Rediscover Gujrat .....Rediscover the Gujrati in You
Gujarat Plus - Gujarat on Web
|
Rediscover Gujrat .....Rediscover the Gujrati in You |
|
|
This page is no longer
updated. Please go to our main page here
Part I - FM's SPEECH on UNION BUDGET 2001-2002 Thursday, March 1, 2001
Sir,
I rise to present the Budget for the year
2001-2002.
- I do so in all humility. The challenges we face this year
are awesome, made more so by the tragedy and devastation caused by the Gujarat earthquake.
I hope I shall get the understanding and support of the whole House in my endeavour to
meet these challenges.Economic Context
- The Indian economy has continued to exhibit both growth
and resilience that have characterized its performance in the past few years. Overall
economic growth this year is expected to be about 6 per cent despite a series of
unexpected setbacks. We have had a second successive year of irregular monsoon resulting
in low agricultural growth. World petroleum prices have continued to stay at high levels
placing strains on the economy as a whole, and have led to a significant increase in
inflation over the past year. Fortunately, despite the increase in energy prices, the
prices of essential commodities, and of manufactured products as a whole, have remained
stable. Inflation, excluding energy, was around 4 per cent during the year. The economy
remained secure with record levels of foreign exchange reserves and public food stocks.
The creditable export performance recorded last year improved further: exports grew by
over 20 per cent in dollar terms in April-December 2000.
It is now 10 years since economic
reforms began in 1991. During this period, the economy has grown at an average rate of 6.4
per cent per year since 1992-93 compared to the 5.8 per cent recorded in the 1980s.
Poverty has fallen from 36 per cent in 1993-94 to 26 per cent or less now.
While economic reforms have placed the
country on a much more secure and sustained growth path, we still have some serious
concerns and cannot afford to be complacent.
l Agricultural reforms have been inadequate
and our agriculture continues to be subject to the vagaries of the monsoon.
l Despite major industrial sector reforms,
industrial growth has not accelerated to the double-digit level as expected.
l Inadequate fiscal adjustment has remained
the most intractable problem over the past decade.
- Interest payments now constitute over 69 per cent of the
Centre’s tax revenues.
Subsidies continue to increase to
unaffordable levels and do not necessarily reach the deserving beneficiaries.
The pension liability of the Government is
becoming onerous.
l Public investment in infrastructure and
social sectors is inadequate due to falling total public sector savings.
l Private investment is constrained due to
high real interest rates and inadequate infrastructure.
Budget Strategy
Thus, despite the many achievements of economic reforms
over the past decade, much remains to be done if we have to achieve our full potential.
There is urgent need to further deepen reforms to set the stage for higher growth over the
next decade. We have to intensify our effort in fiscal adjustment so that the generations
to come are not burdened by our borrowing excesses. The economy has achieved significant
acceleration in growth over the last 20 years. Our aspiration must be to achieve still
higher growth in the next 20 years.
The broad strategy of the budget,
therefore, with this objective of growth in mind is to ensure:-
l Speeding up of agricultural sector
reforms and better management of the food economy.
l Intensification of infrastructure
investment, continued reform in the financial sector and capital markets, and deepening of
structural reforms through removal of remaining tiresome controls constraining economic
activity.
l Human development through better
educational opportunities and programmes of social security.
l Stringent expenditure control of
non-productive expenditure, rationalisation of subsidies and improvement in the quality of
Government expenditure.
l Acceleration of the privatisation process
and restructuring of public enterprises.
l Revenue enhancement through widening of
the tax base and administration of a fair and equitable tax regime.
Agriculture and Rural Development
As I have noted, reforms in the agriculture sector
have been inadequate and must be speeded up. The Government has already announced the
first ever National Policy in Agriculture.
The provision of adequate credit flow is critical for
agricultural production. Total credit flow to agriculture through institutional channels
of commercial banks, cooperative banks and regional rural banks is estimated to have
reached a level of Rs 51,500 crore this year, an increase of about 15 per cent over last
year. It is expected to increase to Rs 64,000 crore in 2001-2002 representing an increase
of 24 per cent. In order to ensure continued healthy growth of the agricultural sector, I
propose the following steps:
The operation of the Rural Infrastructure
Development Fund (RIDF), set up in 1995-96 with NABARD, has been very successful in
upgrading rural infrastructure with about 1,84,000 projects sanctioned so far. To help the
States, I have decided to reduce the interest rate charged by NABARD from 11.5 per cent to
10.5 per cent. The corpus of RIDF VII will be increased from Rs 4500 crore to Rs 5000
crore next year.
The innovation of Kisan Credit Cards has
proved to be very successful. Since the year of its introduction in 1998-99, almost 110
lakh of KCCs have been issued. I am asking our banks to accelerate this programme and
cover all eligible agricultural farmers within the next 3 years.
I am also asking the banks to provide a
personal insurance package to the KCC holders, as is often done with other credit cards,
to cover them against accidental death or permanent disability, upto maximum amount of Rs
50,000 and Rs 25,000 respectively. The premium burden will be shared by the card issuing
institutions.
NABARD and SIDBI were asked to link one lakh
Self-Help Groups during the current year. NABARD by itself is well poised to exceed this
target by the end of next month. I expect NABARD to link 1 lakh additional Self Help
Groups during 2001-02, which would help in providing access to credit to an additional 20
lakh families. Share-croppers and tenant farmers will also become eligible for this scheme
and special attention will be given to SC/ST groups. A micro finance development fund has
also been set up in NABARD with contribution of Rs 40 crore each by NABARD and RBI.
I had permitted NABARD to issue capital gains
tax exemption bonds last year. This has helped NABARD to mobilise more than Rs 1000 crore
at lower than normal interest rates thereby reducing its cost of funds. I propose to
continue with this tax exemption.
The resources from the Watershed
Development Fund set up in NABARD would be used to promote people’s participation and
also enable water users’ associations to implement, operate and maintain irrigation
schemes.
