General Budget 2011-2012

Budget 2011-2012

Speech of
Pranab Mukherjee
Minister of Finance

February 28, 2011


Madam Speaker,
I rise to present the Union Budget for 2011-12.
We are reaching the end of a remarkable 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 consolidation and high economic growth.
2. Our 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 momentum. Services sector continues its near double digit run. Fiscal consolidation has been impressive. This year has also seen significant progress in those critical institutional reforms that would set the pace for double-digit growth in the near future.
3. While we succeeded in making good progress in addressing many areas of our concern, we could 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 medium term perspective, our three priorities of sustaining a high growth trajectory; making development more inclusive; 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 manifestations of these challenges that need urgent attention in the short term.
4. Though we have regained the pre-crisis growth momentum, there is a need to effect adjustments in the composition of growth on demand and supply side. We have to ensure that along with private consumption, the revival in private investment is sustained and matches pre-crisis growth rates at the earliest. This requires a stronger fiscal consolidation 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 measures on both these issues will help address the structural concerns on inflation management. It will also ensure a more stable macroeconomic environment for continued high growth.
5. The UPA Government has significantly scaled up 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 our 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 environmental concerns with necessary developmental needs. Above all, there is the 'challenge of growing aspiration' of a young India.
6. To address these concerns, I do not foresee resources being a major constraint, at least not in the medium-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 developments, the opportunity to improve our regulatory standards and administrative practices. Corruption is a problem that we have to fight collectively.
8. In a complex and rapidly evolving economy, the Government can not profess to be the sole repository of all knowledge. Indeed, in a democratic 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 efforts of the Centre and the State Governments and in some others, on favourable external developments.
9. I see the Budget for 2011-12 as a transition towards a more transparent and result oriented economic management system in India. We are taking major steps in simplifying and placing the administrative 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 Hon’ble 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 of the Economy
11. On last Friday, I laid on the table of the House the Economic Survey 2010-11, which gives a detailed analysis of the economic situation of the country over the past 12 months. The Gross Domestic 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 estimated 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 consolidation of growth. More importantly, the economy has shown remarkable resilience to both external and domestic shocks.
12. Our principal concern this year has been the continued 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 inflation, 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 exports.
13. Despite improvement in the availability of most food items, consumers were denied the benefit of seasonal fall in prices normally seen in winter months. These developments revealed shortcomings in distribution and marketing 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 markets in different parts of the country are just not acceptable. These are at the expense of remunerative prices for farmers and competitive prices for consumers.
14. Monetary policy stance in 2010-11, while being supportive of fiscal policy, has succeeded in keeping core-inflation 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 inflation in coming months.
15. The developments 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 184.6 billion, while imports at US Dollar 273.6 billion have recorded a growth of 17.6 per cent during April-January 2010-11, over the corresponding period last year. The current account deficit is around the
2009-10 level and poses some concerns because of the composition of its financing.
16. Policy making in a globalised world has to take into account the likely international developments. To realise the desired outcomes, it is important that there is convergence in expectations of our investors, entrepreneurs and consumers on the macroeconomic 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 inflation 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 blessings of Lord Indra to bestow on us timely and bountiful monsoons, I would pray to Goddess Lakshmi as well. I think it is a good strategy to diversify one's risks.
II. Sustaining Growth
17. In my last Budget, I had started rolling back the fiscal stimulus implemented over 2008-09 and 2009-10 to mitigate 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 Responsibility and Budget Management Act, 2003 (FRBM Act) at Centre and the corresponding Acts at State level show that statutory fiscal consolidation targets have a positive effect on macroeconomic 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 out 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-up an independent Debt Management Office in the Finance Ministry. A Middle Office is already operational. 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 introduction 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'ble Members are aware, the Direct Taxes Code Bill was introduced in Parliament in August, 2010. After receiving the report of the Standing Committee, we shall be able to finalise the Code for its enactment during
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 administrators to fully understand the legislation and adjust to the revised procedures.
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 legislation 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 Information Utility that will establish and operate the IT backbone for GST. By June 2011, NSDL will set up a Pilot portal in collaboration with eleven States prior to its roll out across the country.
Expenditure Reforms
25. The effective management of public expenditure is an integral part of the fiscal consolidation 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 Committee 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 Nutrient Based Subsidy (NBS) policy was successfully implemented 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 provides subsidies, notably on fuel 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 modalities of implementing such subsidies. The debate now has to make way for decision. To ensure greater efficiency, cost effectiveness and better delivery for both kerosene and fertilisers, the Government will move towards direct transfer of cash subsidy to people living below poverty line in a phased manner.
28. A task force headed by Shri Nandan Nilekani 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.
People’s Ownership of PSUs
29. The Government'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 against a target of `40,000 crore, the Government will raise about `22,144 crore from disinvestment in 2010-11. A higher than anticipated realisation in non-tax revenues has led us to reschedule some of the divestment issues planned for the current year. I intend to maintain the momentum on disinvestment in
