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Budget 2012

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Budget 20 11-20 12 Speech o f

Pranab Mu kherjee

Minister of Finance Feb ruary 28, 20 11 Madam Speaker,

I rise to present the Union Bu dget for 2011- 12.

We are reaching the end of a remarkab le fiscal year. In a globalised world with its share of uncertainties and rapid changes, this year brought us some opportunities and many challenges as we moved ahead with steady steps on the chosen path of fiscal consolidat ion and high economic growth.

2.

Ou r growth in 2010- 11 has been swift and broad -based. The economy is back to its pre-crisis growth trajectory. While agriculture has shown a rebound, industry is regaining its earlier momentu m. Services sector continues its near double digit run. Fiscal consolidat ion has been impressive. This year has also seen significant progress in those critical inst itutional reforms that would set the pace for double-digit growth in the near future.

3.

While we su cceeded in mak ing good progress in addressing many areas of our concern, we co have done better in some others. The total food inflation declined from 20.2 per cent in February 2010 to less than half at 9.3 per cent in January 2011, but it still remains a concern. In the mediu m term perspective, our three priorit ies of sustaining a high growth trajectory; making development more inclu sive; and improving our institutions, public delivery and governance practices, remain relevant. These would continue to engage the Indian policy-planners for some time. However, there are some man ifest ations of these challenges that need u rgent attention in the short term. uld

4.

Tho gh we have regained the pre-crisis growth momentu m, there is a need to effect adjustments in the composit ion of growth on demand and supply side. We have to ensure that along with private consumpt ion, the revival in private investment is sustained and matches pre-crisis growth rates at the earliest. This requires a stronger fiscal consolidat ion to enlarge the resource space for private enterprise and addressing some policy constraints. We also have to improve the supply response of agriculture to the expanding domestic demand. Determined measu res on both these issu es will help address the structu ral concerns on inflation managemen t. It will also ensu re a more stable macroec onomic environment for continu ed high growth. u

5.

The UPA Government has significant ly scaled u p the flow of resources to rural areas to give a more inclusive thrust to the development process. The impact is visible in the new dynamism of o rural economy. It has helped India navigate itself rapidly out of the quagmire of global economic slowdown. Yet, there is much that still needs to be done, especially in rural India. We have to reconcile legitimate environment al concerns with necessary developmental needs. Above all, there is the 'c hallenge of growing aspiration' of a young India. ur

6.

To address these concerns, I do not foresee resou rces being a major constraint, at least not in the mediu m- term. However, the implementation gaps, leakages from public programmes and the quality of our outcomes are a serious challenge.

7.

Certain events in the past few months may have created an impression of drift in governance and a gap in public accountability. Even as the Government is engaged in addressing specific concerns emanating from some of these events in the larger public interest and in upholding the rule of law, such an impression is misplaced. We have to seize in these development s, the opportunity to improve our regulatory standards and administrative practices. Corruption is a problem that we have to fight collectively.

8.

In a comp lex and rapidly evolv ing economy, the Government can not profess to be the sole reposit ory of all knowledge. Indeed, in a democrat ic polity, it stands to benefit from inputs from colleagues on both sides of the House. They must lend their voice and expertise to influence public policy in the wider national interest. In some areas, good results depend on coordinated effort s of the Centre and the State Government s and in some others, on favourable external development s.

9.

I see the Budget for 2011-12 as a transit ion toward s a more transparent and result oriented economic management system in India. We are taking major steps in simplifying and placing the administ rative procedures concerning taxation, trade and tariffs and social transfers on electronic interface, free of discretion and bureaucratic delays. This will set the tone for a newer, vibrant and more efficient economy.

10.

At times the biggest reforms are not the ones that make headline, but the ones concerned with the details of governance, which affect the everyday life of aam aadmi. In preparing this year's Budget, I have been deeply conscious of this fact. I am grateful for the able guidance of the Honble Prime Minister and the strong support lent by UPA Chairperson Smt. Sonia Gandhi in my endeavour. I would now begin with a brief overview of the economy.

I. Overview o f the Eco no my

11.

On last Friday, I laid on the table of the Hou se the Economic Survey 2010- 11, which gives a detailed analysis of the economic situation of the co untry over the past 12 months. The Gross Domest ic Product (GDP) of India is estimated to have grown at 8.6 per cent in 2010- 11 in real terms. In 2010-11 agriculture is estimat ed to have grown at 5.4 per cent, industry at 8.1 per cent and services at 9.6 per cent. All three sectors are contributing to the consolidat ion of growth. More important ly, the economy has shown remarkable resilience to both external and domestic shocks.

12.

Ou r principal concern this year has been the continu ed high food prices. Inflation surfaced in two distinct episodes. At the beginning of the year, food inflation was high for some cereals, sugar and pulses. Towards the second half, while prices of these items moderated and even recorded negative rates of inflat ion, there was spurt in prices of onion, milk, poultry and some vegetables. Of late prices of onion have crashed in wholesale markets and we have had to remove the ban on their export s.

13.

Desp ite imp rov ement in the availability of most food items, consumers were denied the benefit of seasonal fall in prices normally seen in winter months. These development s revealed shortcomings in distribution and market ing systems, which are getting accentuated due to growing demand for these food items with rising income levels. The huge differences between wholesale and retail prices and between market s in different parts of the country are just not acceptable. These are at the expense of remunerative prices for farmers and compet itive prices for consu mers.

14.

Monetary policy stance in 2010- 11, while being su pportive of fiscal policy, has succeeded in keeping core-inflat ion in check. As the transmission lag in monetary policy tends to be long, I expect the measures already taken by the RBI to further moderate inflat ion in coming months.

15. 2009- 10 level and poses some concerns becau se of the comp osit ion of its financing.

The

development s

on

India's

external

sector

in

the

current

year

have

been

encouraging.

Even

as

the

recovery

in

developed

countries

is

gradually

taking

root,

our

trade

performance

has

improved.

Exports

have

grown

at

29.4

per

cent

to

reach

US

Dollar

18 4.6

billion,

while

imp ort s

at

US

Dollar

273.6

billion

have

recorded

growth

of

17.6

per

cent

during

April- Janu ary

2010- 11,

over

the

corresp ond ing

period

last

year.

The

cu rrent

acco nt u

deficit

is

arou nd

the

16.

Policy mak ing in a globalised world has to take into account the likely international development s. To realise the desired outcomes, it is important that there is convergence in expectations of our investors, entrepreneu rs and consumers on the macroec onomic prospects of the economy. Against this backdrop, the Indian economy is expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011- 12. I expect the average inflat ion to be lower next year and the current account deficit smaller and better managed with higher domestic savings rate and stable capital flows. While, like last year, I seek the blessing s of Lord Indra to bestow on us timely and bou ntifu l mon soon s, I wou ld pray to Goddess Lakshmi as well. I think it is a good strategy to diversify one's risk s.

II. Sustaining Growth

17.

In my last Bu dget, I had started rolling back the fiscal stimu lus implemented over 2008-09 and 2009- 10 to mit igate the impact of the global financial crisis on economic slowdown in India. In the course of the year, I have moved further on that path. I believe that a part of the current recovery must be stored away to build future resilience. Indeed, a counter cyclical fiscal policy is our best insurance against external shocks and localised domestic factors.

Fiscal Consolidation 18. The experience with Fiscal Respon sibility and Budget Management Act, 2003 (FRBM Act) at Centre and the corresponding Acts at State level show that statutory fiscal consolidat ion targets have a posit ive effect on macroec onomic management of the economy. In the course of the year the Central Government would introduce an amendment to the FRBM Act, laying down the fiscal road map for the next five years.

19.

The Thirteenth Finance Commission has worked ou t a fiscal consolidation road map for States requiring them to eliminate revenue deficit and achieve a fiscal deficit of 3 per cent of their respective Gross State Domestic Product latest by 2014-15. It has also recommended a combined States debt target of 24.3 per cent of GDP to be reached during this period. The States are required to amend or enact their FRBM Acts to conform to these recommendations.

20.

The Government has been in the process of setting-u p an independent Debt Management Office in the Finance Ministry. A Middle Office is already operat ional. As a next step, I propose to introduce the Public Debt Management Agency of India Bill in the next financial year.

Tax Reforms

21.

The introdu ction of the Direct Taxes Code (DTC) and the proposed Goods and Services Tax (GST) will mark a watershed. These reforms will result in moderation of rates, simplification of laws and better compliance.

22. As Hon'b le Members are aware, 2011- 12. This has been a pioneering effort in participative legislation. The Code is proposed to be effective from April 1, 2012 to allow taxpayers, practitioners and administrat ors to fully understand the legislat ion and adjust to the revised procedures.

the

Direct

Taxes

Code

Bill

was

introduced

in

Parliament

in

Au gu st,

2010.

After

receiving

the

report

of

the

Standing

Committee,

we

shall

be

able

to

finalise

the

Code

for

its

enactment

du ring

23.

