed to cover 60,000 habitations.
Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund
77. In 2007-08 the Government had set up a Financial Inclusion Fund and a
Financial Inclusion Technology Fund in NABARD, to reach banking services to
the unbanked areas. To give momentum to the pace of financial inclusion, I
propose an augmentation of Rs.100 crore for each of these funds, which shall
be contributed by Government of India, RBI and NABARD.
Rural Development
78. In the words of Mahatma Gandhi "Just as the universe is contained in
the self, so is India contained in the villages". For UPA Government,
development of rural infrastructure remains a high priority area. For the year
2010-11, I propose to provide Rs.66,100 crore for Rural Development.
79. Mahatma Gandhi National Rural Employment Guarantee Scheme has completed
four years of implementation during which it has been extended to all
districts covering more than 4.5 crore households. The allocation for NREGA
has been stepped up to Rs.40,100 crore in 2010-11. Bharat Nirman has made a
substantial contribution to the upgradation of rural infrastructure through
its various programmes. For the year 2010-11, I propose to allocate an amount
of Rs.48,000 crore for these programmes.
80. Indira Awas Yojana is a popular rural housing scheme for weaker
sections. Taking note of the increase in the cost of construction, I propose
to raise the unit cost under this scheme to Rs.45,000 in the plain areas and
to Rs.48,500 in the hilly areas. For the year 2010-11, the allocation for this
scheme is being increased to Rs.10,000 crore.
81. As a part of the strategy to bridge the infrastructure gap in backward
districts of the country, the Backward Region Grant Fund has proved to be an
effective instrument. I propose to enhance the allocation to this fund by 26
per cent from Rs.5,800 crore in 2009-10 to Rs.7,300 crore in 2010-11. I have
also provided an additional central assistance of Rs.1,200 crore for drought
mitigation in the Bundelkhand region in the Budget.
Urban Development and Housing
82. "Swarna Jayanti Shahari Rozgar Yojana" designed to provide employment
opportunities in urban areas, has been strengthened with focus on community
participation, skill development and self employment support structures. For
the year 2010-11, I propose to increase the allocation for urban development
by more than 75 per cent from Rs.3,060 crore to Rs.5,400 crore. In addition,
the allocation for Housing and Urban Poverty Alleviation is also being raised
from Rs.850 crore to Rs.1,000 crore in 2010-11.
83. While presenting the Union Budget for the year 2009-10, I had announced
a Scheme of one per cent interest subvention on housing loans up to Rs.10
lakhs where the cost of the house does not exceed Rs.20 lakhs. I propose to
extend this Scheme up to March 31, 2011. Accordingly, I propose to provide a
sum of Rs.700 crore for this Scheme for the year 2010-11.
84. The Rajiv Awas Yojana (RAY) for slum dwellers and urban poor was
announced last year to extend support to States that are willing to provide
property rights to slum dwellers. This scheme is now ready to take off. I
propose to allocate Rs.1,270 crore for 2010-11 as compared to Rs.150 crore
last year. This marks an increase of over 700 per cent. The Government's
efforts in the implementation of RAY would be to encourage the States to
create a slum free India at the earliest.
Micro, Small & Medium Enterprises
85. Micro, Small and Medium Enterprises (MSMEs) contribute 8 per cent of
the country's GDP, 45 per cent of the manufactured output and 40 per cent of
our exports. They provide employment to about 6 crore persons through 2.6
crore enterprises. To resolve a number of issues which affect the growth of
this sector, Prime Minister constituted a High-Level Task Force which held
detailed discussions with all stake holders and drew up an agenda for action.
A High Level Council on Micro and Small Enterprises will monitor the
implementation of the recommendations and the agenda for action. I propose to
raise the allocation for this sector from Rs.1,794 crore to Rs.2,400 crore for
the year 2010-11.
86. A loan agreement for US $ 150 million has been signed between the
Government of India and the Asian Development Bank on 22nd December, 2009 for
implementing the comprehensive Khadi Reforms Programme. This programme will
cover 300 selected Khadi institutions.
Micro Finance
87. The programme for linking Self Help Groups (SHGs) with the banking
system has emerged as the major micro-finance initiative in the country. It
was re-designated as the 'Micro-Finance Development and Equity Fund' in
2005-06 with a corpus of Rs.200 crore. The fund corpus is being doubled to
Rs.400 crore in 2010-11.
Unorganized Sector
National Social Security Fund for unorganised sector workers
88. Recognising the need for providing social security to the workers in
the unorganised sector, and as a follow up to the Unorganised Sector Workers
Social Security Act, 2008, it has been decided to set up a National Social
Security Fund for unorganised sector workers with an initial allocation of
Rs.1,000 crore. This fund will support schemes for weavers, toddy tappers,
rickshaw pullers, bidi workers etc.