- In 1999, I had announced a credit linked subsidy scheme for
construction of cold storages for perishable commodities. So far, NABARD and NCDC have
provided Rs 161 crore of credit for creation of additional capacity of 9.69 lakh tonnes. A
subsidy of Rs 78 crore for setting up these cold storages was provided during 2000-2001. I
now propose to extend the coverage of this scheme to also cover rural godowns. The subsidy
to be provided by the Government would be suitably enhanced to take care of increased
coverage. The loans would carry an adequate long-term repayment period and would enable
individuals, cooperative societies and others to build godowns by availing of loans from
cooperative banks, commercial banks and RRBs.
- This scheme will enable small farmers to enhance their
holding capacity in order to sell their produce at remunerative prices. NABARD proposes to
reduce its rate of interest for funding the storage of crops, from 10 per cent to 8.5 per
cent. Small farmers will particularly benefit from this scheme by avoiding distress sales.
With the diversification and modernisation
of agricultural practices, there is a need to augment support and extension services for
agriculture. For this purpose, a scheme for setting up Agriclinics and Agribusiness
Centres by agricultural graduates will be launched with the support of NABARD. These
centres will provide a package of soil and input testing facilities and other consultancy
services, They will strengthen transfer of technology and extension services and also
provide self-employment opportunities to technically trained persons. Loans on attractive
terms for setting up these centres will be provided by banks with refinance from NABARD.
There is a significant potential of
improving crop productivity in the Eastern and North Eastern regions through crop
diversification and adoption of improved technologies. These regions also have large
untapped ground water resources. A sum of Rs 61 crore has been provided for the Centrally
Sponsored Scheme on "On-Farm Water Management for Increasing Crop Production in
Eastern India".
- I am also happy to inform the House that I have provided Rs
38 crore for the "Technology Mission for Integrated Development of Horticulture in
the North-Eastern States", announced by me last year.Rural Roads
In my last Budget, I had announced the
launching of a new scheme, the Pradhan Mantri Gramodaya Yojana (PMGY) with the objective
of undertaking time bound programmes to fulfill the critical needs of the rural people. As
a follow up, particularly with the objective of achieving rural connectivity, the Pradhan
Mantri Gram Sadak Yojana has been launched by the Hon’ble Prime Minister on December
25, 2000. A Central allocation of Rs 2500 crore was provided for 2000-01. I am providing
another allocation of Rs 2500 crore for the coming year. 50 per cent of the diesel cess is
earmarked for development of rural roads.
Rural Electrification
It is a matter of concern that even
after 50 years of planned development there are still about 80,000 villages, which do not
have access to electricity. A package of initiatives is therefore being launched to
improve the power distribution system in rural areas. This includes:
l Completion of electrification of
bulk of the remaining villages in the next 6 years.
l Extension of assistance to the States
for village electrification works under the PMGY whose funding is being augmented.
l Stepping up credit support from Rural
Electrification Corporation to SEBs for speedy electrification of dalit bastis, households
of scheduled tribes and other weaker sections of society.
l Improving the quality of power supply
in villages, augmentation of distribution networks in rural areas supported by REC under
the Accelerated Power Development Programme.
l Earmarking a sum of at least Rs 750
crore out of RIDF for rural electrification works.
- l Augmenting the resources of REC, by allowing it to float
capital gains tax exemption bonds along with NABARD and NHAI under Section 54 EC of the
Income Tax Act.
Management of the Food Economy
Increased production and rising
productivity makes the proper management of the food economy more critical then ever
before. Our policy has to be transformed to deal with surpluses rather than only
shortages. The present arrangement of Government of India procuring foodgrains and States
managing the PDS has led to many problems. While the subsidy has increased from Rs 8210
crore at B.E. to Rs 12,125 crore at R.E. stage this year, the satisfaction level has gone
down. I propose, therefore, to give an enlarged role to the State Governments in both
procurement and distribution of foodgrains for PDS in their respective states. Instead of
providing subsidised foodgrains, financial assistance will be provided to the State
Governments to enable them to procure and distribute foodgrains to BPL families at
subsidised rates. FCI will continue to procure foodgrains for maintaining food security
reserves and for such State Governments who will assign it this task on their behalf.
Details for operationalising these arrangements will be worked out in consultation with
the State Governments at the earliest.
The agricultural sector continues to be
constrained by the existence of a number of inhibiting controls and regulations. The
Essential Commodities Act, 1955 provides for the control of production, supply and
distribution of certain commodities identified as essential commodities under the Act to
protect the interest of consumers. State Governments have issued a large number of Control
Orders under this Act inhibiting free movement of some food and agriculture products. In
the changed present situation undue restrictions on movement and stocking of foodgrains
and agricultural produce is acting as a disincentive to farmers.
- Government therefore proposes to review the operation of the
Essential Commodities Act, 1955 and remove many of the restrictions that have been
imposed on the free inter-State movement of foodgrains and agricultural produce and also
on the storage and stocking of such commodities. It will also review the list of
commodities declared as essential under the said Act and bring their number down to the
minimum required. My colleague the Food Minister will issue necessary direction in this
regard after consultations with the State Governments.
Infrastructure
Rapid development of the economy depends
on adequate investment in infrastructure. A key issue here is imposition of appropriate
user charges necessary to provide adequate returns on investment. Public resources have
been invested in the public sector over the last 50 years for the provision of
infrastructure services in the country. One consequence of this has been that user charges
have inevitably become politically determined. Over time non-merit subsidies inherent in
such low user charges have mounted to over 10 per cent of GDP, a figure similar to the
total fiscal deficit of the Central and State Governments combined. Hence they are a major
cause of the fiscal distress being experienced at all levels.
I believe that this issue is now so
important that it needs urgent discussion throughout the country. The challenge is to
achieve a consensus on the imposition of appropriate user charges in such a manner that
the poor are protected while those who can pay are made to do so. Only then will we be
able to accelerate investment in these essential services in both the public and private
sectors. A prime example of this is the power sector.
Power
The importance of power in fuelling
economic growth cannot be over emphasised. The total cost to the State Electricity Boards
of implicit subsidies amounts to about Rs 36,000 crore this year. After accounting for
cross subsidy and State subventions, actual commercial losses of all SEBs combined are
estimated to be about Rs 24,000 crore. Hidden in these loss figures are extremely high
T&D losses.