Unlike DTC, decisions on the GST have to be taken in concert with the States with whom our dialogue has made considerable progress in the last four years. Areas of divergence have been narrowed. As a step towards the roll- out of GST, I propose to introduce the Constitution Amendment Bill in this session of Parliament. Work is also underway on drafting of the model legislat ion for the Central and State GST.

24.

Among the other steps that are being taken for the introduction of GST is the establishment of a strong IT infrastructure. We have made significant progress on the GST Network (GSTN). The key business processes of registration, returns and payments are in advanced stages of finalisation. The National Securities Depository Limited (NSDL) has been selected as technology partner for incubating the National Informat ion Utility that will establish and operate the IT backbone for GST. By June 2011, NSDL will set up a Pilot portal in collaborat ion with eleven States prior to its roll out across the country.

Expenditure Reforms

25.

The effective management of public expenditu re is an integral part of the fiscal consolidat ion process. Expenditure has to be oriented towards the production of public goods and services. The extant classification of public expenditure between plan, non-plan, revenue and capital spending needs to be revisited. This is necessary as one recognises the importance of service sector and the knowledge economy for our development. A Commit tee under Dr. C. Rangarajan has been set up by the Planning Commission to look into these issues.

Subsidies

26.

During the year 2010- 11, the Nu trient Based Su bsidy (NBS) policy was successfully implement ed for all fertilisers except urea. The policy has been well received by all stakeholders, and the availability of fertilisers has improved. The extension of the NBS regime to cover urea is under active consideration of the Government.

27.

The Government prov ides su bsid ies, notably on fu el and food grains, to enable the common man to have access to these basic necessities at affordable prices. A significant proportion of subsidised fuel does not reach the targeted beneficiaries and there is large scale diversion of subsidised kerosene oil. A recent tragic event has highlighted this practice. We have deliberated for long the modalit ies of implementing such subsidies. The debate now has to make way for decision. To ensure greater effic iency, cost effectiveness and better delivery for both kerosene and fertilisers, the Govern ment will move toward s direct transfer of cash su bsidy to people liv ing below poverty line in a phased mann er.

28.

A task force headed by Shri Nandan Nilekan i has been set-up to work out the modalities for the proposed system of direct transfer of subsidy for kerosene, LPG and fertilisers. The interim report of the task force is expected by June 2011. The system will be in place by March 2012.

Peoples Ownership of PSUs

29.

The Govern ment's programme to broadbase the ownership of Central Public Sector Undertakings (CPSUs) has received an overwhelming response. The six public issues of CPSUs in the current financial year have attracted around 50 lakh retail investors.

30. As again st a target of 2011- 12 by raising `40,000 crore. Let me reiterate here that the Govern ment is commit ted to retain at least 51 per cent ownership and man agement control of the CPSUs, as stated earlier in my Budget speech for 2009- 10.

`40,000

crore,

the

Government

will

raise

about

`22,144

crore

from

disinvestment

in

2010-11.

higher

than

anticipated

realisation

in

non- tax

revenu es

has

led

us

to

reschedu le

some

of

the

divest ment

issu es

planned

for

the

cu rrent

year.

intend

to

maintain

the

momentu m

on

disinvestment

in

Investment Environment Foreign Direct Investment

31.

To make the FDI policy more u ser-friendly, all prior regulations and guidelines have been consolidated into one comprehensive document, which is reviewed every six months. The last review has been released in September 2010. This has been done with the specific intent of enhancing clarity and predictability of our FDI policy to foreign invest ors. Discussions are underway to further liberalise the FDI policy.

Foreign Institutional Investors

32.

Currently, only FIIs and su b-acco nts registered with the SEBI and NRIs are allowed to invest in mutual fund schemes. To liberalise the portfolio investment route, it has been decided to permit SEBI registered Mutual Funds to accept subscriptions from foreign investors who meet the KYC requirement s for equity schemes. This would enable Indian Mutual Funds to have direct access to foreign investors and widen the class of foreign investors in Indian equity market. u

33.

To enhance the flow of fu nds to the infrastru ctu re sector, the FII limit for invest ment in corporate bonds, with residual maturity of over five years issued by companies in infrastructure sector, is being raised by an additional limit of US Dollar 20 billion taking the limit to US Dollar 25 billion. This will raise the total limit available to the FIIs for investment in corporate bonds to US Dollar 40 billion. Since most of the infrastructure companies are organised in the form of SPVs, FIIs would also be permitted to invest in unlisted bonds with a minimu m lock-in period of three years. However, the FIIs will be allowed to trade amongst themselves du ring the lock- in period.

Financial Sector legislative Initiatives

34.

The financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. The UPA Government is committed to take this process further. Accordingly, I propose to move the following legislations in the financial sector:

(i) (ii) (iii) (iv) (v) (vi) (vii) 35.

The Insurance Laws (Amendment) Bill, 2008; The Life Insurance Corporat ion (Amendment) Bill, 2009; The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005; Banking Laws Amendment Bill, 2011; Bill on Factoring and Assignment of Receivables; The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.

In my last Budget speech, I had annou nced that Reserve Bank of India would consider giving some additional banking licences to private sector players. Accordingly, RBI issued a discussion paper in August, 2010, invit ing feedback from the public. RBI has proposed some amendments in the Banking Regulation Act. I propose to bring suitable legislat ive amendment s in this regard in this session. RBI is planning to issue the guidelines for banking licences before the close of this financial year.

Public Sector Bank Recapitalisation

36.

During the year 2010- 11, the Government is provid ing a su m of `20,157 crore for infusion in the Public Sector Banks to maintain Tier I Capital to Risk Weighted Asset Ratio (CRAR) at 8 per cent and increase government equity in some banks to 58 per cent. I propose to provide a sum of `6,000 crore for the year 2011- 12 to enable Public Sector Banks to maintain a minimu m Tier I CRAR at 8 per cent.

Recapitalisation of Regional Rural Banks

37.

As a part of financial strengthening of Regional Ru ral Banks, an amount of `350 crore was given to these banks during this year. I propose to provide `500 crore during 2011- 12 to enable them maintain a CRAR of at least 9 per cent as on March 31, 2012.

Micro Finance Institutions

38.

The Micro Finance Institutions (MFIs) have emerg ed as an important means of financial inclusion. Creation of a dedicated fund for providing equity to smaller MFIs would help them maintain growth and achieve scale and efficiency in operat ions. I propose to create in the course of the year, "India Microfinance Equity Fund" of `100 crore with SIDBI. To empower women and promot e their Self Help Groups (SHGs), I propose to create a Womens SHGs Development Fund with a corpus of `500 crore. The Commit tee set up by RBI to look into issu es relating to micro finance sector in India has sub mitted its report. The Govern ment is considering pu tting in place approp riate framework to protect the interest s of small borrowers.

Rural Infrastructure Development Fund

39.

The Rural Infrastru cture Development Fund (RIDF) is an important instru ment for routing bank funds for financing rural infrastructure. This is popular among State Government s. I propose to raise the corpus of RIDF XVII to `18,000 crore in 2011- 12 from `16,000 crore in the current year. The additional alloc ation would be dedicated to creation of warehousing facilities.

Micro, Small and Medium Enterprises

40.

Micro and Small enterprises play a cru cial role in fu rthering the objective of equitable and inclu sive growth. Last year, `4,000 crore was provided to SIDBI for refinancing incremental lending by banks to these enterprises. For the year 2011- 12, I propose to provide `5,000 crore to SIDBI for the same purpose out of the shortfall of banks on priority sector lending targets.

41.

Handloom weavers have been facing economic stress. Consequently, many of them have not been able to repay debts to handloom weaver cooperat ive societ ies which have become financially unviable. I propose to provide `3,000 crore to NABARD, in phases for these cooperat ive societ ies. The initiative would benefit 15,000 cooperat ive societ ies and about 3 lakh handloom weavers. The details of the scheme would be worked out by the Ministry of Textiles in consultation with Planning Commission.

42.

I am happy to report that the ou tstanding loans to minority communit ies which stood at 13 per cent of total priority sector lending at the end of last year have increased to 13.6 per cent in the current year. I have directed the Public Sector Banks to achieve the target of 15 per cent at the earliest.

Housing Sector Finance

43.

To fu rther stimu late growth in hou sing sector, I am liberalising the existing scheme of interest subvention of 1 per cent on housing loans by extending it to housing loan upto `15 lakh where the cost of the house does not exceed `25 lakh from the present limit of `10 lakh and `20 lakh respectively.

44.

On accou nt of increase in prices of resident ial properties in urban areas, I propose to enhance the exist ing ho using loan limit from `20 lakh to `25 lakh for dwelling units under priority sector lending.

45.

To provide hou sing finance to targeted grou ps in ru ral areas at compet itive rates, I propose to enhance the provision under Rural Housing Fund to `3,000 crore from the existing `2,000 crore.

46.

Credit enablement of Economic ally Weaker Sections (EWS) and LIG households is a serious challenge. To address this issue, I propose to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana. This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness.

47.

To prevent frau ds in loan cases involv ing mu ltip le lending from different banks on the same immovable property, the Government has facilitated setting up of Central Electronic Registry under the SARFAESI Act, 2002. This Registry will become operat ional by March 31, 2011.