2011-12 by raising `40,000 crore. Let me reiterate here that the Government is committed to retain at least 51 per cent ownership and management control of the CPSUs, as stated earlier in my Budget speech for 2009-10.
Investment Environment
Foreign Direct Investment
31. To make the FDI policy more user-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 investors. Discussions are underway to further liberalise the FDI policy.
Foreign Institutional Investors
32. Currently, only FIIs and sub-accounts 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 requirements 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.
33. To enhance the flow of funds to the infrastructure sector, the FII limit for investment 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 minimum lock-in period of three years. However, the FIIs will be allowed to trade amongst themselves during 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) The Insurance Laws (Amendment) Bill, 2008;
(ii) The Life Insurance Corporation (Amendment) Bill, 2009;
(iii) The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005;
(iv) Banking Laws Amendment Bill, 2011;
(v) Bill on Factoring and Assignment of Receivables;
(vi) The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and
(vii) Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.
35. In my last Budget speech, I had announced 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, inviting feedback from the public. RBI has proposed some amendments in the Banking Regulation Act. I propose to bring suitable legislative amendments 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 providing a sum 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 minimum Tier I CRAR at 8 per cent.
Recapitalisation of Regional Rural Banks
37. As a part of financial strengthening of Regional Rural 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 emerged 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 operations. I propose to create in the course of the year, "India Microfinance Equity Fund" of `100 crore with SIDBI. To empower women and promote their Self Help Groups (SHGs), I propose to create a “Women’s SHG’s Development Fund” with a corpus of `500 crore. The Committee set up by RBI to look into issues relating to micro finance sector in India has submitted its report. The Government is considering putting in place appropriate framework to protect the interests of small borrowers.
Rural Infrastructure Development Fund
39. The Rural Infrastructure Development Fund (RIDF) is an important instrument for routing bank funds for financing rural infrastructure. This is popular among State Governments. 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 allocation would be dedicated to creation of warehousing facilities.
Micro, Small and Medium Enterprises
40. Micro and Small enterprises play a crucial role in furthering the objective of equitable and inclusive 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 cooperative societies which have become financially unviable. I propose to provide `3,000 crore to NABARD, in phases for these cooperative societies. The initiative would benefit 15,000 cooperative societies 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 outstanding loans to minority communities 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 further stimulate growth in housing 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 account of increase in prices of residential properties in urban areas, I propose to enhance the existing housing loan limit from `20 lakh to `25 lakh for dwelling units under priority sector lending.
45. To provide housing finance to targeted groups in rural areas at competitive 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 Economically 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 frauds in loan cases involving multiple 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 operational by March 31, 2011.
Financial Sector Legislative Reforms Commission
48. In pursuance of the announcement made in Budget 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 requirements of a modern financial sector. The Commission will complete its work in 24 months.
49. The Companies 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. Agriculture development is central to our growth strategy. Measures taken during the current year have started attracting private investment in agriculture and agro-processing activities. This process has to be deepened further.
51. In the Budget for 2010-11, I had delineated a four-pronged strategy covering agricultural production, reduction in wastage of produce, credit support to farmers and a thrust to the food processing sector. These initiatives 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 distribution bottlenecks for these items will be the focus of my attention this year. I propose to make allocations for these schemes under the ongoing Rashtriya Krishi Vikas Yojana (RKVY) for an early take off. The total allocation of RKVY is being increased from `6,755 crore in 2010-11 to `7,860 crore in 2011-12.
Bringing Green Revolution to Eastern Region
52. The Green Revolution 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 allocation 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. Government's initiative on pulses has received a positive 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 consolidating 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 imports, 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 major 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 under oil palm plantation, by integrating the farmers with the markets. The initiative will yield about 3 lakh metric tonnes of palm oil annually 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 competitive prices will have to be established. I propose to provide an amount of `300 crore for implementation of vegetable initiative to set in motion 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 ensure food for all, we must also promote balanced nutrition. Bajra, jowar, ragi and other millets are highly nutritious and are known to possess several medicinal properties. 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 initiative would provide market linked production support to ten lakh millet farmers in the arid and semi-arid regions of the country. The programme would be taken up in 1000 compact blocks covering about 25,000 villages. This will help improve nutritional security and increase feed and fodder supply for livestock.
National Mission for Protein Supplements
57. The consumption 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. Adequate availability of fodder is essential for sustained 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 curious as to why all these new initiatives are being launched with an allocation 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 yields 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 indiscriminate use of chemical fertilizers, aided by distorted prices.
61. To address these issues, the Government 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 existing interest subvention scheme of providing 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 agriculture 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 cooperative credit institutions and RRBs at concessional rates, I propose a contribution of `10,000 crore to NABARD’s Short-term Rural Credit Fund for 2011-12 from the shortfall in priority sector lending by Scheduled Commercial Banks.
Mega Food Parks