Although all of these losses are borne by
SEBs and State Governments, I have to express my concern on this issue since this is a
massive national loss and affects Central Government undertakings also. The total dues
owed to Central Government utilities by SEBs and others now amount to over Rs 25,000
crore. If these resources were available, the country would have no difficulty in
investing adequately in power sector expansion to the benefit of all. Theft of electricity
must be stopped and economic tariffs levied.
The most vital element of the reform process
is the restoration of financial viability of the State Electricity Boards (SEBs). On the
basis of consensus that has progressively emerged in the National Development Council
Resolution of 1992, the Common Minimum National Action Programme drawn up in 1996 and the
Power Ministers’ Conference of February 2000, the Central Government is accelerating
the programme of reforms in SEBs on the basis of specific milestones that are being built
into MOUs entered into with State Governments. These MOUs include specific milestones such
as:-
l A time bound programme for installation of
100 per cent metering by December 2001.
l Energy audit at all levels.
l A specific programme for reduction and
eventual elimination of power theft.
l Tariff determination by SERCs and
compliance thereof.
l Commercialisation of distribution and
l SEB restructuring.
To demonstrate the importance of this task,
the Prime Minister will hold a meeting of State Chief Ministers on March 3, 2001.
MOUs have already been entered into
with 5 States and we expect more States to adopt the reform process. Accordingly, plan
allocation to the Accelerated Power Development Programme (APDP) has been stepped up to Rs
1500 crore next year from a level of Rs 1000 crore this year. Priority under APDP would be
given to those states that undertake such reform. The key to restoration of financial
viability is reform of distribution. Assistance from the Fiscal Reform Incentive Fund
recommended by the 11th Finance Commission would also, inter-alia, be linked to the
achievement of power reforms. The reforming States would also receive support from the
Central Government in form of preferential allocation of power to SEBs from CPSUs,
additional investment by CPSUs in generation and transmission, and preferential allocation
of external aid.
In order to help accelerate the
reform process in the power sector and to unify all existing central legislations in the
sector, my colleague the Minister for Power will introduce the Electricity Bill 2001
within this session.
- The Plan outlay for central sector power utilities is being
raised from Rs 9,194 crore this year to Rs 10,030 crore for 2001-02. This demonstrates the
commitment of the Central Government to accelerate public sector power investment along
with power sector reforms.
Roads
The National Highway Development
Programme (NHDP) represents a new road vision for this country. Its unprecedented scale is
symbolic of government’s earnestness to provide connectivity and mobility of an
altogether different order. The key to government’s success in accelerating the road
development programme lies in its bold policy of levying a cess on petrol and diesel as a
user charge for road usage. Resources for Phase I, to be completed by December 2003, have
already been tied up. Work has already been awarded for more than 1500 Kms. of the golden
quadrilateral in addition to the completed sections totalling 600 Kms. The balance portion
is expected to be awarded by the middle of this year.
The cess has paved the way for integrated
road development in the country, including village roads, district roads, state roads, and
national highways. Rs 962 crore from the cess fund is being made available to States for
state roads. The total plan outlay for this sector is being enhanced by 93 per cent to Rs
8727 crore in 2001-02.
Telecom
Another area of success is in the
telecommunications sector. Almost all the policy measures announced in the New Telecom
Policy 1999 regarding basic and cellular services, national long distance, Internet
services, and corporatisation of Department of Telecom Services have been implemented.
Competition is being introduced in all service segments.
By March 2001, overall teledensity is
expected to reach 3.5 per hundred, about double the teledensity of only two years ago.
Moreover, the new competition has already reduced prices for consumers. There are now
almost 800,000 STD/ISD/Local booths around the country bringing telephone service within
reach of almost all consumers, apart from generating considerable employment.
Looking ahead, having recognised the
imperatives of technological change in this area, the Government proposes to introduce the
Convergence Bill to cover telecommunications, information technology, and information and
broadcasting sectors in an integrated manner.
Ports
Coming to the port sector, I am glad to
report that policy initiatives designed to increase private sector participation in ports
have also been successfully implemented. Overall, capacity in Indian major ports is
expected to go up to 314 million tonnes this year and further to 376 million tonnes by the
end of 2001-2002, along with substantial capacity addition in minor ports. There is now
adequate capacity in major ports. Ships no longer have to wait for berths as was the case
before.
- Ennore port has already been corporatised and Jawahar Lal
Nehru Port in New Mumbai is next, and with experience, other major ports can also be
corporatized, enabling them to raise resources in the market. Successful investment is
being enabled by the setting of economic tariff levels. With the formation of the Tariff
Authority for Major Ports, these tariffs are being rationalised further on a continuing
transparent and fair basis.Financial Sector and Capital Markets
A great deal of progress has been made
over the last few years in pursuing reforms in the financial sector and capital markets. I
propose to continue reform in this sector.
Debt Market
The Indian equity market is the oldest
in Asia. Since the creation of SEBI much greater transparency as well as automaticity has
been introduced in the working of the equity market. The need now is to develop and deepen
the debt market. This will be of great benefit to small investors and institutional
investors alike. The infrastructure sector will be enabled to raise long term funds,
particularly with the opening of the insurance sector.
In order to further develop a transparent
and active debt market in general, and the Government securities market in particular, I
propose to take the following measures:-
l A Clearing Corporation will be set up
under the active encouragement of the RBI, with State Bank of India as the chief promoter,
and is expected to be in place by June 2001. It will also enable settlement of forex
transactions.
l Trading of Government Securities, through
order driven screen-based system will be implemented.
l An electronic Negotiated Dealing System
will be set up by the RBI by June 2001 to facilitate transparent electronic bidding in
auctions and dealings in Government securities on a real time basis.
l In order to ensure smooth and quick
movement of funds, the Electronic Fund Transfer (EFT) and Real Time Gross
Settlement Systems (RTGS) are being put in place by the Reserve Bank of India within
the next year.
l Clarifications are being issued by CBDT to
promote the issuance of STRIPS, zero coupon bonds, deep discount bonds, and the like.
l The old Public Debt Act will be replaced
by Government Securities Act.
l Comprehensive legislation will be
introduced on securitization.