Financial Sector Legislative Reforms Commission

48.

In pu rsu ance of the annou ncement mad e in Bu dget 2010- 11, the Government has set up a Financial Sector Legislative Reforms Commission under the Chair of Justice B. N. Srikrishna. It would rewrite and streamline the financial sector laws, rules and regulations and bring them in harmony with the requirement s of a modern financial sector. The Commission will complete its work in 24 months.

49.

The Comp anies Bill introduced in the Parliament in 2009 has been received from the Parliamentary Standing Committee. The proposed bill will be introduced in the Lok Sabha in the current session.

Agriculture 50. 51. Agricu ltu re develop ment is central to ou r growth strategy. Measures taken during the current year have started attracting private invest ment in agriculture and agro-processing activities. This process has to be deepened further. In the Budget for 2010- 11, I had delineated a fou r-pronged strategy covering agricultural production, reduction in wastage of produce, credit support to farmers and a thrust to the food processing sector. These initiat ives have started showing results but there are other issues in our food economy that require attention. The recent spurt in food prices was driven by increase in the prices of items like fruits and vegetables, milk, meat, poultry and fish, which account for more than 70 per cent of the WPI basket for primary food items. Removal of production and distribu tion bottlenecks for these items will be the focu s of my attention this year. I prop ose to make allocat ions for these schemes u nder the ong oing Rashtriya Krishi Vikas Yojana (RKVY) for an early take off. The total alloc ation of RKVY is being increased from `6,755 crore in 2010- 11 to `7,8 60 crore in 2011- 12.

Bringing Green Revolution to Eastern Region

52.

The Green Revolu tion in Eastern Region is waiting to happen. To realize the potential of the region, last year's initiative will be continued in 2011- 12 with a further allocat ion of `400 crore. The program would target the improvement in the rice based cropping system of Assam, West Bengal, Orissa, Bihar, Jharkhand, Eastern Uttar Pradesh and Chhattisgarh.

Integrated Development of 60,000 pulses villages in rainfed areas

53.

Govern ment's init iat ive on pu lses has received a posit ive response from the farmers. As per the second advance estimates, a record production of 165 lakh tonnes of pulses is expected this year as against 147 lakh tonnes last year. While consolidat ing these gains, we must strive to attain self- sufficiency in production of pulses within next three years. I propose to provide an amount of `300 crore to promote 60,000 pulses villages in rainfed areas for increasing crop productivity and strengthening market linkages.

Promotion of Oil Palm

54.

The domestic production of edible oil meets only about 50 per cent demand. The gap in supply is met through import s, which are often at high prices due to the quantum of our requirement. Our recent interventions and good rains are expected to result in a higher oilseeds production of 278 lakh tonnes in 2010-11 as against 249 lakh tonnes in 2009- 10. To achieve a maj or breakthrough, we have to pay special attention to oil palm as it is one of the most efficient oil crops. I propose to provide an amount of `300 crore to bring 60,000 hectares u nder oil palm plantation, by integrating the farmers with the market s. The init iat ive will yield abou t 3 lakh metric tonnes of palm oil annu ally in 5 years.

Initiative on Vegetable Clusters

55.

The growing demand for vegetables has to be met by a robust increase in the productivity and market linkage. An efficient supply chain, to provide quality vegetables at compet itive prices will have to be established. I propose to provide an amount of `300 crore for implementat ion of vegetable initiative to set in mot ion a virtuous cycle of higher production and incomes for the farmers. To begin with, this programme will be launched near major urban centres.

Nutri-cereals

56.

While we ensu re food for all, we mu st also promote balanced nutrition. Bajra, jowar, ragi and other millet s are highly nutritious and are known to possess several medicinal propert ies. The availability and consumption of these Nutri-cereals is, however, low and has been steadily declining over recent years. A provision of `300 crore is being made to promote higher production of these cereals, upgrade their processing technologies and create awareness regarding their health benefits. This initiat ive would provide market linked production su pport to ten lakh millet farmers in the arid and semi- arid regions of the country. The programme wou ld be taken u p in 1000 compact blocks covering abou t 25,000 villages. This will help improve nu trition al secu rity and increase feed and fodder su pply for livestock.

National Mission for Protein Supplements

57.

The consu mption of foods rich in animal protein and other nutrients has risen of late, with demand growing faster than production. The National Mission for Protein Supplements is being launched in 2011-12 with an allocation of `300 crore. It will take up activities to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries in selected blocks.

Accelerated Fodder Development Programme

58.

Adequ ate availability of fodder is essential for su stained production of milk. It is necessary to accelerate the production of fodder through intensive promotion of technologies to ensure its availability throughout the year. I propose to provide `300 crore for Accelerated Fodder Development Programme which will benefit farmers in 25,000 villages.

59.

Hon'ble Members may be cu riou s as to why all these new init iat ives are being launched with an allocat ion of `300 crore. Well, the number 3 happens to be my lucky number !

National Mission for Sustainable Agriculture

60.

While the need to maximize crop yield s to meet the growing demand for food grains is critical, we have to sustain agricultural productivity in the long run. There has been deterioration in soil health due to removal of crop residues and indiscriminat e use of chemical fertilizers, aided by distorted prices.

61.

To address these issu es, the Govern ment proposes to promote organic farming methods, combining modern technology with traditional farming practices like green manuring, biological pest control and weed management.

Agriculture Credit

62.

To get the best from their land, farmers need access to affordable credit. Banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For the year 2011- 12, I am raising the target of credit flow to the farmers from `3,75,000 crore this year to `4,75,000 crore in 2011- 12. Banks have been asked to step up direct lending for agriculture and credit to small and marginal farmers.

63.

The exist ing interest su bvention scheme of prov iding short term crop loans to farmers at 7 per cent interest will be continued during 2011- 12. In the last budget, I had provided an additional 2 per cent interest subvention to those farmers who repay their crop loans on time. The response to this scheme has been good. In order to provide further incentive to these farmers, I propose to enhance the additional subvention to 3 per cent in 2011-12. Thus, the effective rate of interest for such farmers will be 4 per cent per annum.

64.

In view of the enhanced target for flow of agricu ltu re credit, I propose to strengthen NABARD's capital base by infusing `3000 crore, in a phased manner, as Government equity. This would raise its paid-up capital to `5,000 crore. To enable NABARD refinance the short-term crop loans of the cooperat ive credit inst itutions and RRBs at concessional rates, I propose a contribution of `10, 000 crore to NABARDs Short-term Rural Credit Fund for 2011- 12 from the shortfall in priority sector lending by Scheduled Commercial Banks.

Mega Food Parks

65.

Desp ite growing production of vegetables and fru its, their availability is inadequate due to bottlenecks in retailing capacity. An estimat ed 40 per cent of the fruit and vegetable production in India goes waste due to lack of storage, cold chain and transport infrastructure. To address these issues, the Eleventh Plan target for number of Mega Food Parks was set at 30. So far, 15 such parks have been sanctioned. During 2011-12, approval is being given to set up 15 more Mega Food Parks.

Storage Capacity and Cold Chains

66.

The years 2008 to 2010 saw very high levels of foodgrain procurement. On January 1, 2011, the foodgrain stock in Central pool reached 470 lakh metric tonnes, 2.7 times higher than 174 lakh metric tonnes on January 1, 2007. The storage capacity for such large quantities requires augmentat ion. Process to create new storage capacity of 150 lakh metric tonnes through private entrepreneurs and warehousing corporations has been fast tracked. Decision to create 20 lakh metric tonnes of storage capacity under Public Entrepreneurs Guarantee (PEG) Scheme throu gh modern silos has been taken. While we will be able to add about 2.6 lakh tonnes of capacity by March 2011, based on existing sanction s, the addition will reach 40 lakh tonnes by March 2012. Du ring 2010- 11, another 24 lakh metric tonnes of storage capacity has been created under the Ru ral Godown Scheme.

67.

Invest ment in cold storage projects is now gaining momentum. During this year, 24 cold storage projects with a capacity of 1.4 lakh metric tonnes have been sanctioned under National Horticulture Mission. In addition, 107 cold storage projects with a capacity of over 5 lakh metric tonnes have been approved by the National Horticulture Board.

68.

To attract invest ment in this sector, henceforth, capital invest ment in the creation of modern storage capacity will be eligible for viability gap funding scheme of the Finance Ministry. It is also proposed to recognize cold chains and post- harvest storage as an infrastructure sub-sector.

Agriculture Produce Marketing Act

69.

The recent episode of inflation in vegetables and fru its has exposed seriou s flaws in our supply chains. The government regulated mandis sometimes prevent retailers from integrating their enterprises with the farmers. There is need for the State Governments to review and enforce a reformed Agriculture Produce Marketing Act urgently.

Infrastructure and Industry 70. Infrastructure is critical for ou r develop ment. For 2011- 12, an allocat ion of over ` 2,14,000 crore is being made for this sector, which is 23.3 per cent higher than current year. This amounts to 48.5 per cent of the Gross Budgetary Support to plan expenditure.