65. Despite growing production of vegetables and fruits, their availability is inadequate due to bottlenecks in retailing capacity. An estimated 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 augmentation. 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 through 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 sanctions, the addition will reach 40 lakh tonnes by March 2012. During 2010-11, another 24 lakh metric tonnes of storage capacity has been created under the Rural Godown Scheme.
67. Investment 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 investment in this sector, henceforth, capital investment 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 fruits has exposed serious 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 our development. For 2011-12, an allocation 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. Our experience with PPP model for creation of public sector assets in the country 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 Governments in further developing public-private partnerships.
72. Government established India Infrastructure Finance Company Limited (IIFCL) to provide long term financial assistance to infrastructure projects. It is expected to achieve a cumulative 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 implemented 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 infrastructure development 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 includes Indian Railway Finance Corporation `10,000 crore, National Highway Authority of India `10,000 crore, HUDCO `5,000 crore and Ports `5,000 crore.
74. To attract foreign funds for the infrastructure 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 sustained growth of GDP and productive employment 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 competitive.
76. To address the need for greater transparency and accountability in procurement policy and allocation, pricing and utilisation of natural resources, the Government has set up two committees. The recommendations will be available within three months.
77. A Group of Ministers has been set up to consider all issues relating to reconciliation of environmental concerns emanating from various departmental activities including those related to infrastructure and mining. This Group will also suggest changes in the existing statutes, rules, regulations and guidelines and make its recommendations in a time bound manner.
78. The Indian automobile market is the second fastest growing in the world and has shown nearly 30 per cent growth this year. World over, substantial investments 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 funding 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 assistance for speedy implementation.
80. Investment in fertilizer sector is capital intensive and is considered high risk. It is proposed to include capital investment in fertiliser production as an infrastructure sub-sector.
Exports
81. The Task Force on Transactions Cost set up by the Department of Commerce 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 quicken the clearance of the cargo by Customs authorities and further modernise the Customs administration, I propose to introduce self-assessment in Customs. Under this, importers and exporters will themselves assess their duty liabilities while filing their declarations in the EDI system. The Department will verify such assessments on a selective system driven basis.
83. There have been considerable difficulties in the sanction of refunds relating 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 expeditious 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 clusters have large employment and export potential. I propose to extend the Mega Cluster Scheme for development of leather products. Seven mega leather clusters would be set up during the year 2011-12. I also propose to include Jodhpur for the development of a handicraft mega cluster.
Black Money
85. The generation and circulation of black money is an area of serious concern. To deal with this problem effectively, Government has put into operation a five-fold strategy which consists of Joining the global crusade against 'black money'; Creating an appropriate legislative framework; Setting up institutions for dealing with illicit funds; Developing systems for implementation; and Imparting skills to the manpower for effective action.
86. We secured Membership 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 concluded discussions for 11 Tax Information Exchange Agreements (TIEAs) and 13 new Double Taxation Avoidance Agreements (DTAAs) along with revision of provisions of 10 existing DTAAs. To effectively handle the increase in tax information 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 our Money Laundering 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 commissioned a study on unaccounted income and wealth held within and outside our country. It would suggest methods to tax and repatriate this illicit money.
90. Trafficking in narcotic drugs is also a contributor 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 Inclusion
91. The UPA Government has engineered a major directional change in public policy by its focus on inclusive development. Creation of legal entitlements for an individual's right to work has added to resilience and dynamism in our rural economy. The right to information 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 including State Governments, we are close to the finalisation of National Food Security Bill (NFSB) which will be introduced in the Parliament during the course of this year. The proposed allocation of ` 1,60,887 crore for social sector in 2011-12 is an increase of 17 per cent over current year. It amounts to 36.4 per cent of the total plan allocation.
Bharat Nirman
92. The UPA Government's flagship programmes have been the principal instrument 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 provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.
MGNREGA
93. In pursuance of my earlier budget announcement 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 primitive tribal groups from `185 crore in 2010-11 to `244 crore in 2011-12.
Education
96. Our “demographic dividend” of a relatively younger 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 allocation of ` 52,057 crore, which is an increase of 24 per cent over the current year.
Sarva Shiksha Abhiyan
97. The existing operational norms of Sarva Shiksha 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 “Vocationalisation of Secondary Education” will be implemented from 2011-12 to improve the employability of our youth.
98. Empowerment 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 National 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 institutions will be provided by March 2012.
Innovations
100. To move beyond the formal R&D paradigm, a National Innovation Council under Shri Sam Pitroda has been set up to prepare a roadmap for innovations in India. The process of setting up State Innovation Councils in each State and Sectoral Innovation Councils aligned to Central Ministries is underway.
101. The Government has been providing special grants to recognise excellence in universities and academic institutions. In the course 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 Financial 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 Economics, Delhi; and
• `10 crore for Madras School of Economics.
Skill Development
102. I am happy to inform the House that National Skill Development Council (NSDC) is well on course 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 placements. I will provide an additional `500 crore to the National Skill Development Fund during the next year.