I propose to set up a small group
comprising the Reserve Bank of India, SEBI, the stock exchanges and Ministry of Finance to
monitor and implement these developments so that the debt market becomes active next year.
Banking Sector
Banking sector reforms have proceeded
apace in a phased manner over the past decade. However, the problem of non-performing
assets with banks has continued. Special attention is being paid to recovery of NPAs:-
l Public Sector Banks have recovered Rs
800 crore of NPAs from 2 lakh accounts in 2000-01.
l Net NPAs as percentage of net advances were
almost half at
7.4 per cent in 1999-2000 compared to 14.5 per cent in 1993-94.
l 22 Debt Recovery Tribunals (DRTs) and 5
Appellate Tribunals have been established.
l 7 more DRTs will be set up during 2001-02.
I also propose to bring in a legislation
that will facilitate foreclosure and enforcement of securities in cases of default in
order to enable the intitutions to realise their dues.
In the light of new competition in the
banking industry it is necessary to strengthen the management of the public sector banks.
I propose to provide greater autonomy to bank managements. It is also essential to provide
greater independence to bank managements in forming their own recruitment strategy and in
implementing it. I therefore propose to abolish the Banking Services Recruitment Boards.
This will be done in association with the Reserve Bank of India by July 31, 2001 or
earlier. All future recruitments will be done by banks themselves.
Capital Account Liberalisation
Until about 10 years ago, all foreign
exchange transactions were tightly controlled by the government and by the RBI. We have
progressively loosened these controls and made the current account completely convertible.
We have also liberalised the capital account for certain purposes. I propose to take
further measures for liberalising the capital account. These are:
l Indian companies wishing to invest abroad
may now invest up to US $50 million on an annual basis through the automatic route without
being subject to the three year profitability condition.
l Companies which have issued ADRs/GDRs may
henceforth make foreign investments up to 100 per cent of these proceeds; up from the
current ceiling of 50 per cent.
l Companies with proven track record wishing
to invest larger amounts may now get a block allocation in advance from the RBI for
investments overseas.
l Indian companies that have issued
ADRs/GDRs may acquire shares of foreign companies up to an amount of US $100 million or an
amount equivalent to ten times of their exports in a year, whichever is higher.
l ADRs/GDRs will be provided two-way
fungibility. Converted local shares may be reconverted to ADRs/GDRs while being subject to
sectoral caps, wherever applicable.
l Indian companies will now be permitted to
list in foreign stock exchanges by sponsoring ADR/GDR issues against block share holding.
This facility would have to be offered to all categories of shareholders.
The Reserve Bank of India will be issuing
these guidelines separately.
Investments by Registered partnership
firms and companies providing professional services have not, so far, been permitted to
make overseas investments. This ban is now being removed. Similarly, Indian employees who
have the benefit of ESOP schemes in foreign owned companies can now make investments
abroad up to US $20,000 annually instead of in a block of 5 years.
Foreign Investment
Progressive liberalization has taken
place in the provisions relating to foreign investment. I propose to take the following
further measures:
l Foreign Institutional Investors (FIIs) can
invest in a company under the portfolio investment route up to 24 per cent of the paid up
capital of the company. This can be increased to 40 per cent with the approval of the
General Body of the shareholders by a special resolution. I propose to increase this limit
to 49 per cent.
l Foreign Direct Investment (FDI) in
Non-Banking Financial Companies (NBFCs) is permitted on a case by case basis upto 100 per
cent but with a condition that a minimum of 25 per cent of their holding is divested in
the domestic market. This condition is being removed, provided the foreign investors bring
in a minimum of US $50 million. FDI in NBFCs will now be put on the automatic route
subject to RBI guidelines.
Structural Reforms
In order to accelerate growth in the
Indian economy, we have now to address some of the difficult areas of reform that have not
been tackled so far.
There are four significant areas where a
price and distribution control regime exists. These are the areas of petroleum,
fertilizer, sugar and drugs.
Administered Pricing Mechanism (APM)
Petroleum
As Hon’ble Members are aware,
Government had, in November 1997, notified the details of dismantling of the Administered
Pricing Mechanism (APM) in the petroleum sector by March 2002. I propose to adhere to this
deadline. A time bound action programme is being prepared for the deregulation of APM by
March, 2002. My colleague the Minister of Petroleum and Natural Gas will be outlining the
road map for this separately.
Fertilizer
Hon’ble Members will recall that I
have in the past referred to the rationalisation of fertilizer pricing with the objective
of phasing out the existing retention price scheme (RPS) in the medium-term. Government
has now decided to implement the recommendations of the Expenditure Reforms Commission for
a phased programme of complete decontrol of urea by April 1, 2006. The following steps
would be taken in the first phase commencing from April 1, 2001:
l The unit specific RPS will be replaced by
a Group Concession Scheme. The current MRP arrangement will be continued and the
concession for each group calibrated to enable the units to sell urea at the stipulated
MRP.
l The rate of concession for urea units based on
naphtha/FO/LSHS will be linked to international prices of these feed stocks.
Sugar
Government is committed to complete
decontrol of sugar. But this must be irreversible. Government has decided to introduce
futures/forward trading in sugar within the coming year, a step that is necessary before
full decontrol. Sugar under the Public Distribution System will continue to be supplied to
ration cardholders in the special category states, hill states, island territories and to
BPL families in other states and UTs. Such supplies can even continue after sugar is
completely decontrolled. The retail issue price of sugar under the PDS is being revised to
Rs 13.25 per kg. with effect from March 1, 2001.
Drug Price Control
The domestic drugs and pharmaceutical
industry needs support in order to meet the challenges and to avail of the opportunities
arising out of liberalisation of our economy and the impending advent of the product
patent regime. Government has been considering measures to lessen the rigours of the
present price control mechanism where they have become counter productive. Towards this
end, we have decided that the span of price control will be reduced substantially.
However, keeping in view the interest of the weaker sections of society, Government will
retain the power to intervene comprehensively in cases where prices behave abnormally.