89. The Government had launched Rashtriya Swasthya Bima Yojana on October
1, 2007 to provide health insurance cover to below poverty line workers and
their families. It became operational on April 1, 2008 and so far more than 1
crore smart cards have been issued under this scheme. In view of the success
of the scheme, it is now proposed to extend its benefits to all such Mahatma
Gandhi NREGA beneficiaries who have worked for more than 15 days during the
preceding financial year.
90. To encourage the people from the unorganised sector to voluntarily save
for their retirement and to lower the cost of operations of the New Pension
Scheme (NPS) for such subscribers, Government will contribute Rs.1,000 per
year to each NPS account opened in the year 2010-11. This initiative, "Swavalamban"
will be available for persons who join NPS, with a minimum contribution of
Rs.1,000 and a maximum contribution of Rs.12,000 per annum during the
financial year 2010-11. The scheme will be available for another three years.
Accordingly, I am making an allocation of Rs.100 crore for the year 2010-11.
It will benefit about 10 lakh NPS subscribers of the unorganised sector. The
scheme will be managed by the interim Pension Fund Regulatory and Development
Authority.
91. I also appeal to the State Governments to contribute a similar amount
to the scheme and participate in providing social security to the vulnerable
sections of the society.
Skill development
92. Prime Minister's Council on National Skill Development has laid down
the core governing principles for operating strategies for skill development.
The Council has a mission of creating 50 crore skilled people by 2022. Of
these, the target for the National Skill Development Corporation, which has
started functioning from October, 2009, is 15 crore. It has completed a
comprehensive skill gap study of 21 high growth sectors and approved three
projects worth about Rs.45 crore to create 10 lakh skilled manpower at the
rate of one lakh per annum. Other projects are in advanced stages of
consideration.
93. It is proposed to launch an extensive skill development programme in
the textile and garment sector by leveraging the strength of existing
institutions and instruments of the Textile Ministry. The resources of the
private sector will also be harnessed by incentivising training through an
outcome - based approach. Through these instruments, the Ministry of Textiles
has set an ambitious target of training 30 lakh persons over 5 years.
Social Welfare
94. I propose to step up the plan outlay for Women and Child Development by
almost 50 per cent. Several new initiatives that were launched in 2009-10 are
now ready for implementation. A mission for empowerment of women is being set
up. The ICDS platform is being expanded for effective implementation of the
Rajiv Gandhi Scheme for Adolescent Girls.
95. To further improve female literacy rate, the Government has recast the
earlier National Literacy Mission as a new programme "Saakshar Bharat". It was
launched in September, 2009 with a target of 7 crore non-literate adults which
includes 6 crore women.
96. A Mahila Kisan Sashaktikaran Pariyojana to meet the specific needs of
women farmers is being launched. I have provided Rs.100 crore for this
initiative as a sub-component of the National Rural Livelihood Mission.
97. I am happy to inform the Honourable Members that I propose to enhance
the plan outlay of the Ministry of Social Justice and Empowerment to Rs.4500
crore. This amounts to an increase of 80 per cent as compared to 2009-10. This
will support the programmes being implemented for the target population groups
covering the Scheduled Castes, Other Backward Classes, persons with
disabilities, senior citizens and victims of alcoholism and substance abuse.
With this enhancement, the Ministry will be able to revise rates of
scholarship under its post-matric scholarship schemes for SCs and OBC
students, which is long overdue.
98. The allocation will also assist in establishing an Indian Sign Language
Research and Training Centre for the benefit of the hearing impaired. District
Disability Rehabilitation Centres are being set up in 50 additional districts
along with two composite regional centres for persons with disabilities.
99. I also propose to raise the plan allocation for the Ministry of
Minority Affairs from Rs.1,740 crore to Rs.2,600 crore for the year 2010-11.
This marks an increase of nearly 50 per cent. I am happy to inform the
Honourable Members that we are close to achieving the target of 15 per cent
priority sector lending to minorities in the current year. This will be
maintained for the next three years.
STRENGTHENING TRANSPARENCY & PUBLIC ACCOUNTABILITY
100. The UPA Government has made a serious attempt to create an environment
that supports transparency and accountability in the working of the public
institutions in the country. As Honourable Members are aware, a number of
legislative and administrative measures have been taken in this regard.
Financial Sector Legislative Reforms Commission
101. Most of our legislations governing the financial sector are very old.
Large number of amendments to these Acts made at different points of time has
also increased ambiguity and complexity. The Government proposes to set up a
Financial Sector Legislative Reforms Commission to rewrite and clean up the
financial sector laws to bring them in line with the requirements of the
sector.
Administrative Reforms Commission
102. The Administrative Reforms Commission constituted by the UPA
Government in its first term has submitted 15 reports, of which 10 reports
have been examined by the Government. Out of the 800 identified
recommendations for implementation so far, 350 recommendations have been
implemented and 450 are under implementation.