103. National celebrations of 150th Birth Anniversary of Gurudev Rabindranath Tagore will commence from May 7, 2011 in New Delhi. Important events will be held in several countries 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 instituted for promoting values of Universal Brotherhood in the memory of Gurudev Rabindranath Tagore.
Health
104. For health, I propose to step up the plan allocations 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 beneficiaries, 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, dolomite, mica and asbestos etc.
Financial Inclusion
105. In my last budget speech I had advised Banks to provide banking facilities to habitations having a population of over 2000 by March, 2012. The Banks have identified about 73,000 such habitations for providing banking facilities using appropriate technologies. A multi-media campaign, “Swabhimaan”, has been launched to inform, educate and motivate 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 announced 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 minimum 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 Swavalamban who enroll during 2010-11 and 2011-12. An estimated 20 lakh beneficiaries will join the scheme by March 2012.
107. Under the on-going Indira Gandhi National 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 forests has great ecological, economic and social value. 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 implementation in 2011-12.
Environmental Management
109. Environmental pollution has emerged as a serious public 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 remediation programmes.
Cleaning of Rivers and Lakes
110. A number of projects under the National Ganga River Basin Authority have been approved in 2010-11. This momentum will be further stepped up. There are many rivers and lakes of cultural and historical significance that need to be cleaned. In the course of the year 2011-12, I propose to provide a special allocation 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 development in the North Eastern Region and Special Category States, the allocation for special assistance has been almost doubled to `8,000 crore for 2011-12. Out of this, `5,400 crore has been allocated as untied Special Central Assistance.
112. The Government’s special support 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 infrastructure 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 allocation 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 problems 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-military 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 country's defence would be met.
117. In order to speed up delivery of justice, the Plan provision for Department 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 Census in the country is being conducted from 9th February. It is the largest administrative exercise in the country providing statistical data on different socio-economic parameters of population.
119. In response to the overwhelming demand for enumeration 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. Improving Governance
I now turn to some important measures being taken for improving governance.
UID Mission
120. The UID Mission has taken off and Aadhaar numbers 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 efficient 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 and e-filing of income tax returns,
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.
• The Centralized Processing Centre (CPC) at Bengaluru has increased its daily processing capacity from 20,000 to 1.5 lakh returns in 2010-11. This project has won a Gold Award for
e-Governance in 2011. Two more CPCs will become operational in Manesar and Pune by May 2011 and a fourth CPC will come up in Kolkata in 2011-12.
• 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 Department so that they can report and track the resolution of their refunds and credit for prepaid taxes.
122. Mission Mode Projects for computerization of Commercial 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 development of the economy, the need to review the provisions of the Indian Stamp Act, 1899 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 initiative to introduce a modern and people-friendly e-stamping facility in the country. Only six States have introduced this system so far. I propose to launch a new scheme with an outlay of `300 crore to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years.
125. I propose to introduce a new simplified return form 'Sugam' to reduce the compliance burden of small taxpayers who fall within the scope of presumptive 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. Substantial amounts of revenue 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 litigation 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 productivity of resources employed in raising revenue.
Corruption
128. A Group of Ministers has been constituted to consider measures for tackling corruption. The Group has been tasked with addressing issues relating to State funding of elections, speedier processing of corruption cases of public servants, transparency in public procurement and contracts, discretionary powers of Central ministers and competitive system for exploiting natural resources. The Group will make its recommendations in a time bound manner.
Performance Monitoring and Evaluation System
129. Pursuant to the recommendations of Second Administrative Reforms Commission, the Government has set up a Performance Monitoring and Evaluation System (PMES) to assess the effectiveness of Government departments in their mandated functions. It involves preparation of a Results Framework Document (RFD) by each department, highlighting 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 pursuance of the announcement made 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 modalities of implementation are being worked out.
131. Indian Rupee now has a new symbol which has been notified for use by the Central and State Governments, business entities and the general public. A new series of coins carrying this symbol will be issued shortly. The Government has approached Unicode Standards Authority for inclusion of the symbol in international standards.
V. Budget Estimates 2011-12
I now turn to the Budget 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 Estimates 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 estimated at `1,25,435 crore.
133. The total expenditure proposed 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 includes grants of `13,713 crore in 2011-12 to local bodies as per the recommendation of the Thirteenth Finance Commission.
135. Hon'ble Members 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 Budget. In the Medium Term Fiscal Policy Statement being presented to the House 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 developmental 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 revenue expenditures were in the nature of capital expenditure. Similarly, in 2011-12 grants-in-aid for creation of capital assets, which are now shown separately in the Budget documents, are about `1.47 lakh crore. Taking these budget provisions into account, the “effective revenue deficit” is estimated at 2.3 per cent in the Revised Estimates for 2010-11 and 1.8 per cent for 2011-12.
137. In my last Budget, I had stated that Government would avoid issuing bonds in lieu of subsidies to oil and fertiliser companies. I have adhered to this decision, thereby bringing all subsidy related liabilities into our fiscal accounting.
138. The fiscal deficit of 4.6 per cent of GDP in 2011-12 works out 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 proportion of GDP is estimated at 44.2 per cent for 2011-12 as against 52.5 per cent recommended by the Thirteenth Finance Commission.