Changes in the Pharmaceutical Policy are being made accordingly.
Industrial Restructuring
Government had constituted a high level
committee on law relating to revival, reconstruction and/or winding up of companies. The
Committee has submitted its report and Government has accepted its key recommendations. It
is proposed to repeal the SICA and also to amend the Companies Act in order to set up a
National Company Law Tribunal. These legislative proposals are proposed to be introduced
during the current session by my colleague, the Minister for Law, Justice and Company
Affairs.
Labour Market
Along with these changes, it is also
necessary to address the contentious issue of rigidities in our labour legislations. Some
existing provisions in the Industrial Disputes Act have made it almost impossible for
industrial firms to exercise any labour flexibility. The Government is now convinced that
some change is necessary in this legislation. Chapter VB of the ID Act stipulates that
employers in specified industrial establishments must obtain prior approval of the
appropriate government authority for effecting lay-off, retrenchment and closure, after
following the prescribed procedure. It is proposed that these provisions may now apply to
industrial establishments employing not less than 1000 workers instead of 100. The
separation compensation will be increased from 15 days to 45 days for every completed year
of service. The enhancement of compensation would act as a deterrent on employers to take
recourse to lay-off, retrenchment and closure in a routine manner.
Similarly, rigidities inherent in the
existing legislation regarding Contract Labour inhibit growth in employment in many
service activities. Section 10 of the existing Act envisages prohibition of contract
labour in work/process/operation if the conditions set therein like perennial nature of
job etc. are fulfilled. Section 10 enables the contract labour engaged in prohibited jobs
to become direct employees of the principal employer. To overcome this difficulty and at
the same time ensure the protection of labour, it is proposed to bring an amendment to
facilitate outsourcing of activities without any restrictions as well as to offer contract
appointments. It would not differentiate between core and non-core activities, and provide
protection to labour engaged in outsourced activities in terms of their health, safety,
welfare, social security, etc. It would also provide for larger compensation based on last
drawn wages as retrenchment compensation for every year of service.
These measures will promote industrial
investment in labour intensive, and export oriented activities providing for renewed
industrial growth, while, at the same time safeguarding the interest of workers. My
colleague, the Minister for Labour will introduce appropriate legislation to amend the
Industrial Disputes Act and Contract Labour Act within this session.
Ashraya Bima Yojana
I am conscious of the short-term impact
on organized labour force of the on-going liberalization of the economy. I therefore
propose to introduce a new scheme of group insurance viz. "Ashraya Bima Yojana"
to extend security cover to such affected workers. The policy will provide compensation of
up to 30 per cent of last drawn annual pay for a period of one year to workers who lose
their jobs. It is proposed that the policy will initially cover all employees drawing a
salary up to Rs 10,000 per month. The four Government owned general insurance companies
will administer this policy on a "No Profit No Loss" basis and will announce
full details including premium rates of the proposed policy by the end of June 2001.
Small Scale Industries
Government’s commitment to the
Small Scale sector has been repeatedly demonstrated. A comprehensive policy package for
this sector was announced by the Prime Minister on 30, August, 2000.
In order to encourage production and
employment in this sector, the exemption limit has been doubled to Rs 1 crore from
September 1, 2000.
The new Credit Guarantee Scheme of August
2000 has been provided budgetary support of Rs 100 crore in the current year. The limit of
loan without collateral which was earlier fixed at Rs 10 lakh has been raised to Rs 25
lakh under this scheme. Already 7 banks have entered into an agreement with the Credit
Guarantee Fund Trust that has been created to implement the scheme. A credit linked
capital subsidy scheme for technology upgradation was launched in October 2000 envisaging
12 per cent capital subsidy. It is expected that loans to the extent of Rs 5000 crore
would be made available to the SSI sector over the next 5 years under the scheme.
- Our small-scale entrepreneurs have proved their
competitiveness in providing over 35 per cent of national exports. To enable further new
investment and technology upgradation in some of the key export oriented sectors, it is
now proposed to dereserve another 14 items related to leather goods, shoes and toys.Textiles
The Government has recently announced a
New Textile Policy aimed at preparing industry for the new challenges of global
competition. I am happy to announce a textile package comprising the following schemes:
l A scheme for setting up Integrated
Apparel Parks is being initiated. This will enable the dereserved readymade garment
industry to set up modern units with the best infrastructure. A budget provision of Rs 10
crore has been provided for the year 2001-02.
l A strong and modern weaving sector is
very critical for this purpose. At least 50,000 new shuttleless looms and the
modernisation of 2.5 lakh plain looms to automatic looms is expected to take place by 2004
through funding from the Technology Upgradation Fund Scheme (TUFS). The budget provision
under TUFS is being raised from Rs 50 crore this year to Rs 200 crore in the next year.
l The Cotton Technology Mission is being
continued and strengthened. The budget provision is being increased from Rs 15 crore to Rs
25 crore.
l The budget allocation for Ministry of
Textiles is being enhanced substantially from Rs 457 crore in 2000-01 to Rs 650 crore in
2001-02.
l I shall provide the details of the proposed fiscal
changes in Part B of my speech.
Human Development
Health and Family Welfare
Recognizing the need for increasing
investments in social sectors, the Plan allocation for the Ministry of Health & Family
Welfare has been stepped up from Rs 4920 crore to Rs 5780 crore. This includes an
allocation of Rs 180 crore for HIV/Aids Control Programme.
Indian System of Medicine
There is now a great interest worldwide
in herbal products as people look for gentler forms of treatment devoid of side effects.
We are establishing a Traditional Knowledge Digital Liberary to bring the knowledge
already in the public domain in international languages to prevent the grant of patents.
We are also introducing a new scheme for strengthening the State Drug Testing Laboratories
and pharmacies. We propose to provide Indian Systems of Medicine and Homeopathy benefits
similar to the pharmaceutical industry.
Education
An integrated National Education Programme
– the Sarva Siksha Abhiyan has been launched for universalising elementary education
and a National Mission constituted with the Prime Minister as Chairman. The programme aims
to provide eight years of quality elementary education for all children upto the age of 14
years in a Mission mode with a thrust on community ownership, disadvantaged group and
girls’ quality education and alternative modes of education. All existing schemes on
elementary education will converge with this scheme after the Ninth Plan and it will cover
all districts in the country by March, next year.