71.

Ou r experience with PPP model for creation of pu blic sector assets in the co untry has been good. We have recently launched the National Capacity Building Programme to enhance capacities of public functionaries in identifying, conceptualising, structuring and managing PPPs. It is our endeavour to come up with a comprehensive policy that can be used by the Centre and the State Government s in further developing public-private partnerships.

72.

Govern ment establish ed India Infrastructure Finance Company Limit ed (IIFCL) to provide long term financial assistance to infrastructure projects. It is expected to achieve a cum ulative disbursement target of `20,000 crore by March 31, 2011 and `25,000 crore by March 31, 2012. The take out financing scheme announced in the Budget 2009- 10 has been implement ed and seven projects have been sanctioned with a debt of `1,500 crore. Another `5,000 crore will be sanctioned during 2011- 12.

73.

In order to give a boost to infrastru ctu re develop ment in railways, ports, housing and highways development, I propose to allow tax free bonds of `30,000 crore to be issued by various Government undertakings in the year 2011- 12. This inclu des Indian Railway Finance Corporat ion `10,000 crore, National Highway Authority of India `10, 000 crore, HUDCO `5,000 crore and Ports `5,000 crore.

74.

To attract foreign fu nds for the infrast ructu re financing, I propose to create Special Vehicles in the form of notified infrastructure debt funds. I will come to the details in Part B of my speech.

National Manufacturing Policy

75.

For su stained growth of GDP and productive emp loyment for younger generation, it is imperative that the growth in manufacturing sector picks up. We expect to take the share of manufacturing in GDP from about 16 per cent to 25 per cent over a period of ten years. Government will come out with a manufacturing policy, which will bring down the compliance burden on the industry through self- regulation and help make Indian industry globally competit ive.

76.

To address the need for greater transparency and accountability in procurement policy and allocat ion, pricing and utilisat ion of natural resources, the Government has set up two committees. The recommendat ions will be available within three months.

77.

A Grou p of Ministers has been set u p to consider all issues relating to reconciliat ion of environment al concerns emanating from various departmental activit ies inclu ding those related to infrastructure and mining. This Group will also suggest changes in the exist ing statutes, rules, regulations and guidelines and make its recommendations in a time bound manner.

78.

The Indian au tomob ile market is the second fastest growing in the world and has shown nearly 30 per cent growth this year. World over, substantial investment s are being made in the field of hybrid and electric mobility. To provide green and clean transportation for the masses, National Mission for Hybrid and Electric Vehicles will be launched in collaboration with all stakeholders.

79.

The fu nding of 15,260 modern low floor and semi- low floor buses under JNNURM, besides adding to passenger comfort, has transformed the urban transport across India. In 2011- 12, Delhi Metro Phase-III and Mumbai Metro Line III are proposed to be taken up. The ongoing Metro projects of Bengaluru, Kolkata and Chennai will be provided financial assist ance for speedy implement ation.

80.

Invest ment in fertilizer sector is capital intensive and is considered high risk. It is proposed to include capital invest ment in fertiliser production as an infrastructure sub-sector.

Exports

81.

The Task Force on Transaction s Cost set u p by the Depart ment of Commerc e to identify and suggest ways to achieve improvement in efficiency of our export processes, has completed its work. Twenty one suggestions made by the Task Force have already been implemented. Action on remaining two will be taken in next few months. This will mitigate transactions cost by about `2,100 crore.

82.

To qu icken the clearance of the cargo by Cu stoms au thorities and further modernise the Customs administrat ion, I propose to introduce self-assessment in Customs. Under this, importers and exporters will themselves assess their duty liabilit ies while filing their declarations in the EDI system. The Depart ment will verify such assessments on a selective system driven basis.

83.

There have been consid erab le difficu lties in the sanction of refunds relat ing to tax paid on services used for export of goods. I propose to shortly introduce a scheme for the refund of these taxes on the lines of drawback of duties in a far more simplified and expeditiou s manner. A new scheme is also being introduced by which units in SEZs will be able to obtain tax-free receipt of services wholly consumed within the zone and get their refunds in a much easier manner.

84.

Mega clu sters have large emp loyment and export potential. I propose to extend the Mega Clu ster Scheme for development of leather products. Seven mega leather clusters would be set up during the year 2011- 12. I also propose to inclu de Jodhpur for the development of a handicraft mega clu ster.

Black Money 85. The generation and circu lation of black money is an area of serious concern. To deal with this problem effectively, Government has put into operat ion a five- fold strategy which consists of Joining the global crusade against 'black money'; Creating an appropriate legislat ive framework; Setting up institutions for dealing with illicit funds; Developing systems for implementat ion; and Imparting skills to the manpower for effective action.

86.

We secu red Memb ership of the Financial Action Task Force (FATF) in June last year. This is an important initiative of G-20 for anti-money laundering. We have also joined the Task Force on Financial Integrity and Economic Development, Eurasian Group (EAG) and Global Forum on Transparency and Exchange of Information for Tax Purposes.

87.

During the year, we have conclu ded discu ssion s for 11 Tax Informat ion Exchange Agreement s (TIEAs) and 13 new Do uble Taxation Avoidance Agreements (DTAAs) along with revision of provisions of 10 existing DTAAs. To effectively handle the increase in tax informat ion exchange and transfer pricing issues, Foreign Tax Division of CBDT has been strengthened. A dedicated Cell for exchange of information is being set up to work on this agenda.

88.

The amendment in ou r Money Lau ndering Legislation in 2009 has significantly increased its scope and application. The number of cases registered under this law has increased from 50 between 2005 to 2008 to over 1200 by January this year. The strength of the Enforcement Directorate has been increased three-fold to deal effectively with the increased workload.

89.

The Ministry of Finance has commission ed a stu dy on unaccounted income and wealth held within and outside o country. It would suggest methods to tax and repatriate this illic it money. ur

90.

Trafficking in narcotic dru gs is also a contribu tor to the generation of black money. To strengthen controls over prevention of trafficking and improve the management of narcotic drugs and psychotropic substances, I propose to announce a comprehensive national policy in the near future.

III. Strengthening Inclusio n

91.

The UPA Government has engineered a maj or directional change in public policy by its focus on inclu sive development. Creation of legal entitlement s for an individual's right to work has added to resilience and dynamism in our rural economy. The right to informat ion and the right to education are effective tools of empowerment for removing social imbalances. The country has carried for long enough the burden of hunger and malnutrition. After detailed consultations with all stakeholders inclu ding State Government s, we are close to the finalisation of National Food Secu rity Bill (NFSB) which will be introduced in the Parliament during the cou rse of this year. The prop osed allocat ion of ` 1,60,8 87 crore for social sector in 2011- 12 is an increase of 17 per cent over current year. It amou nts to 36.4 per cent of the total plan allocation.

Bharat Nirman 92. The UPA Government 's flagsh ip programmes have been the principal instru ment for implementing its agenda for inclusive development. For the year 2011- 12, Bharat Nirman, which includes Pradhan Mantri Gram Sadak Yojna (PMGSY), Accelerated Irrigation Benefit Programme, Rajiv Gandhi Grameen Vidyutikaran Yojna, Indira Awas Yojna, National Rural Drinking Water Programme and Rural telephony have together been allocated `58,000 crore. This is an increase of `10,000 crore from the current year. A plan has been finalised to prov ide Ru ral Broadband Connectivity to all 2,50,000 Panchayats in the cou ntry in three years.

MGNREGA

93.

In pu rsu ance of my earlier budget annou ncement to provide a real wage of `100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour. The enhanced wage rates have been notified by the Ministry of Rural Development on January 14, 2011. It has resulted in significant enhancement of wages for the beneficiaries across the country.

94.

The Anganwadi workers and Anganwadi helpers are the backbone of Integrated Child Development Services Scheme. I am happy to announce an increase in the remuneration of Anganwadi workers from `1,500 per month to `3,000 per month and for Anganwadi helpers from `750 per month to `1,500 per month. This will be effective from April 1, 2011. Around 22 lakh Anganwadi workers and helpers will benefit from the increase.

Scheduled Castes and Tribal Sub-plan

95.

In the Budget for 2011- 12, for the first time, specific allocations are being earmarked towards Scheduled Castes Sub-plan and Tribal Sub-plan. These will be shown in the Budget of the relevant Ministries and Departments under separate minor heads of account. Further, I propose to increase the Budget allocation for primit ive tribal groups from `185 crore in 2010- 11 to `244 crore in 2011-12.

Education 96. Ou r demog raph ic dividend of a relatively you nger population compared to developed countries is as much of an opportunity as it is a challenge. Over 70 per cent of Indians will be of working age in 2025. In this context, universalising access to secondary education, increasing the percentage of our scholars in higher education and providing skill training is necessary. For education, I propose an allocat ion of ` 52,057 crore, which is an increase of 24 per cent over the current year.

Sarva Shiksha Abhiyan

97.