PART - B
Madam Speaker,
I shall now present my tax proposals.
139. In the formulation of these proposals, my priorities are directed towards making taxes moderate, payments 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 outlined in the DTC, which is before Parliament, I have limited my proposals to initiatives that require urgent attention.
141. Last year I provided relief to individual 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 citizens deserve our special attention. For them, I propose
• to reduce the qualifying age, from 65 years to 60 years;
• to enhance the exemption 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 domestic companies to 5 per cent. Simultaneously, I propose to increase the rate of Minimum Alternate Tax (MAT) from the current rate of 18 per cent to 18.5 per cent of book profits 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 operating in SEZs.
144. To attract foreign funds for financing of infrastructure, 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 promote savings and raise funds for infrastructure, an additional deduction of `20,000 for investment 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 repatriation 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 agriculture sector, I propose to extend the benefit of investment linked deduction to businesses engaged in the production of fertilisers.
148. Considering the importance of housing, I also propose investment linked deduction to businesses which develop affordable housing under a notified scheme.
149. In this Decade of Innovation, I enhanced the weighted deduction on payments 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 our 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 proposals on direct taxes are estimated to result in a net revenue loss of `11,500 crore for the year.
VII. Indirect Taxes
I shall now turn to my indirect tax proposals.
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 would 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.
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 exemption on 130 of these items that are mainly in the nature of consumer goods. The remaining 240 items would be brought into the tax net when GST is introduced.
154. A nominal 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 mandatory 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 inputs, capital goods and input services would be available to manufacturers of these products. Keeping in mind the fragmented nature of this industry, full SSI exemption is also being extended to these products. Export of these items would continue to be zero-rated.
157. We have a long term commitment to align our customs 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 encouraging some of the thrust sectors that are in need of attention.
Agriculture & Related Sectors
159. Hon'ble Members would recall that, in the last Budget, I had announced a package of measures to improve the availability of storage and warehouse facilities for agricultural produce as well as to incentivize food processing.
I have received encouraging feedback on the impact of these measures. I propose to enlarge the scope of these exemptions by:
• extending full exemption from excise duty to air-conditioning equipment and refrigeration panels for cold chain infrastructure;
• including conveyor belts in the full exemption from excise duty to equipment used in cold storages, mandis and warehouses.
160. A concessional rate of basic customs 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-irrigation is an environment-friendly and efficient means of irrigation especially for dry land farming. I propose to reduce the basic customs duty on micro-irrigation equipment from 7.5 per cent to 5 per cent.
162. De-oiled rice bran cake constitutes an important ingredient of cattle feed and its improved availability would have a positive impact on milk production. I propose to provide full exemption from basic customs duty to this item. Simultaneously, an export duty of 10 per cent would be levied to discourage its export.
Manufacturing Sector
163. For the manufacturing sector, my proposals seek to encourage domestic value addition vis-a-vis imports, 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, components and accessories for manufacture of mobile handsets till 31st March, 2012 and to include 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 duty 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 exemption from export duty is being provided to iron ore pellets to encourage the value addition process for fines.
165. As a measure of relief to cement industry, I propose 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 inclusion agenda of the Government, I propose to fully exempt cash dispensers from basic customs duty. Full exemption is also being extended to parts of such machines to encourage their domestic production.
Environment
167. Full exemption from basic customs duty 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. Fuel cell or Hydrogen cell technology is a promising 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 concessional 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 exemption 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 domestic production.
170. In response to the growing demand for green products, a technology has been developed indigenously 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 duty on LED lights was reduced from 8 per cent to 4 per cent to promote their use. The basic component of these lights 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 our countrymen in far-flung 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. Environmental considerations demand promotion 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 industry use chemicals which are pollutants. To encourage use of green processes, full exemption from basic excise duty is being granted to enzyme based preparations for pre-tanning.
Infrastructure
175. Capital goods imported for the expansion of existing mega or ultra mega power projects enjoy a concessional basic customs duty of 2.5 per cent and full exemption from CVD. This creates a disability for the domestic 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 exemption.
176. Bio-based asphalt is an emerging, 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 exemption.
Other Proposals
177. Works of art and antiquities are exempt from customs duties when imported for exhibition in a public museum or national institution. In recent years, many organisations have joined the cause of promoting 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 initiatives, I propose to expand the scope of this exemption for works of art and antiquities to also apply to imports for exhibition or display, in private art galleries or similar premises that are open to the general public. Department of Culture will notify details of the scheme separately.
178. Full exemption from import duty is available to spares and capital goods required for ship-repair units. This exemption is being extended to imports by ship owners too.
179. The concessional basic customs duty of 5 per cent and CVD of 5 per cent, presently applicable to high-speed printing presses imported by newspaper establishments is being extended to mailroom equipment.
180. The Indian film industry has represented that colour, unexposed jumbo rolls of cinematographic film are not manufactured domestically and have to be imported. I propose to exempt jumbo rolls of 400 feet and 1000 feet from CVD by providing full exemption from excise duty.
181. I propose to provide outright concession to factory-built ambulances in place of the existing refund-based concession from excise duty. A refund-based concession is available to taxis having a seating capacity not exceeding 7 persons including 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 measures 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 proposals relating to customs and Central excise are estimated 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 predominantly 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 valuation;
• Modifying provisions of the Cenvat Credit scheme to achieve a more realistic 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 deviants would be dealt with severely; and
• 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 accommodation, 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 up or treatment. This levy has resulted in differential treatment 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 value of service. I also propose to extend the levy to diagnostic tests of all kinds with the same rate of abatement. However, all Government hospitals shall be outside this levy.
187. I propose to raise the service tax on air travel by `50 in the case of domestic air travel and `250 on international journeys by economy class. I also propose to tax travel by higher classes on domestic sector at the standard rate of 10 per cent to bring it on par with journeys by higher classes on international air travel.
188. Services provided by life insurance companies in the area of investment 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 representational 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 mainly by way of rationalisation or expansion in the scope of certain services or by plugging existing loopholes. I do not wish to take the valuable time of the House in further elaboration here.
190. The strength of a good value-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 definitions so that the scope of inputs and input services that are eligible and those that are not, is clear. Allocation of CENVAT credit to exempt and taxable goods and services is also being streamlined.
191. The number 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 formalities 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 our thrust to encourage voluntary 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. Simultaneously, 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 proposals relating to service tax are estimated to result in net revenue gain of `4,000 crore for the year.
194. Many experts have argued 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 notifications giving effect to the changes in Customs, Central Excise and Service Tax will be laid on the Table of the House in due course.
196. My proposals on direct taxes are estimated to result in a revenue loss of `11,500 crore for the year. Proposals relating 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 emerging economy, with a voice on the global 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 possibilities into realities. 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 words, I commend the Budget to the House.