We are determined to maintain and strengthen
our competitiveness in the field of technology education. A task force set up for this
purpose under the HRD Minister has made wide ranging recommendations to upgrade and expand
this area of education, The Roorkee Engineering College will be upgraded in to an IIT and
funding for IIT, Guwahati has been stepped up to ensure its early completion. The base of
IITs is to be expanded, regional engineering colleges are to be strengthened and new
institutes will be set up with public private partnership. The role of the private sector
will be encouraged. A new Centrally Sponsored Scheme for computer literacy and studies in
schools is being launched and other initiatives planned for encouraging IT education from
school to college levels.
Last year, I announced the availability of
100 per cent deduction from income tax of payments made to institutions for vocational
education and training by the private sector set up in rural areas and small towns. I
propose to make the same deduction available for payments to engineering institutions
also.
Educational Loans for Students
Mr Speaker Sir, I have personally
experienced poverty and faced problems in pursuing higher studies. I, therefore, feel that
no deserving student in the country should be deprived of higher and technical education
for want of finances. I am glad that the Indian Banks Association (IBA) has formulated a
new comprehensive Educational Loan Scheme, which will cover all courses in schools and
colleges in India and abroad. Loans will be available under this scheme up to Rs 7.5 lakh
for studies in India, and Rs 15 lakh for studies abroad. No collateral or margin will be
stipulated for loans up to Rs 4 lakh, the interest of which will not exceed the prime
lending rate (PLR). The interest rate will not exceed PLR plus 1 per cent for loans above
Rs 4 lakh. The loans would be repaid over a period of 5 to 7 years with provision of a
grace period. I hope that this scheme will enable needy children to pursue higher and
technical studies both inside and outside India.
Women
The year 2001 is being observed as
Women’s Empowerment Year. My colleague, the Deputy Chairman of the Planning
Commission is heading a Task Force to review the programmes for women. Meanwhile I propose
to:
l Strengthen the Rashtriya Mahila Kosh for
providing micro credit to poor assetless women through NGOs.
l Launch an integrated scheme for women’s
empowerment in 650 blocks through women’s self help groups.
l Start a new scheme for women in difficult
circumstances like widows of Vrindavan, Kashi and other places, destitute women and other
disadvantaged women groups.
Scheduled Castes and Scheduled Tribes
In keeping with Government’s
commitment to improve the Welfare of the scheduled tribes, a separate National Scheduled
Tribes Finance & Development Corporation with an authorised share capital of Rs 500
crore has been set up. The allocation for the schemes for welfare of scheduled tribes in
the Ministry of Tribal Affairs has been enhanced from Rs 786 crore this year to Rs 986
crore in the coming year.
Similarly, the allocation for the schemes
for welfare and upliftment of scheduled castes in the Ministry of Social Justice &
Empowerment has been enhanced from Rs 709 crore this year to Rs 790 crore in the coming
year.
Social Security
Hon’ble Members may recall my
announcement in the last budget, of a new Group Insurance Scheme, the "Janashree Bima
Yojana" to extend Social Security cover to the poorest sections of society. The said
scheme was launched by the Prime Minister on 10, August, 2000 and has been well received.
332 schemes have been approved so far covering 99,750 people in the BPL segment.
I believe that the Social Security cover
needs to be widened to minimize the miseries of our people below the poverty line.
Accordingly, I propose to introduce two more schemes during the next financial year:
(i) A special scheme for landless
agricultural labourers, the Khetihar Mazdoor Bima Yojana, which will provide benefits of
insurance cover as available under Janashree Bima Yojana and a pension of Rs 100 per
month, to the beneficiary on attaining the age of 60 years. In the case of beneficiaries
who join the scheme at a young age, some periodical payments at the end of every ten years
are also envisaged. The beneficiaries will be required to make a small contribution
towards the premium.
(ii) A Shiksha Sahyog Yojana, to provide an
education allowance of Rs 100 per month to the children of parents living below the
poverty line, to meet the expenses of education during their studies from 9th to 12th
standard, so that a needy student is not deprived of the opportunity to continue his/her
education for want of funds. This will be available to subscribers of the Janashree Bima
Yojana.These schemes will be managed by LIC.
Meanwhile, I have some good news for
workers. The wage ceiling for coverage under the EPF and MP Act, 1952 has been enhanced
from Rs 5000 to Rs 6500. To promote the welfare of employees I propose to enhance the
ceiling for Government contribution of 1.16 per cent of monthly wage of employees to the
Pension Fund from Rs 5000 to Rs 6000 per month. The extra expenditure on this account is
estimated to be Rs 77 crore per annum.
Whereas the organised sector is at present
covered by various pension, provident fund and gratuity schemes, the unorganised sector
does not have adequate social security coverage. I am asking the Insurance Regulatory
Development Authority to look into all these issues and provide a road map for pension
reforms by October 1, 2001.
Journalists Welfare Fund
Journalists have to increasingly take
greater risks in covering terrorist and other violence prone incidents. As an
acknowledgement of their services and sacrifices, and with the expectation of a better
treatment at their hands, I propose to set up a Journalists Welfare Fund with a
contribution of Rs 1 crore under the grants of Ministry of I&B. My colleague the
I&B Minister will announce the details of the scheme.
Entertainment
Our entertainment industry, particularly
the film industry not only provides the much needed fantasy to millions of our people who
live in an otherwise harsh and cruel world, it has also emerged as an important segment of
our economy and holds great promise for the future. Two years ago, I provided for this
industry the same tax exemption that was available for merchandise exports. A few months
ago, the Government issued a notification under the IDBI Act whereby entertainment
industry including films has been declared as an industrial concern. Banks are in the
process of finalising guidelines for financing such projects that are bankable. I hope
that the film industry will take full advantage of these measures to bring about a greater
degree of professionalism and transparency in its operations, and will not do things
chupke chupke and certainly not chori chori.