Unique Identification Authority of India (UIDAI)
103. In my last Budget Speech, I had announced the constitution of the
Unique Identification Authority of India, its broad working principles and the
timelines for delivery of the first UID numbers. I am happy to report that the
Authority has been constituted and it will be able to meet its commitments of
issuing the first set of UID numbers in the coming year. It would provide an
effective platform for financial inclusion and targeted subsidy payments.
Since the UIDAI will now get into the operational phase, I am allocating
Rs.1,900 crore to the Authority for 2010-11.
Technology Advisory Group for Unique Projects (TAGUP)
104. An effective tax administration and financial governance system calls
for creation of IT projects which are reliable, secure and efficient. IT
projects like Tax Information Network, New Pension Scheme, National Treasury
Management Agency, Expenditure Information Network, Goods and Service Tax, are
in different stages of roll out. To look into various technological and
systemic issues, I propose to set up a Technology Advisory Group for Unique
Projects under the Chairmanship of Shri Nandan Nilekani.
Independent Evaluation Office (IEO)
105. The Government had announced the setting-up of an Independent
Evaluation Office to undertake impartial and objective assessments of the
various public programmes and improve the effectiveness of the public
interventions. It has been decided that it would be an independent entity
under a Governing board chaired by the Deputy Chairman, Planning Commission.
The IEO would evaluate the impact of flagship programmes and place the
findings in the public domain. It would be funded by the Planning Commission.
Symbol for Indian Rupee
106. In the ensuing year, we intend to formalise a symbol for the Indian
Rupee, which reflects and captures the Indian ethos and culture. With this,
Indian Rupee will join the select club of currencies such as the US Dollar,
British Pound Sterling, Euro and Japanese Yen that have a clear distinguishing
identity.
Security and Justice
107. Secure borders and security of life and property fosters development.
I propose to increase the allocation for Defence to Rs.1,47,344 crore. This
would include Rs.60,000 crore for capital expenditure. Needless to say, any
additional requirement for the security of the nation will be provided for.
108. In 2009-10, the overall internal security and law and order situation
in the country remained largely under control. Several new measures were taken
by the Government to strengthen the security apparatus of the country. These
include operationalisation of the National Investigation Agency (NIA),
establishment of four NSG Hubs, augmentation of the Intelligence Bureau and
its Multi-Agency Centre.
109. There was decline in violence in Jammu and Kashmir in the year 2009.
We have taken a number of confidence building measures. As one more such
measure, Government proposes to recruit about 2,000 youth as constables in
five Central Para Military Forces in the year 2010.
110. To address the development problems of the thirty three left wing
extremism affected districts, a Task Force headed by the Cabinet Secretary was
formed for promoting coordinated efforts across a range of development and
security measures. It has been decided that Planning Commission will prepare
an integrated action plan for the affected areas. Adequate funds will be made
available to support the action plan. I appeal to the misguided elements to
eschew violence and join the development process.
National Mission for Delivery of Justice and Legal Reforms
111. To provide timely delivery of justice to all, the Government has
approved the setting up of the National Mission for Delivery of Justice and
Legal Reforms. The objective of the mission is to help reduce legal backlog in
courts from an average of 15 years at present to 3 years by 2012. It would
also help in improving the legal environment for business. The Thirteenth
Finance Commission has provided grants amounting to Rs.5,000 crore for the
States to improve the delivery of justice, including strengthening of
alternate dispute resolution mechanisms.
Budget Estimates 2010-11
I now turn to the Budget Estimates for 2010-11.
112. The Gross Tax Receipts are estimated at Rs.7,46,651 crore. The Non Tax
Revenue Receipts are estimated at Rs.1,48,118 crore. The net tax revenue to
the Centre as well as the expenditure provisions in 2010-11 have been
estimated with reference to the recommendations of the Thirteenth Finance
Commission.
113. The total expenditure proposed in the Budget Estimates for 2010-11 is
Rs.11,08,749 crore, which is an increase of 8.6 per cent over the total
expenditure in BE 2009-10. The Plan and Non Plan expenditures in BE 2010-11
are estimated at Rs.3,73,092 crore and Rs.7,35,657 crore, respectively. While
there is a 15 per cent increase in Plan expenditure, the increase in Non Plan
expenditure is only 6 per cent over the BE of previous year. With this level
of Plan expenditure, I am confident that the total Plan expenditure would be
very close to 100 per cent of the expenditure envisaged in the Eleventh Five
Year Plan.