General Budget 2010-2011

I rise to present the Union Budget for 2010-11.

In 2009, when I presented the interim Budget in February and the regular Budget in July in this august House, the Indian economy was facing grave uncertainties. Growth had started decelerating and the business sentiment was weak. The economy's capacity to sustain high growth was under serious threat from the widespread economic slowdown in the developed world.

2. It was not clear to us, as also to the policy makers in many other countries, how this crisis would eventually unfold. What would be its impact on the growth momentum of the Indian economy? How soon will we be able to turnaround the fortunes of our economy? The short term global outlook was bleak and the consensus was that year 2009 would face the brunt of this crisis across the world.

3. At home, there was added uncertainty on account of the delayed and sub-normal south-west monsoon, which had undermined the kharif crop in the country. There were concerns about production and prices of food items and its possible repercussions on the growth of rural demand.

4. Today, as I stand before you, I can say with confidence that we have weathered these crises well. Indian economy now is in a far better position than it was a year ago. That is not to say that the challenges today are any less than what they were nine months ago when UPA under the leadership of Mrs Sonia Gandhi was elected back to power and Prime Minister Dr. Manmohan Singh formed the Government for the second term.

5. The three challenges and the medium term perspective that I had outlined in my last Budget Speech remain relevant, even today. These would continue to engage the Indian policy-planners for the next few years.

6. The first challenge before us is to quickly revert to the high GDP growth path of 9 per cent and then find the means to cross the 'double digit growth barrier'. This calls for imparting a fresh momentum to the impressive recovery in growth witnessed in the past few months. In this endeavour, I seek Lord Indra's help to make the recovery more broad-based in the coming months.

7. Growth is only as important as what it enables us to do and be. Therefore, the second challenge is to harness economic growth to consolidate the recent gains in making development more inclusive. The thrust imparted to the development of infrastructure in rural areas has to be pursued to achieve the desired objectives within a fixed time frame.

8. We have to strengthen food security, improve education opportunities and provide health facilities at the level of households, both in rural and urban areas. These are issues that require significant resources, and we have to find those resources.

9. The third challenge relates to the weaknesses in government systems, structures and institutions at different levels of governance. Indeed, in the coming years, if there is one factor that can hold us back in realising our potential as a modern nation, it is the bottleneck of our public delivery mechanisms. There have been many initiatives in this regard, in different sectors, at different points of time. Some of them have been effective in reforming the way the Government works in those areas. But we have a long way to go before we can rest on this count.

10. The Union Budget cannot be a mere statement of Government accounts. It has to reflect the Government's vision and signal the policies to come in future.

11. With development and economic reforms, the focus of economic activity has shifted towards the non-governmental actors, bringing into sharper focus the role of Government as an enabler.

12. An enabling Government does not try to deliver directly to the citizens everything that they need. Instead it creates an enabling ethos so that individual enterprise and creativity can flourish. Government concentrates on supporting and delivering services to the disadvantaged sections of the society.

13. It is this broad conceptualisation of the Budget that informs my speech today. I would now begin by presenting a brief overview of the economy.

Overview of the Economy

14. Yesterday, I laid on the table of the House the Economic Survey, which gives a detailed analysis of the economic situation of the country over the past twelve months. I intend to highlight only a few salient features that form the backdrop of this Budget.

15. The fiscal year 2009-10 was a challenging year for the Indian economy. The significant deceleration in the second half of 2008-09, brought the real GDP growth down to 6.7 per cent, from an average of over 9 per cent in the preceding three years. We were among the first few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown. It included a substantial fiscal expansion along with liberal monetary policy support.

16. The effectiveness of these policy measures became evident with fast paced recovery. The economy stabilised in the first quarter of 2009-10 itself, when it clocked a GDP growth of 6.1 per cent, as against 5.8 per cent in the fourth quarter of the preceding year. It registered a strong rebound in the second quarter, when the growth rate rose to 7.9 per cent. With the Advance Estimates placing the likely growth for 2009-10 at 7.2 per cent, we are indeed vindicated in our policy stand. The final figure may well turn out to be higher when the third and fourth quarter GDP estimates for 2009-10 become available.

17. This recovery is very encouraging for it has come about despite a negative growth in the agriculture sector. More importantly, it is the result of a renewed momentum in the manufacturing sector and marks the rise of this sector as the growth driver of the economy. The growth rate in manufacturing in December 2009 was 18.5 per cent— the highest in the past two decades. There are also signs of a turnaround in the merchandise exports with a positive growth in November and December 2009 after a decline of about twelve successive months. Export figures for January are also encouraging. Significant private investment can now be expected to provide the engine for sustaining a growth of 9 per cent per annum. With some luck, I hope to breach the 10 per cent mark in not-too-distant a future.

18. A major concern during the second half of 2009-10 has been the emergence of double digit food inflation. There was a momentum in food prices since the flare-up of global commodity prices preceding the financial crisis in 2008, but it was expected that the agriculture season beginning June 2009 would help in moderating the food inflation. However, the erratic monsoons and drought like conditions in large parts of the country reinforced the supply side bottlenecks in some of the essential commodities. This set in motion inflationary expectations. Since December 2009, there have been indications of these high food prices, together with the gradual hardening of the fuel product prices, getting transmitted to other non-food items as well. The inflation data for January seems to have confirmed this trend.

19. Government is acutely conscious of this situation and has set in motion steps, in consultation with the State chief ministers, which should bring down the inflation in the next few months and ensure that there is better management of food security in the country.

CONSOLIDATING GROWTH

20. Managing a complex economy is a difficult task, more so when it is a growing economy in a globalised world. And yet, choices have to be made and they have to be well-timed.

21. After successfully managing the effects of the global slowdown, we need to strengthen the domestic macroeconomic environment to help consolidate the rebound in growth and sustain it over the medium term. We need to review the stimulus imparted to the economy and move towards the preferred path of fiscal consolidation that facilitated the remarkable growth in the pre-crisis five year period. We need to make growth more broad-based and ensure that supply-demand imbalances are better managed.

Fiscal Consolidation

22. The success of the fiscal stimulus in supporting domestic demand could be traced to its composition. The approach of the Government was to increase the disposable income in the hands of the people by effecting reductions in indirect taxes and by expanding public expenditure on programmes like the Mahatma Gandhi National Rural Employment Guarantee Scheme and rural infrastructure. Now that the recovery has taken root, there is a need to review public spending, mobilise resources and gear them towards building the productivity of the economy.

23. In shaping the fiscal policy for 2010-11, I have acted on the recommendations of the Thirteenth Finance Commission. It has recommended a calibrated exit strategy from the expansionary fiscal stance of last two years. The Commission has recommended a capping of the combined debt of the Centre and the States at 68 per cent of the GDP to be achieved by 2014-15.