The exist ing operational norms of Sarva Shik sha Abhiyan have been revised to implement the right of children to free and compulsory education which has come into force with effect from April 1, 2010. For the year 2011- 12, I propose to allocate `21,000 crore which is 40 per cent higher than `15,000 crore allocated in the Budget for 2010- 11. A revised Centrally Sponsored Scheme Vocationalisat ion of Secondary Education will be implement ed from 2011- 12 to improve the employability of our youth.

98.

Emp owermen t flows from Education. While the Scheduled Castes and Scheduled Tribes had access to post matric scholarships, there was so far a lack of pre matric scholarship scheme. In 2011- 12, I propose to introduce a scholarship scheme for needy students belonging to the Scheduled Castes and Scheduled Tribes studying in classes ninth and tenth. It would benefit about 40 lakh Scheduled Caste and Scheduled Tribe students.

National Knowledge Network 99. Approved in March 2010, the Nation al Knowledge Network (NKN) will link 1500 Institutes of Higher Learning and Research through an optical fibre backbone. During the current year, 190 Institutes will be connected to NKN. Since the core will be ready by March 2011, the connectivity to all 1500 inst itutions will be provided by March 2012.

Innovations 100. To move beyond the formal R&D parad igm, a National Innovat ion Co uncil under Shri Sam Pitroda has been set up to prepare a roadmap for innovations in India. The process of setting up State Innovation Co uncils in each State and Sectoral Innovat ion Councils aligned to Central Ministries is underway.

101.

The Government has been provid ing special grants to recognise excellence in universities and academic inst itutions. In the co urse of 2011-12, I propose to provide: `50 crore each to upcoming centres of Aligarh Muslim University at Murshidabad in West Bengal and Malappuram in Kerala;

`100 crore as one-time grant to the Kerala Veterinary and Animal Sciences University at Pookode, Kerala;

`10 crore each for setting up Kolkata and Allahabad Centres of Mahatma Gandhi Antarrashtriya Hindi Vishwavidyalaya, Wardha;

`200 crore as one time grant to IIT, Kharagpur;

`20 crore for Rajiv Gandhi National Institute of Youth Development, Sriperumbudur, Tamil Nadu

`20 crore for IIM, Kolkata, to set up its Financ ial Research and Trading Laboratory;

`200 crore for Maulana Azad Education Foundation;

`10 crore for Centre for Development Economics and Ratan Tata Library, Delhi School of Economic s, Delhi; and

`10 crore for Madras School of Economic s.

Skill Development 102. I am happy to inform the Hou se that National Skill Development Co uncil (NSDC) is well on co urse to achieve its mandate of creation of 15 crore skilled workforce two years ahead of 2022, the stipulated target year. It has already sanctioned 26 projects with a total funding of `658 crore. These projects alone are expected to create more than 4 crore skilled workforce over the next ten years. In the current year, skill training has so far been provided to 20,000 persons. Of these, 75 per cent have found placement s. I will provide an additional `500 crore to the Nation al Skill Development Fund du ring the next year.

103.

National celebration s of 150th Birth Anniversary of Gurudev Rabindranath Tagore will commence from May 7, 2011 in New Delhi. Important events will be held in several co untries in Europe, America and Asia. A series of events are also proposed to be organized under the aegis of joint India- Bangladesh Celebrations Committee. An international award with prize money of `1 crore is being inst ituted for promot ing values of Universal Brotherhood in the memory of Gurudev Rabindranath Tagore.

Health 104. For health, I propose to step up the plan allocat ions in 2011-12 by 20 per cent to `26,760 crore. The Rashtriya Swasthya Bima Yojana has emerged as an effective instrument for providing a basic health cover to poor and marginal workers. It is now being extended to MGNREGA benefic iaries, beedi workers and others. In 2011- 12, I propose to further extend this scheme to cover unorganized sector workers in hazardous mining and associated industries like slate and slate pencil, dolomit e, mica and asbest os etc.

Financial Inclusion 105. In my last budget speech I had advised Banks to provide banking facilit ies to habitations having a population of over 2000 by March, 2012. The Banks have identified about 73,000 such habitations for providing banking facilit ies using appropriate technologies. A mult i-media campaign, Swabhimaan, has been launched to inform, educate and mot ivate people to open bank accounts. During this year, banks will cover 20,000 villages. Remaining will be covered during 2011-12.

Unorganised sector 106. I had annou nced a co-contributory pension scheme Swavalamban in the Budget 2010- 11. This scheme has been welcomed by the workers in unorganised sector. Over 4 lakh applications have already been received. On the basis of the feedback received, I am relaxing the exit norms whereby a subscriber under Swavalamban will be allowed exit at the age of 50 years instead of 60 years, or a minimu m tenure of 20 years, whichever is later. I also propose to extend the benefit of Government contribution from three to five years for all subscribers of Swavalamb an who enroll du ring 2010- 11 and 2011-12. An estimated 20 lakh beneficiaries will join the scheme by March 2012.

107.

Under the on-going Indira Gandhi Nation al Old Age Pension Scheme for BPL beneficiaries, the eligibility for pension is proposed to be reduced from 65 years at present to 60 years. Further, for those who are 80 years and above, the pension amount is being raised from ` 200 at present to ` 500 per month.

Environment and Climate Change Forests

108.

Protection and regeneration of forest s has great ecological, economic and social valu e. Our Government has launched an ambitious ten-year Green India mission. I propose to allocate `200 crore from the National Clean Energy Fund to begin its implementat ion in 2011- 12.

Environmental Management

109.

Environment al pollu tion has emerged as a seriou s pu blic health concern across the country. I propose to allocate `200 crore from the National Clean Energy Fund as Centre's contribution in 2011- 12 for launching environmental remediat ion programmes.

Cleaning of Rivers and Lakes

110.

A nu mber of projects under the National Ganga River Basin Authority have been approved in 2010-11. This momentu m will be further stepped up. There are many rivers and lakes of cultural and hist orical significance that need to be cleaned. In the course of the year 2011- 12, I propose to provide a special allocat ion of `200 crore for the clean-up of some important lakes and rivers other than the Ganga.

Some Other Initiatives 111. In order to boost develop ment in the North Eastern Region and Special Category States, the allocation for special assist ance has been almost doubled to `8,000 crore for 2011- 12. Out of this, `5,400 crore has been allocated as untied Special Central Assist ance.

112.

The Government s special su pport to Jammu & Kashmir is anchored in `28,000 crore Prime Minister's Reconstruction Plan. In addition, for the current year, about `8,000 crore has been provided for the State's development needs. A Task Force to assess infrast ructure needs that can be addressed within a time horizon of 24 months for Ladakh and Jammu regions of the State has recommended projects amounting to `416 crore and `497 crore, respectively. I am providing `100 crore for Ladakh and `150 crore for Jammu for these identified projects in 2011- 12.

113.

To give a boost to the development of backward regions, the allocat ion under the Backward Regions Grant Fund has been increased from `7,300 crore to `9,890 crore amounting to an increase of over 35 per cent.

114.

To address prob lems related to Left Wing Extremism affected districts, an Integrated Action Plan (IAP) for 60 selected tribal and backward districts has been launched in December 2010. The scheme is being implemented with 100 per cent block grant of `25 crore and `30 crore per district during the years 2010- 11 and 2011-12, respectively. The allocated funds are placed at the disposal of the district level committees who in consultation with local MPs will have the flexibility to spend the amount on development schemes as per the local needs.

115.

In recognition of the sacrifices made by Central Para-military Forces engaged in tackling Left Wing Extremism, a lump sum ex-gratia compensation of `9 lakh for 100 per cent disability will now be granted to personnel of the Defence and para-milit ary forces who are discharged from service on medical grounds on account of disability attributable to or aggravated in government service. For personnel with disability ranging from 20 to 99 per cent, a proportionate amount would be given.

116.

In the Budget 2011- 12, a provision of `1,64,415 crore has been made for Defence services which include `69,199 crore for capital expenditure. Needless to say, any further requirement for the co untry's defence would be met.

117.

In order to speed up delivery of ju stice, the Plan provision for Depart ment of Justice for 2011- 12 has been increased three-fold to `1,000 crore. The enhanced provision will help in building judicial infrastructure and the project on E-courts.

Census 2011

118.

The 15th Censu s in the co ntry is being condu cted from 9th February. It is the largest administrative exercise in the country providing statistical data on different socio- economic paramet ers of population. u

119.

In response to the overwhelmin g demand for enu meration of castes other than Scheduled Castes and Scheduled Tribes in Census 2011, it has been decided to canvass caste as a separate time bound exercise. This exercise will start in June 2011 and will be completed by 30th September 2011.

IV. Impro ving Governance

I now turn to some important measu res being taken for improving governance.

UID Mission

120.

The UID Mission has taken off and Aadhaar nu mbers are being generated in large numbers. So far 20 lakh Aadhaar numbers have been given and from 1st October 2011, ten lakh numbers will be generated per day. The stage is now set for realising the potential of Aadhaar for improving service delivery, accountability and transparency in governance of various schemes.

IT Initiatives

121.