114. Honourable Members will agree that fiscal policy has to be guided by
the required framework for fiscal prudence. In the Medium Term Fiscal Policy
Statement presented along with Budget 2009-10, I had laid down a road map for
fiscal deficit. I am happy to report that in keeping with my commitment, I
have been able to present the Budget for 2010-11 with a fiscal deficit of 5.5
per cent. In the Medium Term Fiscal Policy Statement being presented to the
House today, along with other Budget documents, the rolling targets for fiscal
deficit are pegged at 4.8 per cent and 4.1 per cent for 2011-12 and 2012-13,
respectively. These projections improve upon the recommendations of the
Thirteenth Finance Commission.
115. While presenting the Budget for 2009-10, I had expressed my concern
about the high level of fiscal deficit. I had also stated that the Government
will address this issue in right earnest to come back to the path of fiscal
consolidation at the earliest. I am happy to report that against a fiscal
deficit of 7.8 per cent in 2008-09, inclusive of oil and fertiliser bonds, the
comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for
2009-10. Both these deficit figures are based on the revised GDP numbers
published by the Central Statistical Organisation and include what were
earlier referred to as below the line items. This marks an improvement of
about one per cent in fiscal deficit during the current year. I have made a
conscious effort to avoid issuing bonds to oil and fertiliser companies. I
would like to continue with this practice of extending Government subsidy in
cash, thereby bringing all subsidy related liabilities into our fiscal
accounting.
116. The fiscal deficit of 5.5 per cent of GDP in 2010-11 works out to
Rs.3,81,408 crore. Taking into account the various other financing items for
fiscal deficit, the actual net market borrowing of the Government in 2010-11
would be of the order of Rs.3,45,010 crore. There will be enough space to
meet the credit needs of the private sector. The Government will plan the
borrowing programme in consultation with the RBI.
PART - B
Madam Speaker,
I shall now present my tax proposals.
117. While formulating them, I have been guided by the principles of sound
tax administration as embodied in the following words of Kautilya:
"Thus, a wise Collector General shall conduct the work of revenue
collection.... in a manner that production and consumption should not be
injuriously affected.... financial prosperity depends on public prosperity,
abundance of harvest and prosperity of commerce among other things."
118. I had stated last year that tax reform is a process and not an event.
The process I had outlined in the area of direct taxes was to release a draft
Direct Taxes Code along with a Discussion Paper. In the area of indirect
taxes, the reform initiative was the introduction of a Goods and Services Tax.
I have presented the developments in both reform initiatives in Part 'A' of my
Speech.
119. We have continued on the path of computerisation in core areas of
service delivery in the administration of direct taxes. This will reduce the
physical interface between taxpayers and tax administration and speed up
procedures and processes. The Centralised Processing Centre at Bengaluru is
now fully functional and is processing around 20,000 returns daily. This
initiative will be taken forward by setting up two more Centres during the
year.
120. As a part of Government's initiative to move towards citizen centric
governance, the income tax department has introduced "Sevottam", a pilot
project at Pune, Kochi and Chandigarh through Aayakar Seva Kendras. These
provide a single window system for registration of all applications including
those for redressal of grievances as well as paper returns. This year the
scheme will be extended to four more cities.
121. To achieve the roll-out of GST by April 2011, the indirect tax
administrations at the Centre and the States need to revamp their internal
work processes based on the use of Information Technology. I am happy to
inform Honorable Members that project ACES - Automation of Central Excise &
Service Tax, has already been rolled out throughout the country this year.
This will impart greater transparency in tax administration and improve the
delivery of taxpayer services. Similarly, a Mission Mode Project for
computerisation of Commercial Taxes in States has been approved recently. With
an outlay of Rs.1133 crore of which the Centre's share is Rs.800 crore, the
project will lay the foundation for the launch of GST.
122. I mentioned last year, that the income tax return forms should be
simple and user friendly. The income tax department is now ready to notify
SARAL-II form for individual salaried taxpayers for the coming assessment
year. This form will enable individuals to enter relevant details in a simple
format in only two pages.
123. To expeditiously resolve disputes with taxpayers I propose to expand
the scope of cases which may be admitted by the Settlement Commission to
include proceedings related to search and seizure cases pending for
assessment. I also propose to expand the scope of Settlement Commission in
respect of Central Excise and Customs so that certain categories of cases that
hitherto fell outside its jurisdiction may be admitted.
124. Last year, amendments to the statute enabled Government to enter into
tax treaties with specified territories besides sovereign states. We have
commenced bi-lateral discussions to enhance the exchange of bank related and
other information to effectively track tax evasion and identify undisclosed
assets of resident Indians lying abroad.
Direct Taxes
I shall now deal with direct taxes.