As promised in my earlier Budget Speeches, I
appointed the Expenditure Reforms Commission last year and introduced the Fiscal
Responsibility Bill in this House in the last session. The bill seeks to reduce the fiscal
deficit to 2 per cent and completely eliminate the revenue deficit over the next five
years.
Fiscal Consolidation
As I have already stated the most
serious problem confronting the economy is the poor state of the fiscal health of both the
Central and State Governments. The combined fiscal deficit of the two together is in the
region of 10 per cent of GDP. I have often been described as a fiscal fundamentalist. Some
have gone to the extent of calling me a fiscal terrorist. Why am I so concerned about the
fiscal deficit? Let me try to explain. The total receipts of the Central Government in the
current year according to BE are about Rs 281,000 crore. Of this amount, Rs 72,000 crore
is States’ share of the Central taxes and grants. The Central Government is,
therefore, left with Rs 209,000 crore. On the expenditure side, about Rs 101,000 crore was
to be spent on interest,
Rs 59,000 crore on defence, Rs 23,000 crore on major subsidies and Rs 16,000 crore on
pensions. The net amount left for meeting all other Government expenditure totalling Rs
123,000 crore was, therefore, only Rs 12,000 crore. I have, therefore, to borrow Rs
111,000 crore in the current year to make both ends meet. The most worrisome aspect is
that over 70 per cent of my borrowing, i.e., Rs 77,000 crore was for financing
unproductive revenue expenditure. This will add to my interest burden next year forcing me
to borrow more and ultimately fall into a debt trap. I am deeply conscious of the burden
which is being placed on future generations, by our extravagance. I cannot allow this
situation to continue.
A number of initiatives have already been
taken to contain, in particular, the growth of non-plan expenditure. I have not allowed
any increase in non-plan expenditure this year. Consequently, for the first time in many
years, the fiscal deficit target fixed in the budget has indeed been achieved, and remains
at 5.1 per cent in the RE of the current year. The target of 3.6 per cent revenue deficit
has also been achieved.
Expenditure Management
I intend to carry forward the process of
bringing about structural changes in the composition of Central Government expenditure and
effect economy in non-plan revenue expenditure with greater vigour while improving the
quality of plan expenditure. For this, I propose to take the following initiatives:
l User charges for services provided by
government and its agencies will be revised keeping in view the increased cost of these
services. A portion of this increase will be provided to enhance the maintenance and
quality of these services.
l Similarly, postal rates will be revised
moderately to contain the rising postal deficit.
l All requirements of recruitment will be
scrutinized to ensure that fresh recruitment is limited to 1 per cent of total civilian
staff strength. As about 3 per cent of staff retire every year, this will reduce the
manpower by 2 per cent per annum, achieving a reduction of10 per cent in five years as
announced by the Prime Minister.
l The Surplus Pool under the Department of
Personnel will be streamlined and equipped to redeploy and retrain surplus staff.
Employees in the Surplus Pool will also be offered an attractive VRS package.
l Standard licence fee (rent) on government
accommodation will be enhanced by 50 per cent for Group A, 25 per cent for Group B and 15
per cent for other categories of staff with effect from April 1, 2001.
l Facility of LTC to Central Government
employees will be suspended for 2 years for the remaining part of the four-year block
period except for employees who are entitled to last LTC before retirement.
l Use of Information Technology in government
activities with large public interface will be maximized to promote efficiency. For this
purpose, operations like GPF, pension, pay and accounts offices, passports, income tax,
customs, central excise, will be fully computerized by March 31, 2002. Public sector banks
and insurance companies are also being asked to complete computerization of their
operations within this period.
The Expenditure Reforms Commission,
which was set up last year, has presented reports concerning downsizing in 6 Ministries
and Departments. These include Department of Economic Affairs, Ministry of Information
& Broadcasting, Ministry of Coal, Department of Heavy Industry, Department of Public
Enterprises and Ministry of Small Scale Industries. Reports of the Commission concerning
other Departments will also be received within the next six months. These recommendations
will be implemented by July 31, 2001 and identified surplus staff transferred to the
Surplus Pool.
Charity, it is said, must begin at home. I
believe austerity, too, must begin at home. To lead by example, based on the
recommendations of the Expenditure Reforms Commission, I propose to abolish three
secretary/special secretary level and two joint secretary level posts in the Department of
Economic Affairs. This will be done in stages by 31, July. In addition, another 44 posts
of directors and below will be abolished, as against 31 recommended by the ERC. 1675 posts
are being abolished in the Currency and Coinage Division which will be restructured and
corporatised. The National Savings Organisation is to be downsized from a level of 1191
staff to about 25. I have asked ERC to provide their recommendations in respect of the
Departments of Revenue and Expenditure also. I am confident that this will expedite the
process of right sizing the establishments in all the Ministries/Departments of
Government.
The Planning Commission has commenced the
task of preparing the Tenth Plan. Given the severity of resource constraints, improvement
in the quality of government spending is of the essence. It has therefore been decided to
subject all existing schemes, both at the Central and State levels, to zero based
budgeting and to retain only those that are demonstrably efficient and essential.
Furthermore, all schemes that are similar in nature will be converged to eliminate
duplication. Centrally sponsored schemes that can be transferred to States will be
identified. Resource flows will be linked to performance. Necessary procedural changes
will also be made to speed up the decision making process for approval of schemes. Utmost
importance will be given to decentralized planning.
Pension Reforms
The Central Government pension liability
has reached unsustainable proportions: as a percentage of GDP, it has risen from about 0.5
per cent in 1993-94 to 1 per cent in 2000-2001. As such it is envisaged that those who
enter central government services after October 1, 2001 would receive pension through a
new pension programme based on defined contributions. In order to review the existing
pension system and to provide a roadmap for the next steps to be taken by the Government,
I propose to constitute a High Level Expert Group, which would give its recommendations
within 3 months.