24. As a part of the fiscal consolidation process, it would be for the first time that the Government would target an explicit reduction in its domestic public debt-GDP ratio. I intend to bring out, within six months, a status paper giving a detailed analysis of the situation and a road map for curtailing the overall public debt. This would be followed by an annual report on the subject.

Tax reforms

25. I am happy to inform the Honourable Members that the process for building a simple tax system with minimum exemptions and low rates designed to promote voluntary compliance, is now nearing completion. On the Direct Tax Code the wide-ranging discussions with stakeholders have been concluded. I am confident that the Government will be in a position to implement the Direct Tax Code from April 1, 2011.

26. On Goods and Services Tax, we have been focusing on generating a wide consensus on its design. In November, 2009 the Empowered Committee of the State Finance Ministers placed the first discussion paper on GST in the public domain. The Thirteenth Finance Commission has also made a number of significant recommendations relating to GST, which will contribute to the ongoing discussions. We are actively engaged with the Empowered Committee to finalise the structure of GST as well as the modalities of its expeditious implementation. It will be my earnest endeavour to introduce GST along with the DTC in April, 2011.

People's ownership of PSUs

27. While presenting the Budget for 2009-10, I invited people to participate in Government's disinvestment programme to share in the wealth and prosperity of the Central Public Sector Undertakings.

28. Since then, ownership has been broad based in Oil India Limited, NHPC, NTPC and Rural Electrification Corporation while the process is on for National Mineral Development Corporation and Satluj Jal Vidyut Nigam. The Government will raise about Rs.25,000 crore during the current year. Through this process, I propose to raise a higher amount during the year 2010-11. The proceeds will be utilised to meet the capital expenditure requirements of social sector schemes for creating new assets.

29. Listing of Central Public Sector Undertakings improves corporate governance, besides unlocking the value for all stakeholders—the government, the company and the shareholders. Market capitalization of five companies which have been listed since October, 2004 has increased by 3.8 times from the book value of Rs.78,841 crore to Rs.2,98,929 crore.

30. The effective management of public expenditure by bringing it in line with the Government's objectives is a part of the fiscal consolidation process. This calls for proper targeting of subsidies and expenditure adjustment.

Fertiliser subsidy

31. I had announced the intent of the Government for the fertiliser sector in my Budget Speech of 2009. A Nutrient Based Subsidy policy for the fertiliser sector has since been approved by the Government and will become effective from April 1, 2010. This policy is expected to promote balanced fertilization through new fortified products and focus on extension services by the fertiliser industry. This will lead to an increase in agricultural productivity and consequently better returns for the farmers. Over time, the policy is expected to reduce volatility in the demand for fertiliser subsidy in addition to containing the subsidy bill. Government will ensure that nutrient based fertiliser prices for transition year 2010-11, will remain around MRPs currently prevailing. The new system will move towards direct transfer of subsidies to the farmers.

Petroleum and Diesel pricing policy

32. In the last Budget, the constitution of an Expert Group, to advise the Government on a viable and sustainable system of pricing of petroleum products, was announced. The Group headed by Shri Kirit Parikh has submitted its recommendations to the Government. Decision on these recommendations will be taken by my colleague, the Minister of Petroleum & Natural Gas, in due course.

33. I am very happy to inform the Honourable Members that we have not only adhered to the fiscal roadmap that I had presented as a part of the Budget documents last year, but we have improved upon it. Except for meeting the liabilities of the year 2008-09, we have not issued oil or fertiliser bonds. I shall come to the numbers when I refer to the budget estimates a little later.

Improving Investment Environment

Foreign Direct Investment

34. Foreign Direct Investment (FDI) inflows during the year have been steady in spite of the decline in global capital flows. India received FDI equity inflows of US$ 20.9 billion during April-December, 2009 compared to US$ 21.1 billion during the same period last year.

35. Government has taken a number of steps to simplify the FDI regime to make it easily comprehensible to foreign investors. For the first time, both ownership and control have been recognised as central to the FDI policy, and methodology for calculation of indirect foreign investment in Indian companies has been clearly defined. A consistent policy on downstream investment has also been formulated. Another major initiative has been the complete liberalization of pricing and payment of technology transfer fee, trademark, brand name and royalty payments. These payments can now be made under the automatic route.

36. Government also intends to make the FDI policy user-friendly by consolidating all prior regulations and guidelines into one comprehensive document. This would enhance clarity and predictability of our FDI policy to foreign investors.

Financial Stability and Development Council

37. The financial crisis of 2008-09 has fundamentally changed the structure of banking and financial markets the world over. With a view to strengthen and institutionalise the mechanism for maintaining financial stability, Government has decided to setup an apex-level Financial Stability and Development Council. Without prejudice to the autonomy of regulators, this Council would monitor macro prudential supervision of the economy, including the functioning of large financial conglomerates, and address inter-regulatory coordination issues. It will also focus on financial literacy and financial inclusion.

Banking Licences

38. The Indian banking system has emerged unscathed from the crisis. We need to ensure that the banking system grows in size and sophistication to meet the needs of a modern economy. Besides, there is a need to extend the geographic coverage of banks and improve access to banking services. In this context, I am happy to inform the Honourable Members that the RBI is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies could also be considered, if they meet the RBI's eligibility criteria.

Public Sector Bank Capitalisation

39. During 2008-09, the Government infused Rs.1900 crore as Tier-I capital in four public sector banks to maintain a comfortable level of Capital to Risk Weighted Asset Ratio. An additional sum of Rs.1200 crore is being infused now. For the year 2010-11, I propose to provide a sum of Rs.16,500 crore to ensure that the Public Sector Banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011.