125. Last year I provided relief to individual taxpayers by enhancing the
exemption limit for all taxpayers and withdrawing the surcharge on personal
income tax. Taxpayers have responded positively to these concessions by
contributing a higher level of taxes. There is a persuasive case for further
relief by broadening the current tax slabs which I propose as follows:
Income upto Rs.1.6 lakh
Nil
Income above Rs.1.6 lakh and upto Rs.5 lakh 10 per cent
Income above Rs.5 lakh and upto Rs.8 lakh 20 per
cent
Income above Rs.8 lakh
30 per cent
126. The proposed broadening of tax slabs will provide substantial relief
to a large number of taxpayers.
127. To promote savings as well as to ensure their utilisation for the
thrust area of infrastructure, I propose to allow a deduction of an additional
amount of Rs.20,000 for investment in long-term infrastructure bonds as
notified by the Central Government. This would be over and above the existing
limit of Rs.1 lakh on tax savings. I am sure that these reliefs will put more
money in the hands of individual taxpayers for both consumption as well as
saving.
128. Besides contributions to health insurance schemes which is currently
allowed as a deduction under the Income-tax Act, I propose to allow
contributions to the Central Government Health Scheme also as a deduction
under the same provision.
129. Taking forward my initiative of phasing out surcharge, I propose to
reduce the current surcharge of 10 per cent on domestic companies to 7.5 per
cent. At the same time, I propose to increase the rate of Minimum Alternate
Tax (MAT) from the current rate of 15 per cent to 18 per cent of book profits.
This will further promoteinter-se equity among corporate taxpayers.
130. The President, in her address to the Parliament in June 2009, had
declared this decade as the Decade of Innovation. Last year, I extended the
scope of weighted deduction on expenditure incurred on in-house research and
development (R&D) to all manufacturing businesses except for a small negative
list. To further encourage R&D across all sectors of the economy, I now
propose to enhance the weighted deduction on expenditure incurred on in-house
R&D from 150 per cent to 200 per cent. I also propose to enhance the weighted
deduction on payments made to National Laboratories, research associations,
colleges, universities and other institutions, for scientific research from
125 per cent to 175 per cent.
131. Currently, any payment made to an approved scientific research
association is eligible for weighted deduction. The income of the approved
scientific research association is exempt from tax. I propose that payments
made to approved associations engaged in research in social sciences or
statistical research would be allowed a weighted deduction of 125 per cent.
The income of such approved research associations shall be exempt from tax.
132. In my Budget Speech last year, I stated that profit linked deductions
are inherently inefficient and liable to misuse. To incentivise businesses in
priority sectors, I introduced investment linked deduction as an alternative
to profit linked deduction. To give a boost to investment in the tourism
sector which has high employment potential, I propose to extend the benefit of
investment linked deduction under the Act to new hotels of two-star category
and above anywhere in India.
133. To provide one time interim relief to the housing and real estate
sector which was impacted by the global recession, I propose to allow pending
projects to be completed within a period of five years instead of four years
for claiming a deduction on their profits. I also propose to relax the norms
for built-up area of shops and other commercial establishments in housing
projects to enable basic facilities for their residents.
134. All businesses with a turnover exceeding Rs.40 lakh are currently
required to have their accounts audited. A similar provision also applies to
all professions whose receipts exceed Rs.10 lakh. I, as Finance Minister, had
introduced these limits in my budget of 1984. It is high time to reduce the
compliance burden on small taxpayers. I, therefore, propose to enhance these
limits to Rs.60 lakh in the case of businesses and Rs.15 lakh in the case of
professions.
135. To facilitate the business operations of small taxpayers, I had
extended the scope of presumptive taxation to all small businesses with a
turnover of up to Rs.40 lakh. To further reduce the compliance burden on
small taxpayers, I now propose to enhance this limit to Rs.60 lakh.
136. The threshold limits of payments below which tax is not deductible at
source have remained unchanged for a long time. I propose to rationalise
these thresholds.
137. Relaxing the current provisions on disallowance of expenditure, I
propose to allow deduction of such expenditure, if tax has been deducted at
any time during the financial year and paid before the due date of filing the
return. This will allow most deductors additional time up to September of the
next financial year. At the same time, I propose to increase the interest
charged on tax deducted but not deposited by the specified date, from 12 per
cent to 18 per cent per annum.
138. Last year, I had provided for the taxation of the newly introduced
Limited Liability Partnership (LLP) on the same lines as exists for a general
partnership firm. To facilitate the conversion of small companies into LLPs, I
propose that this will not be subject to capital gains tax.
139. Under the current provisions of the Act, "the advancement of any other
object of general public utility" cannot be considered as "charitable purpose"
if it involves carrying on of any activity in the nature of trade, commerce
or business. I have received representations from many organisations seeking
some relaxation in this restriction. I propose that this restriction would not
be applicable if the receipts from such activities do not exceed Rs.10 lakh in
the year.
140. My proposals on direct taxes are estimated to result in a revenue loss
of Rs.26,000 crore for the year.