The backbone of an effic ient tax administration is a robust IT infrastructure and its deployment for enhanced taxpayer services. Towards this objective, both the Central Boards of Direct Taxes (CBDT) and Excise and Customs (CBEC) have put in place the following measures:

The on- line preparation e-payment of taxes through 32 agency banks, ECS facility for electronic clearing of refunds directly in taxpayers bank accounts and electronic filing of TDS returns are now available throughout the country. These measures have empowered taxpayers to meet their tax obligations without visiting an income tax office.

and

e-filing

of

income

tax

retu rns,

The Centralized Processing Centre e-Governance in 2011. Two more CPCs will become operat ional in Manesar and Pune by May 2011 and a fourth CPC will come up in Kolkata in 2011- 12.

(CPC)

at

Bengaluru

has

increased

its

daily

processing

capacity

from

20,000

to

1.5

lakh

retu rns

in

2010-11.

This

project

has

won

Gold

Award

for

With the completion of its IT Consolidation Project, CBEC can now centrally host its key applications in Customs, Central Excise and Service Tax. The Customs EDI system now covers 92 locations across the country. CBEC's e-Commerce portal ICEGATE, has also been conferred a Gold Award for e-Governance.

The 'Sevottam' concept has been adopted by both Boards. The three pilot projects of Aaykar Seva Kendras (ASKs) under CBDT have come of age. CBDT will commission eight more such centres this year. In 2011- 12, another fifty ASKs will be set up across the country. CBEC has also launched a similar initiative and four of their pilot projects have been commissioned.

The electronic filing of Tax Deduction at Source (TDS) statements has stabilized. The Board shall soon notify a category of salaried taxpayers who will not be required to file a return of income as their tax liability has been discharged by their employer through deduction at source.

CBDT will provide a separate web-based facility to enable a direct, stand-alone interface for taxpayers with the Income Tax Depart ment so that they can report and track the resolution of their refunds and credit for prepaid taxes.

122.

Mission Mode Projects for compu terizat ion of Commerc ial Taxes in States that I announced in my last Budget, will allow States to align with the roll out of GST. Funds have been released for 31 projects received from the States and Union Territories. Most of the States and UTs have already enabled the facility of dealers making electronic payments. A number of States have already started accepting Electronic Tax Returns and issuing forms required for inter-state trade.

123.

With the develop ment of the econ omy, the need to review the provisions of the Indian Stamp Act, 1 899 has been felt over the years. I propose to introduce a Bill shortly to amend the Indian Stamp Act.

124.

Five years ago, we took an init iat ive to introduce a modern and people-friendly e-stamping facility in the co untry. Only six States have introduced this system so far. I propose to launch a new scheme with an outlay of `300 crore to provide assist ance to States to modernise their stamp and registration administ ration and roll out e-stamping in all the districts in the next three years.

125.

I propose to introduce a new simplified retu rn form 'Sugam' to reduce the compliance burden of small taxpayers who fall within the scope of presumpt ive taxation.

126.

The increase in scope of cases admitted by the Settlement Commissions has provided relief to several taxpayers. This has also increased the workload of the Commission. To fast track the disposal of cases, three more Benches of the Commission are being set up.

127.

Su bstantial amou nts of revenu e in both direct and indirect taxes, remain locked up in appeals at different levels. Both Boards also invest substantial effort and money in litigation with their employees. In keeping with the National Litigation Policy, several steps have been initiated in 2010-11 for reducing litigat ion and focusing attention on high revenue cases. Instructions have been issued raising limit of tax effects below which, tax disputes will not be pursued by Government in higher Courts of Appeal. These measures would enhance produ ctivity of resou rces employ ed in raising revenu e.

Corruption

128.

A Grou p of Ministers has been constitu ted to consider measures for tackling corruption. The Group has been tasked with addressing issues relat ing to State funding of elections, speedier processing of corruption cases of public servants, transparency in public procurement and contracts, discret ionary powers of Central ministers and compet itive system for exploit ing natural resources. The Group will make its recommendations in a time bound manner.

Performance Monitoring and Evaluation System

129.

Pu rsu ant to the recommen dat ions of Second Ad min istrat ive Reforms Commission, the Government has set up a Performance Monitoring and Evaluation System (PMES) to assess the effectiveness of Government depart ment s in their mandated functions. It involves preparation of a Results Framework Document (RFD) by each depart ment, highlight ing its objectives and priorities for the financial year and achievements against pre-specified targets at the end of the year. This document would be available for public information on the departmental websites. In the first phase, 62 departments have been covered under PMES.

TAGUP

130.

In pu rsu ance of the annou ncement mad e in the Budget 2010-11, I had set up a Technology Advisory Group for Unique Projects (TAGUP). The Group has submitted its report and its recommendations have been accepted in principle. The modalit ies of implement ation are being worked out.

131.

Indian Ru pee now has a new symbol which has been notified for use by the Central and State Government s, business entities and the general public. A new series of coins carrying this symbol will be issued short ly. The Government has approached Unicode Standards Authority for inclu sion of the symbol in international standards.

V. Budget Estima tes 2011-12

I now turn to the Bu dget Estimates for 2011- 12.

132.

The Gross Tax Receipts are estimated at `9,32,440 crore which is an increase of 24.9 per cent over the Budget Estimat es for 2010- 11. After devolution to States, the net tax to Centre in 2011-12 is `6,64,457 crore. The Non Tax Revenue Receipts for 2011-12 are estimat ed at `1,25,435 crore.

133.

The total expenditu re prop osed for 2011-12 is `12,57,729 crore, which is an increase of 13.4 per cent over the Budget Estimates for 2010- 11. The Plan Expenditure at `4,41,547 crore marks an increase of 18.3 per cent and the Non Plan Expenditure at `8,16,182 crore is an increase of 10.9 per cent over BE 2010- 11. As 2011- 12 is the last year of the Eleventh Plan, I am happy to share that Eleventh Plan expenditure in nominal terms is more than 100 per cent of the expenditure envisaged for the Plan period.

134.

The total plan and non-plan transfers of `2,01,733 crore to States and UT Governments in 2011-12 have increased by 23 per cent over the Budget Estimates 2010-11. This inclu des grants of `13,713 crore in 2011- 12 to local bodies as per the recommendation of the Thirteenth Finance Commission.

135.

Hon 'ble Memb ers are aware that in the course of 2010-11, I had the opportunity to effect a further improvement in the fiscal balance, due to the higher than anticipated non- tax revenues from 3G spectrum auctions. I chose to do that and much more. While I provided additional resources of about `50,000 crore to critical infrastructure and social sectors and also to meet the expenditure on subsidies, I have brought down the fiscal deficit from 5.5 per cent to 5.1 per cent of the GDP for 2010- 11. For 2011- 12, I have kept it at 4.6 per cent of GDP, which improves upon my own target for 2011- 12 indicated in the fiscal road map presented in the last Bu dget. In the Mediu m Term Fiscal Policy Statement being presented to the Hou se today, the rolling targets for fiscal deficit are placed at 4.1 per cent for 2012-13, and 3.5 per cent for 2013- 14.

136.

There has been some concern expressed regarding the stickiness of Government 's revenue deficit in the post- global crisis phase of the economy. For 2010- 11 as against a target of 4 per cent, the revenue deficit is estimated at 3.4 per cent of GDP. In the past few years the transfers to States and other development al expenditure have grown significantly. These are classified as revenue expenditure even though a considerable part of the expenditure from these transfers is in the nature of capital expenditure. In 2010-11, `90,792 crore from such revenu e expenditu res were in the natu re of capital expenditu re. Similarly, in 2011- 12 grants- in-aid for creation of capital assets, which are now shown separately in the Bu dget docu ments, are abou t `1.47 lakh crore. Taking these budget provision s into accou nt, the effective revenu e deficit is estimated at 2.3 per cent in the Revised Estimat es for 2010- 11 and 1.8 per cent for 2011- 12.

137.

In my last Bu dget, I had stated that Govern ment would avoid issuing bonds in lieu of subsidies to oil and fertiliser companies. I have adhered to this decision, thereby bringing all subsidy related liabilit ies into our fiscal accounting.

138.

The fiscal deficit of 4.6 per cent of GDP in 2011- 12 works o to `4,12,817 crore. Taking into account the various other financing items for fiscal deficit, the net market borrowing of the Government in 2011- 12 would be `3.43 lakh crore. In addition, `15,000 crore is proposed to be financed through Treasury Bills. Accordingly, the Central Government debt as a proport ion of GDP is estimated at 44.2 per cent for 2011-12 as against 52.5 per cent recommended by the Thirteenth Finance Commission. ut

PART - B

Madam Speaker,

I shall now present my tax prop osals.

139.

In the formu lation of these prop osals, my priorit ies are directed towards making taxes moderate, payment s simple for the taxpayer and collection of taxes easy for the tax collector.

VI. Direct Taxes

I shall now deal with direct taxes.

140.

As Government 's policy on direct taxes has been ou tlined in the DTC, which is before Parliament, I have limit ed my proposals to initiatives that require urgent attention.