Interest Rates
I have drawn your attention to the
increasing share of debt service burden in the expenditure budget caused by rising
government debt and exacerbated by the prevalence of high real interest rates. Most
interest rates in the economy are now market determined. But, their movement downward is
constrained by the rigidities inherent in the administered interest rates governing the
contractual saving sphere i.e. Provident Fund and Small Savings Schemes. I have examined
this issue very carefully. I find that the interest rates provided in all these schemes
seldom exceeded consumer price inflation by more than 3 per cent between 1980 and 1998.
Since then, this difference has risen to 6 to 8 per cent. Not only are such high real
interest rates putting an unsustainable burden on both Central and State Governments but
the resulting high cost of capital is also inhibiting economic growth all round. I am
therefore reducing most administered rates by 1.5 per cent as of March 1, 2001. Government
guarantee and tax incentives for these schemes will continue. For the future, I propose to
explore a better system for the determination of these rates. I propose to appoint an
Expert Committee to provide recommendations on this issue.
The benefit of reduction in interest rates
on Small Savings Deposits will be fully passed on to the States. This will reduce their
borrowing cost from Small Savings by 100 to 150 basis points. In addition, I am also
reducing the interest rate on loans portion of Central assistance to State Plans by 50
basis points. Alignment of interest rates on GPF by the State Governments along with the
reduced provident funds interest rates at the Centre will further reduce the interest
burden of State Governments. Moreover, because of the anticipated increase in gross tax
collection of the Centre, devolution of central taxes to States is expected to increase by
over Rs 9000 crore in 2001-02 over the current year. All these measures will help in
reducing the debt burden of the States and improve their fiscal position.
State Fiscal Reforms
86. Along with fiscal consolidation at
the Centre, it will be our endeavour to work jointly with the States to reform their
finances. Pursuant to the recommendations of the Eleventh Finance Commission, an Incentive
Fund of Rs 10,607 crore has been earmarked for the next 5 years to encourage States to
implement monitorable fiscal reforms. These reforms will essentially be the States’
own programmes and considerable flexibility has been provided for individual States to
design their programmes. In the fiscal year 2001-02, I have provided an amount of Rs 4243
crore towards this Incentive Fund.
- Public Sector Restructuring and Privatization
Our public sector has expanded in almost
every area of economic activity. In many ways, it has served the nation well; capability
has been developed all round and a strong industrial base built up. These enterprises must
now be strengthened to compete and prosper in the new environment. Last year I had defined
government’s policy in this regard clearly.
Financial and business restructuring plans
of a number of PSUs including SAIL and HMT have been approved. Since 1998 financial
restructuring support to viable and potentially viable PSUs amounting to more than Rs
13,000 crore has been provided to 23 PSUs. Government has also decided to close down 8
non-viable PSUs during the current year. A package of measures for revival and closure of
the various mills of National Textiles Corporation has also been approved.
The procedure for privatization of public
sector enterprises has now been considerably streamlined. The Department of Disinvestment
has been set up to accelerate the privatization process. To maximise returns to
government, our approach has shifted from the disinvestment of small lots of shares to
strategic sales of blocks of shares to strategic investors. The Government has already
approved privatization of 27 companies in which the process of disinvestment is expected
to be completed during the course of the year. These companies include among others VSNL,
Air India, and Maruti Udyog Limited.
Given the advanced stage of the process of
disinvestment in many of these companies, I am emboldened to take credit for a receipt of
Rs 12000 crore from disinvestment during the next year. An amount of Rs 7000 crore out of
this will be used for providing restructuring assistance to PSUs, safety net to workers
and reduction of debt burden. A sum of Rs 5000 crore will be used to provide additional
budgetary support for the Plan primarily in the social and infrastructure sectors. This
additional allocation for the plan will be contingent upon realization of the anticipated
receipts. In consultation with Planning Commission I shall come up with sectoral
allocation proposals during the course of the year.
Gujarat Earthquake
The earthquake in Gujarat has been a
terrible and unprecedented tragedy in terms of loss of life and damage to property.
Although I am confident that the inherent resilience and entrepreneurial spirit so
characteristic of the people of Gujarat will result in quick restoration of economic
activity, I would like to assure the House that we have the capacity to fully meet the
challenges of such natural calamities without deflecting from our path of pursuing our
economic goals.
To enable the State Government to deal with
the situation, Government of India is extending the following assistance:
l Rs 500 crore was made available to the State
immediately from the National Calamity Contingency Fund.
l The National Calamity Contingency Fund, set
up with initial corpus of Rs 500 crore as a result of the Eleventh Finance Commission
recommendations, is being augmented by the imposition of a 2 per cent surcharge on
personal income tax and corporate tax.
l Assistance will be provided to the State
Government under various Centrally Sponsored Schemes for reconstruction of roads, bridges,
power installations, school buildings, public utilities and other public infrastructure.
l Arrangements have been tied up with the
World Bank and Asian Development Bank for obtaining a line of credit of US $ 800 million.
A joint team has already visited Gujarat and substantial additional funds are expected to
be negotiated.
l RBI has instructed banks to make special
arrangements for freezing of recoveries and extension of new loans on a liberal terms for
borrowers in the affected areas.
l The National Housing Bank and HUDCO have set
apart adequate funds for housing reconstruction. I also propose to allocate a special
quota of tax free bonds of the order of Rs 2000 crore between the two institutions.
l As was done after the Orissa cyclone, cement
and steel used for construction in the Indira Awas Yojana, by HUDCO and by agencies
identified by the State Government, would be exempt from excise duty.
l The Government of Gujarat will be enabled to
raise funds by floating tax free earthquake relief bonds which will be open to
subscription in Rupees to individuals and others including Non-Resident Indians through
the Reserve Bank of India.
l All goods intended for relief have been
exempted from excise and customs duties; direct tax assessees have been given extension of
time for filing their returns.
A natural calamity of this magnitude
has also highlighted the need to set up permanent institutional arrangements for
management of national disasters. The National Committee on Disaster Management under the
Chairmanship of Prime Minister will be making recommendations for laying down effective
long term strategy for this purpose.
This site is dedicated to our friend Younus M, who passed away on 28th Sept 00, and left on us an indelible memories ! - Team GujaratPlus.com
[P] Privacy Policy | © Copyright 2000-2006 | Designed & Hosted by eZee Web Solutions