Indirect Taxes
141. The major objectives that have guided me in the formulation of my
proposals on indirect taxes are the need to achieve some degree of fiscal
consolidation without impairing the recovery process and moving forward on the
road to GST.
142. Unlike the time I presented the last Budget, symptoms of economic
recovery are more widespread and clear-cut now. The three fiscal stimulus
packages that the Government introduced in quick succession have helped the
process of recovery significantly. The improvement in our economic performance
encourages a course of fiscal correction even as the global situation warrants
caution. Therefore, I propose to partially roll back the rate reduction in
Central Excise duties and enhance the standard rate on all non-petroleum
products from 8 per cent to 10 per cent ad valorem. The specific rates of duty
applicable to portland cement and cement clinker are also being adjusted
upwards proportionately. Similarly, the ad valorem component of excise duty on
large cars, multi-utility vehicles and sports-utility vehicles which was
reduced as part of the first stimulus package, is being increased by 2
percentage points to 22 per cent.
143. In the wake of spiralling petroleum prices, Government provided full
exemption from basic customs duty to crude petroleum and proportionately
reduced the basic duty on refined petroleum products in June, 2008. Compared
to the international price of the Indian crude basket of US$ 112 per barrel at
that time, the prices are much softer at present. In view of the pressing need
to move back to a fiscal consolidation path, I propose to restore the basic
duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and
10 per cent on other refined products. I also propose to enhance the Central
Excise duty on petrol and diesel by Re.1 per litre each.
144. Since I quit smoking many years ago, I would urge others to also
follow suit, as smoking is injurious to health. To this end, I am making some
structural changes in the excise duty on cigarettes, cigars and cigarillos
coupled with some increase in rates. I also propose to enhance excise duty on
all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc.
In addition, I propose to introduce a compounded levy scheme for chewing
tobacco and branded unmanufactured tobacco based on the capacity of pouch
packing machines.
145. Let me now turn to some much-needed incentives in thrust areas for
sustainable growth and development.
Agriculture & Related Sectors
146. In supporting the strategy outlined for development of agriculture
earlier in my speech, I propose to address a few key areas that call for
focused attention. These are:
(i) A strong supply chain for perishable farm produce to reach
consumption and processing centres promptly;
(ii) Infrastructure and technology to convert such produce into
value-added products; and
(iii) Infusion of technology to augment agricultural production.
147. Similar attention needs to be paid to related sectors such as apiary,
horticulture, dairy, poultry, meat, marine and aquaculture.
148. For achieving these objectives, I propose to provide:
• project import status with a concessional import duty of 5 per cent for
the setting up of mechanised handling systems and pallet racking systems in 'mandis'
or warehouses for food grains and sugar as well as full exemption from service
tax for the installation and commissioning of such equipment.
• project import status at a concessional customs duty of 5 per cent with
full exemption from service tax to the initial setting up and expansion of
» Cold storage, cold room including farm pre-coolers for preservation or
storage of agriculture and related sectors produce ; and
» Processing units for such produce.
• full exemption from customs duty to refrigeration units required
for the manufacture of refrigerated vans or trucks.
149. I also propose to provide:
• concessional customs duty of 5 per cent to specified agricultural
machinery not manufactured inIndia;
• central excise exemption to specified equipment for preservation, storage
and processing of agriculture and related sectors and exemption from service
tax to the storage and warehousing of their produce; and
• full exemption from excise duty to trailers and semi-trailers used in
agriculture.
150. Concessional import duty was provided to specified machinery for use
in the plantation sector in the year 2003. This exemption is to lapse in July
2010. The modernization of this labour-intensive sector is yet to reach the
expected level. I propose therefore, to extend it up to March 31, 2011 along
with a CVD exemption. I hope this will provide sufficient time for the sector
to achieve the desired objective.
151. One of the prerequisites for agricultural productivity is access to
good quality and disease-resistant seeds. I propose to exempt the testing and
certification of agricultural seeds from service tax.
152. I also propose to exempt the transportation by road of cereals and
pulses from service tax. Their transportation by rail would remain exempt.
153. I propose two measures under the Central Excise law to ease the cash
flow position for small-scale manufacturers hard hit by the economic slowdown.
First, they would be permitted to take full credit of Central Excise duty paid
on capital goods in a single instalment in the year of their receipt.
Secondly, they would be permitted to pay Central Excise duty on a quarterly,
rather than monthly basis. These measures that come into effect on the April
1, 2010 should provide them considerable relief.
Environment
154. Harnessing renewable energy sources to reduce dependence on fossil
fuels is now recognised as a credible strategy for combating global warming
and climate change. To build the corpus of the National Clean Energy Fund
announced earlier, I propose to levy a clean energy cess on coal produced in
India at a nominal rate of Rs.50 per tonne. This cess will also apply to
imported coal.