141.

Last year I prov ided relief to individu al taxpayers by broadening the tax slabs. To take us closer to DTC rates, I propose to enhance the exemption limit for the general category of individual taxpayers from `1,60,000 to `1,80,000 this year. This measure will provide a uniform tax relief of `2,000 to every taxpayer of this category.

142.

Senior citizen s deserve ou r special attention. For them, I propose

to reduce the qualifying age, from 65 years to 60 years;

to enhance the exempt ion limit from `2,40,000 to `2,50,000;

To create a new category of Very Senior Citizens, eighty years and above, who will be eligible for a higher exemption limit of `5,00, 000.

143.

In the case of corporates, my initiative of phasing out the surcharge continues. I propose to reduce the current surcharge of 7.5 per cent on domest ic companies to 5 per cent. Simultaneously, I propose to increase the rate of Minimu m Alternate Tax (MAT) from the current rate of 18 per cent to 18.5 per cent of book profit s to keep the effective rate of the MAT at the same level. As a measure to ensure equal sharing of the corporate tax liability, I propose to levy MAT on developers of Special Economic Zones as well as units operat ing in SEZs.

144.

To attract foreign fu nds for financing of infrast ructure, I propose to:

create special vehicles in the form of notified infrastructure debt funds;

subject interest payment on the borrowings of these funds to a reduced withholding tax rate of 5 per cent instead of the current rate of 20 per cent;

exempt the income of the fund from tax.

145.

In order to promot e saving s and raise fu nds for infrast ructure, an additional deduction of `20,000 for invest ment in long-term infrastructure bonds was notified by the Central Government in 2010-11. I propose to extend this window for one more year.

146.

It has been represented that the taxation of foreign dividends in the hands of resident taxpayers at full rate is a disincentive for their repatriat ion to India and they continue to remain invested abroad. For the year 2011-12, I propose a lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary. I do hope these funds will now flow to India.

147.

In order to give a boost to production in the agricu lture sector, I propose to extend the benefit of invest ment linked deduction to businesses engaged in the production of fertilisers.

148.

Considering the importance of hou sing, I also prop ose invest ment linked deduction to businesses which develop affordable housing under a notified scheme.

149.

In this Decade of Innovation, I enhanced the weighted deduction on payment s made to National Laboratories, universities and Institutes of technology, for scientific research, to 175 per cent in the last budget. I propose to further enhance this to 200 per cent.

150.

In order to strengthen ou r system of collection of information from foreign tax jurisdictions, I propose to provide a toolbox of counter measures to discourage transactions with entities located in non-cooperative jurisdictions as may be notified by the Government.

151.

My prop osals on direct taxes are estimated to resu lt in a net revenue loss of `11,500 crore for the year.

VII. Indirect Taxes

I shall now turn to my indirect tax prop osals.

152.

In view of the healthy growth in indirect taxes in 2010- 11, I had the option to roll back the Central excise duty to levels prevailing in November 2008. I have chosen not to do so for two reasons. I wo like to see improved business margins translated into higher investment rates. I would also like to stay my course towards GST. I have therefore decided to maintain the standard rate of Central excise duty at 10 per cent. uld

153.

I propose certain changes in the Central Excise rate structure to prepare the ground for the transition to GST, beginning with a reduction in the number of exemptions. At present, there are about 100 items that are exempt from Central Excise as well as State VAT. In addition, there are as many as 370 items that enjoy exemption from Central Excise duty but are chargeable to VAT. I propose to withdraw the exempt ion on 130 of these items that are mainly in the nature of consu mer goods. The remaining 240 items would be brought into the tax net when GST is introduced.

154.

A nomin al Central Excise duty of 1 per cent is being imposed on the 130 items that are entering the tax net. No Cenvat credit would be available for the manufacture of these items. Basic food and fuel would continue to be exempt. This levy would also not apply to precious metals and stones. In case of jewellery and articles of gold, silver and precious metals, the levy would apply only to goods sold under a brand name.

155.

Most of the States have increased their merit rate of VAT from 4 per cent to 5 per cent. In line with this, I also propose to enhance the lower rate of Central Excise duty from 4 per cent to 5 per cent.

156.

Ready-made garments and made- ups of textiles are currently under an optional excise duty regime. A manufacturer is required to pay duty only if he wishes to avail of Cenvat credit. Our garment and made- ups industry has come of age and has shown handsome growth in recent years. As part of base expansion, I propose to convert the optional levy into a mandat ory levy at a unified rate of 10 per cent. The levy would however, apply only to branded garments or made-ups and not to those tailored or made to order for a retail customer. Credit of tax paid on inpu ts, capital good s and inpu t serv ices wou ld be available to manu factu rers of these products. Keeping in mind the fragmented natu re of this indu stry, fu ll SSI exempt ion is also being extended to these products. Export of these items wou ld continu e to be zero- rated.

157.

We have a long term commit ment to align ou r cu stoms duty rates to those prevailing in ASEAN countries. The peak rate of customs duty has been reduced over the years and has settled at 10 per cent. In view of continued uncertainties in the global economy, I propose to hold the peak rate at its current level. However, some rationalization is being done to unify three rates namely, 2 per cent, 2.5 per cent and 3 per cent at the middle level of 2.5 per cent.

158.

I now turn to proposals that are aimed at encou raging some of the thrust sectors that are in need of attention.

Agriculture & Related Sectors

159. Hon 'ble I have received encouraging feedback on the imp act of these measu res. I prop ose to enlarge the scope of these exemption s by:

Members

wo uld

recall

that,

in

the

last

Budget,

had

announced

package

of

measu res

to

improve

the

availab ility

of

storage

and

warehou se

facilities

for

agricu ltu ral

produ ce

as

well

as

to

incentivize

food

processing.

extending full exempt ion from excise duty to air-conditioning equipment and refrigerat ion panels for cold chain infrastructure;

inclu ding conveyor belts in the full exempt ion from excise duty to equipment used in cold storages, mandis and warehouses.

160.

A concession al rate of basic cu stoms duty of 5 per cent was provided to specified agricultural machinery in the last budget. This duty is being reduced further to 2.5 per cent and the concession is also being extended to parts of such machinery to encourage their domestic production.

161.

Micro- irrigat ion is an environment -friend ly and efficient means of irrigat ion especially for dry land farming. I propose to reduce the basic customs duty on micro- irrigat ion equipment from 7.5 per cent to 5 per cent.

162.

De-oiled rice bran cake constitu tes an important ingredient of cattle feed and its improved availability would have a posit ive impact on milk production. I propose to provide full exemption from basic customs duty to this item. Simu ltaneously, an export duty of 10 per cent would be levied to discourage its export.

Manufacturing Sector

163.

For the manu facturing sector, my proposals seek to encourage domestic valu e addition vis- a-vis import s, to remove duty inversions and anomalies and to provide a level playing field to the domestic industry. The major proposals are to:

reduce basic customs duty on raw silk (not thrown) from 30 to 5 per cent;

reduce basic customs duty from 5 per cent to 2.5 per cent on certain textile intermediates and inputs for chemicals, ferro-alloys and paper;

reduce basic customs duty on certain specified inputs for manufacture of certain technical fibre and yarn from 7.5 per cent to 5 per cent;

fully exempt stainless steel scrap from basic customs duty;

reduce import duties on specified raw material for the manufacture of syringes and needles to 5 per cent basic and 4 per cent CVD;

extend the concession available to parts, component s and accessories for manufacture of mobile handset s till 31st March, 2012 and to inclu de few more items in its ambit;

expand the raw material list for manufacture of specified electronic components that are fully exempt from basic customs duty;

reduce excise duty (and hence CVD) on parts of ink-jet and laser-jet printers from 10 per cent to 5 per cent.

164.

Iron ore attracts an export du ty of 15 per cent in the case of lumps and 5 per cent in the case of fines. This is a natural resource which needs to be conserved. I propose to enhance the rate of export duty for all types of iron ore and unify it at 20 per cent ad valorem. Iron ore is also exported in a value-added, pelletized form. Full exempt ion from export duty is being provided to iron ore pellet s to encourage the value addition process for fines.

165.

As a measu re of relief to cement indu stry, I prop ose to replace the existing excise duty rates with composite rates having an ad valorem and specific component with some rationalization. The basic customs duty on two critical raw materials of this industry viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent.

166.

To drive the financial inclu sion agenda of the Government, I propose to fully exempt cash dispensers from basic customs duty. Full exempt ion is also being extended to parts of such machines to encourage their domest ic production.

Environment

167.

Fu ll exemption from basic customs du ty and a concessional rate of Central Excise duty of 4 per cent was provided to specified parts of electrical vehicles in the last Budget on actual-user basis. I propose to extend the concession to batteries imported by such manufacturers for the replacement market.

168.

Fu el cell or Hydrogen cell technology is a promisin g green technology for the automobile sector. I propose to extend the concessional excise duty of 10 per cent to vehicles based on this technology.

169.