155. In pursuance of Government's resolve to implement the National Solar
Mission, I propose to provide a concessional customs duty of 5 per cent to
machinery, instruments, equipment and appliances etc. required for the initial
setting up of photovoltaic and solar thermal power generating units. I also
propose to exempt them from Central Excise duty. Similarly, ground source heat
pumps used to tap geo-thermal energy would be exempt from basic customs duty
and special additional duty.
156. Wind energy has shown promising growth in the country in recent years.
As a measure of further relief, I propose to exempt a few more specified
inputs required for the manufacture of rotor blades for wind energy generators
from Central Excise duty.
157. LED lights are staging a debut as a highly energy-efficient source of
lighting for streets, homes and offices. Central Excise duty on these is being
reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps.
158. Full exemption from Central Excise duty was provided to electric cars
and vehicles that offer an eco-friendly alternative to petrol or diesel
vehicles. The manufacturers of such vehicles have expressed difficulty in
neutralising the duty paid on their inputs and components. I propose to remedy
this by imposing a nominal duty of 4 per cent on such vehicles. I also propose
to exempt some critical parts or sub-assemblies of such vehicles from basic
customs duty and special additional duty subject to actual user condition.
These parts would also enjoy a concessional CVD of 4 per cent.
159. The humble cycle rickshaw is now being acclaimed as an
environment-friendly means of transport. CSIR has developed an innovative
product called 'soleckshaw' to replace manually-operated rickshaws. It runs on
batteries which are charged by solar power. I propose to provide a
concessional excise duty of 4 per cent to this product. Its key parts and
components are also being exempted from customs duty.
160. To encourage the use of bio-degradable materials, I propose to exempt
the import of compostable polymer from basic customs duty.
Infrastructure
161. Strengthening the public transport system is another means of reducing
dependence on fossil fuels. I propose to grant project import status to
'Monorail projects for urban transport' at a concessional basic duty of 5 per
cent.
162. Full exemption from import duty is available to specified machinery
for road construction projects on the condition that the machinery shall not
be sold or disposed of for a minimum period of five years. In view of
representations that this leads to idling of machinery, I propose to allow
resale of such machinery on payment of import duty at depreciated value. It is
also being clarified that the importer is free to relocate such machinery to
other eligible road construction projects.
163. With the subscriber base growing at 14 million per month, India is one
of the fastest growing markets for mobile phone connections in the world.
Domestic production of mobile phones is now picking up in view of exemptions
from basic, CVD and special additional duties granted to their parts,
components and accessories. To encourage the domestic manufacture of
accessories, these exemptions are now being extended to parts of battery
chargers and hands-free headphones. Also, the validity of the exemption from
special additional duty is being extended till March 31, 2011.
Medical Sector
164. Medical equipment, instruments and appliances are subjected to a very
complex import duty regime based on several long lists that describe
individual items. Multiple rates coupled with descriptions not aligned with
tariff lines, result in disputes and at times prevent state-of-art equipment
from getting the benefit of exemption. I propose to prescribe a uniform,
concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption
from special additional duty on all medical equipment. A concessional basic
duty of 5 per cent is being prescribed on parts and accessories for the
manufacture of such equipment while they would be exempt from CVD and special
additional duty. Full exemption currently available to medical equipment and
devices such as assistive devices, rehabilitation aids etc. is being retained.
The concession available to Government hospitals or hospitals set up under a
statute is also being retained.
165. The manufacturers of orthopaedic implants have represented that their
inputs attract a higher rate of duty than the finished product. I propose to
exempt specified inputs for the manufacture of such implants from import duty.
Infotainment
166. India is a nation of movie-goers. The film industry has been
experiencing difficulties in importing digital masters of films for
duplication or distribution loaded on electronic medium vis-a-vis those
imported on cinematographic film, owing to a differential customs duty
structure. I propose to rationalise this by charging customs duty only on the
value of the carrier medium. The same dispensation would apply to music and
gaming software imported for duplication. In keeping with the tradition of
Indian cinema, however, I shall provide a surprise ending. In all such cases
the value representing the transfer of intellectual rights would be subjected
to service tax.
167. Cable transmission of infotainment is undergoing a transformation with
the adoption of digital technology. The multi-service operators need to invest
in "Digital Head End" equipment. To enable this, I propose to provide project
import status at a concessional customs duty of 5 per cent with full exemption
from special additional duty to the initial setting up of such projects.
Precious Metals
168. The prices of precious metals continue to rise. Since the customs duty
is levied on these at specific rates, I propose to index the rates as follows:
• On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams.
• On silver from Rs.1,000 per kg to Rs.1,500 per kg.
169. Gems and jewellery is a traditional item in our export basket. Rhodium
- a precious metal used for polishing jewellery attracts a basic customs duty
of 10 per cent. This is being reduced to 2 per cent.