Hybrid vehicles enjoy a concession al excise duty rate of 10 per cent. However, import dependence for their critical parts/ sub-assemblies is still quite high. It is proposed to grant specified parts of such vehicles full exempt ion from basic customs duty and special CVD. In addition, a concessional rate of excise duty of 5 per cent is being prescribed to incentivise their domest ic production.

170.

In response to the growing demand for green products, a technology has been developed indigenou sly for the conversion of fossil fuel vehicles into Hybrid vehicles through the fitment of a kit. I propose to reduce the excise duty on such kits and their parts from 10 per cent to 5 per cent.

171.

In the last Budget, Central Excise du ty on LED light s was reduced from 8 per cent to 4 per cent to promot e their use. The basic component of these light s viz. the LED attracts an excise duty (hence, CVD) of 10 per cent and a special CVD of 4 per cent. The excise duty on LEDs is being reduced to 5 per cent and special CVD is being fully exempted.

172.

The solar lantern enables ou r cou ntry men in far-flu ng villages to partake of developments in green technology. The basic customs duty on such lanterns is being reduced from 10 per cent to 5 per cent. Basic customs duty on a few more inputs used in the manufacture of solar modules/ cells is being reduced to Nil.

173.

Environment al consid erat ions demand promot ion of laundry soaps which conserve water and are gentle on the soil. To this end, full exemption from basic customs duty is being provided to Crude Palm Stearin for use in the manufacture of laundry soap.

174.

Pre- tanning or tanning processes in the leather indu stry use chemicals which are pollutants. To encourage use of green processes, full exempt ion from basic excise duty is being granted to enzyme based preparations for pre-tanning.

Infrastructure

175.

Capital good s imported for the expansion of exist ing mega or ultra mega power projects enjoy a concessional basic customs duty of 2.5 per cent and full exempt ion from CVD. This creates a disability for the domest ic suppliers who are required to pay Central Excise duty on supplies to such projects. I propose to correct this anomaly by providing a parallel excise duty exempt ion.

176.

Bio- based asphalt is an emerg ing, green technology for the surfacing of roads. Full exemption from basic customs duty is being extended to bio-asphalt and specified machinery for its application in the construction of national highways. Tunnel-boring machines required for the construction of highways are also being included in this exempt ion.

Other Proposals

177.

Work s of art and antiqu ities are exempt from customs duties when imported for exhibition in a public museu m or national institution. In recent years, many organisat ions have joined the cause of promot ing and popularising both traditional and contemporary art. Some of them have been active in locating heritage works of Indian art and antiquities in foreign countries and bringing them back home. To encourage such init iatives, I propose to expand the scope of this exemption for works of art and antiquities to also apply to import s for exhibition or display, in private art galleries or similar premises that are open to the general public. Department of Cu ltu re will notify details of the scheme separately.

178.

Fu ll exemption from import duty is availab le to spares and capital goods required for ship- repair units. This exempt ion is being extended to import s by ship owners too.

179.

The concession al basic customs du ty of 5 per cent and CVD of 5 per cent, presently applicable to high-speed printing presses import ed by newspaper establishment s is being extended to mailroom equipment.

180.

The Indian film indu stry has represented that colou r, unexposed jumbo rolls of cinemat ographic film are not manufactured domest ically and have to be imported. I propose to exempt jumbo rolls of 400 feet and 1000 feet from CVD by providing full exempt ion from excise duty.

181.

I propose to provide outright concession to factory-built ambulances in place of the exist ing refund-based concession from excise duty. A refund-based concession is available to taxis having a seating capacity not exceeding 7 persons inclu ding the driver. I propose to extend this to vehicles upto a seating capacity not exceeding 13 persons including the driver.

182.

Some of the other relief measu res that I propose are: Reduction in basic customs duty on raw pistachio from 30 per cent to 10 per cent;

Reduction in basic customs duty on bamboo for agarbatti from 30 per cent to 10 per cent;

Reduction in basic customs duty on lactose for the manufacture of homeopathic medicines from 25 per cent to 10 per cent; and

Reduction in central excise duty on sanitary napkins, baby and adult diapers from 10 per cent to 1 per cent.

183.

My prop osals relat ing to cu stoms and Central excise are estimat ed to result in a net revenue gain of `7,300 crore for the year.

VIII. Service Tax

184.

The actual collections of Service Tax do not reflect the full potential of this sector. While retaining the standard rate of service tax at 10 per cent, I seek to achieve a closer fit between the present service tax regime and its GST successor by: Bringing in a few new services into the tax net to expand the tax base while ensuring that the impact is predominant ly on sections of society that have the ability to pay;

Suitably expanding or rationalizing the scope of existing service categories;

Rationalizing certain provisions relating to import of services and valu ation;

Modifying provisions of the Cenvat Credit scheme to achieve a more realist ic balance between input credits and output tax and harmonising the provisions of the scheme across goods and services;

Rationalizing penal provisions to reinforce the message that honest taxpayers would be facilitated and deviant s wo be dealt with severely; and uld

Adoption of Point of Taxation rules for services which would shift the basis for tax collection from cash towards accrual basis as with Central Excise duty.

185.

I propose to levy service tax on the following new services:

Hotel accommodat ion, in excess of declared tariff of `1,000 per day with an abatement of 50 per cent so that the effective burden is only 5 per cent of the amount charged;

Service provided by air- conditioned restaurants that have license to serve liquor, by giving an abatement of 70 per cent. Thus, the effective burden will be 3 per cent of the bill.

186.

I imposed service tax in 2010- 11 on health check u p or treatment. This levy has resulted in different ial treat ment between persons who make payments themselves and others where payments are made by an insurance company or a business entity. Thus, I propose to replace it with a tax on all services provided by hospitals with 25 or more beds that have the facility of central air-conditioning. Though the tax is on high- end treatment, I propose to sweeten the pill by an abatement of 50 per cent so that the actual burden is kept at 5 per cent of the valu e of service. I also prop ose to extend the levy to diagnostic tests of all kinds with the same rate of abatement. However, all Government hosp itals shall be ou tside this levy.

187.

I propose to raise the service tax on air travel by `50 in the case of domest ic air travel and `250 on international journeys by economy class. I also propose to tax travel by higher classes on domest ic sector at the standard rate of 10 per cent to bring it on par with journeys by higher classes on internat ional air travel.

188.

Services provided by life insu rance comp anies in the area of invest ment are also proposed to be brought into tax net on the same lines as ULIPs. I propose to expand the scope of legal services to include services provided by business entities to individuals as well as representat ional and arbitration services by individuals to business entities. There shall, however, be no tax on services provided by individuals to other individuals.

189.

There are certain other changes main ly by way of rationalisation or expansion in the scope of certain services or by plu gging exist ing loopholes. I do not wish to take the valuable time of the House in further elaborat ion here.

190.

The strength of a good valu e-added-tax lies in the free flow of the credit of the tax paid at the previous stage. Due to complexities, there have been many legal disputes on the availability of credit on a number of inputs or input services. These provisions are being rationalized by laying down clear definit ions so that the scope of inputs and input services that are eligible and those that are not, is clear. Allocat ion of CENVAT credit to exempt and taxable goods and services is also being streamlined.

191.

The nu mber of assessees in service tax has grown manifold. I find that a large number of them comprise individuals or sole proprietors with small turnovers. Any audit at their premises tends to dislocate their activities for the duration of the audit. I therefore, propose to free all individual and sole proprietor taxpayers with a turnover upto `60 lakh from the formalit ies of audit. This will give relief to a large number of taxpayers. I also intend to give all assessees with turnover upto `60 lakh, the benefit of 3 percentage points in interest on delayed payment.

192.

In keeping with ou r thru st to encou rage volu ntary compliance, the penal provisions for Service Tax are being rationalised. A key component of this strategy would be to treat less harshly those who have maintained truthful records but have fallen short of discharging their tax liability. Simu ltaneously, deliberate evaders with unrecorded business transactions will be dealt with more severely. Similar changes are being carried out in Central Excise and Customs laws. The details of the provisions are in the Finance Bill.

193.

My prop osals relat ing to service tax are estimated to result in net revenue gain of `4,000 crore for the year.

194.

Many experts have argu ed that it will be desirable to tax services based on a small negative list, so that many untapped sectors are brought into the tax net. Such an approach will be very conducive for a nationwide GST. I propose to initiate an informed public debate on the subject to help us finalise the approach to GST.

195.

Copies of notificat ions giving effect to the changes in Customs, Central Excise and Service Tax will be laid on the Table of the House in due co urse.

196.

My prop osals on direct taxes are estimated to resu lt in a revenue loss of `11,500 crore for the year. Proposals relat ing to indirect taxes are estimated to result in a net revenue gain of `11,300 crore, leaving a net loss of `200 crore in the Budget.

197.

As an emerg ing econ omy, with a voice on the glob al stage, India stands at the threshold of a decade which presents immense possibilities. We must not let the recent strains and tensions hold us back from converting these possibilit ies into realit ies. With oneness of heart, let us all build an India, which in not too distant a future, will enter the comity of developed nations.

Madam Speaker, with these word s, I commend the Budget to the House.

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