170. To encourage domestic refining capacity for gold, I propose to reduce
the basic customs duty on gold ore and concentrates from 2 per cent ad valorem
to a specific duty of Rs.140 per 10 grams of gold content with full exemption
from special additional duty. Further, the excise duty on refined gold made
from such ore or concentrate is being reduced from 8 per cent to a specific
duty of Rs.280 per 10 grams.
Other Proposals
171. Full exemption from import duty is available to specified inputs or raw
materials required for the manufacture of sports goods which are assuming
importance as an item of export. This is being expanded to cover a few more
items.
172. In order to incentivise the domestic production of microwave ovens, I
propose to reduce the basic customs duty on one of its key components, namely
magnetrons from 10 per cent to 5 per cent.
173. Presently, there is a value limit of Rs.1 lakh per annum on duty-free
import of commercial samples as personal baggage. I propose to enhance this
limit to Rs.3 lakh per annum.
174. Industry has represented that the exemption from special additional
duty of 4 per cent based on refunds leads to substantial blockage of funds.
To ease this difficulty, I propose to provide an outright exemption from
special additional duty to goods imported in a pre-packaged form for retail
sale. This would also cover mobile phones, watches and ready-made garments
even when they are not imported in pre-packaged form. The refund-based
exemption is also being retained for cases not covered by the new
dispensation.
175. Toy balloons are a source of joy to millions of children. To bring a
smile to their mothers' faces, I propose to fully exempt them from Central
Excise duty.
176. Some of the other relief measures that I propose are as under:
• Reduction in basic customs duty on long pepper from 70 per cent to 30 per
cent;
• Reduction in basic customs duty on asafoetida from 30 per cent to 20 per
cent;
• Reduction in central excise duty on replaceable kits for household type
water filters other than those based on RO technology to 4 per cent;
• Reduction in central excise duty on corrugated boxes and cartons from 8
per cent to 4 per cent;
• Reduction in central excise duty on latex rubber thread from 8 per cent
to 4 per cent; and
• Reduction in excise duty on goods covered under the Medicinal and Toilet
Preparations Act from 16 per cent to 10 per cent.
177. My proposals relating to customs and central excise are estimated to
result in a net revenue gain of Rs.43,500 crore for the year.
Service Tax
178. The service sector contributes nearly 60 per cent of the GDP. The
service tax to GDP ratio however, is only around 1 per cent. This sector thus,
has significant potential to augment revenue.
179. To bridge this gap, I had the option to raise the rate of service tax
to 12 per cent as it was before I introduced the third stimulus package. I am
not resorting to this option to maintain the growth momentum and also to bring
about a convergence in the rates of tax on goods and services. I, therefore,
propose to retain the rate of tax on services at 10 per cent to pave the way
forward for GST.
180. I had another option - to bring all services under service tax. I am
not opting for this either at this stage. I propose, however, to bring certain
services, hitherto untaxed, within the purview of the service tax levy. These
are being notified separately.
181. I am also proposing certain legislative changes to plug revenue
leakages, to remove distortions and to clarify certain doubts that have arisen
over a period of time. I do not want to waste the precious time of the House
elaborating the details, as they are available in the Finance Bill and other
Budget documents.
182. Export of services, especially in the area of Information Technology
and Business Process Outsourcing, generates substantial employment and brings
in foreign exchange. I propose to ease the process of refund of accumulated
credit to exporters of services by making necessary changes in the definition
of export of services and procedures.
183. Accredited news agencies which provide news feed online attract
service tax. Acknowledging the yeoman services of such news agencies in
disseminating news, I propose to exempt such news agencies that meet certain
criteria, from service tax.
184. My proposals relating to service tax are estimated to result in a net
revenue gain of Rs.3,000 crore for the year.
185. 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.
186. My proposals on Direct Taxes are estimated to result in a revenue loss
of Rs.26,000 crore for the year. Proposals relating to Indirect Taxes are
estimated to result in a net revenue gain of Rs.46,500 crore for the year.
Taking into account the concessions being given in my tax proposals and
measures taken to mobilise additional resources, the net revenue gain is
estimated to be Rs.20,500 crore for the year.
187. We have emerged from the global slowdown faster than any other nation.
I did not hesitate in exercising my judgment on the course of action last year
and I have no hesitation in my mind now. Our actions today will determine our
tomorrow.
188. This Budget belongs to 'Aam Aadmi'. It belongs to the farmer, the
agriculturist, the entrepreneur and the investor. The opportunity is great.
The time is right. I have placed my faith in the hands of the people who, I
know, can be depended upon to rise to any occasion in national interest. I
have placed my faith in the collective conscience of the nation that can be
touched to scale undreamt of heights in the coming years.
189. Madam Speaker, with these words I commend the Budget to the House.
|