Recapitalisation of Regional Rural Banks

40. Regional Rural Banks (RRBs) play an important role in providing credit to rural economy. The capital of these banks is shared by the Central Government, sponsor banks and State Governments. The banks were last capitalised in
2006-07. I propose to provide further capital to strengthen the RRBs so that they have adequate capital base to support increased lending to the rural economy.

Corporate Governance

41. Improvement in corporate governance and regulation is an important part of the overall investment environment in the country. Government has introduced the Companies Bill, 2009 in the Parliament, which will replace the existing Companies Act, 1956. The proposed new bill will address issues related to regulation in corporate sector in the context of the changing business environment.

Exports

42. Government has provided interest subvention of 2 per cent on pre-shipment export credit up to March 31, 2010 for exports in certain sectors. I propose to extend the interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.

Special Economic Zones (SEZs)

43. The SEZs have attracted significant flows of domestic and foreign investments. In first three quarters of 2009-10 exports from SEZs recorded a growth of 127 per cent over the corresponding period last year. Government is committed to ensuring continued growth of SEZs to draw investments and boost exports and employment.

Agriculture Growth

44. The agriculture sector occupies centre-stage in our resolve to promote inclusive growth, enhance rural incomes and sustain food security. To spur the growth in this sector, the Government intends to follow a four-pronged strategy covering (a) agricultural production; (b) reduction in wastage of produce;
(c) credit support to farmers; and (d) a thrust to the food processing sector.

45. The first element of the strategy is to extend the green revolution to the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa, with the active involvement of Gram Sabhas and the farming families. For the year 2010-11, I propose to provide Rs.400 crore for this initiative.

46. In the 60th year of the Republic, it is proposed to organise 60,000 "pulses and oil seed villages" in rain-fed areas during 2010-11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry land farming areas. I propose to provide Rs.300 crore for this purpose. This initiative will be an integral part of the Rashtriya Krishi Vikas Yojana.

47. The gains already made in the green revolution areas have to be sustained through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity. I propose an allocation of Rs.200 crore for launching this climate resilient agriculture initiative.

48. The second element of the strategy relates to reduction of significant wastages in storage as well as in the operations of the existing food supply chains in the country. This needs to be addressed. As the Prime Minister has said recently, "We need greater competition and therefore need to take a firm view on opening up of the retail trade." It will help in bringing down the considerable difference between the farm gate prices, wholesale prices and retail prices.

49. There is wastage of grain procured for buffer stocks and public distribution system due to acute shortage of storage capacity in the Food Corporation of India. This deficit in the storage capacity is met through an ongoing scheme for private sector participation where the FCI has been hiring godowns from private parties for a guaranteed period of 5 years. This period is now being extended to 7 years.

50. The third element of the strategy relates to improving the availability of credit to farmers. I am happy to inform the honourable Members that banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For the year 2010-11, the target has been raised to Rs.3,75,000 crore from Rs.3,25,000 crore in the current year.

51. The Debt Waiver and Debt Relief Scheme for Farmers was a major initiative of the UPA Government. In view of the recent drought in some States and the severe floods in some other parts of the country, I propose to extend by six months the period for repayment of the loan amount by farmers from December 31, 2009 to June 30, 2010.

52. In the last budget, I had provided an additional one per cent interest subvention as an incentive to those farmers who repay their short-term crop loans as per schedule. I propose to raise this subvention for timely repayment of crop loans from one per cent to two per cent for 2010-11. Thus, the effective rate of interest for such farmers will now be five per cent per annum. Necessary provision in the Budget has been made.

53. The fourth element of the strategy aims at lending a further impetus to the development of food processing sector by providing state-of-the art infrastructure. In addition to the ten mega food park projects already being set up, the Government has decided to set up five more such parks.

54. As a part of the farm to market initiative, External Commercial Borrowings will henceforth be available for cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat. Changes in the definition of infrastructure under the ECB policy are being made.

Infrastructure

55. Accelerated development of high quality physical infrastructure, such as roads, ports, airports and railways is essential to sustain economic growth. While addressing the policy gaps in this sector, I propose to maintain the thrust for upgrading infrastructure in both rural and urban areas. In the Budget for
2010-11, I have provided Rs.1,73,552 crore, which accounts for over 46 per cent of the total plan allocations, for infrastructure development in the country.

56. To make a visible impact in the road sector, Government has targeted construction of national highways (NHs) at the pace of 20 km per day. To push the pace of implementation, changes have been made in the policy framework, especially in respect of projects being executed through public private partnerships (PPPs). For the year 2010-11, I propose to raise the allocation of road transport by over 13 per cent from Rs.17,520 crore to Rs.19,894 crore.

57. Honourable Members have already heard from the Railway Minister about the large investments required to modernise and expand the network. I have provided Rs.16,752 crore in the Budget for 2010-11 for Railways to lend her a helping hand. This is about Rs.950 crore more than last year, when a substantial increase was made in the budgetary support for Railways.

58. To complement the dedicated freight corridor, the Delhi-Mumbai Industrial Corridor project has been taken up for integrated regional development. Preparatory activities have been completed for creation of six industrial investment nodes with eco-friendly world class infrastructure.

India Infrastructure Finance Company Limited

59. Government established the India Infrastructure Finance Company Limited (IIFCL) to provide long term financial assistance to infrastructure projects. Its disbursements are expected to touch Rs.9,000 crore by end March 2010 and reach around Rs.20,000 crore by March 2011. IIFCL has also been authorised to refinance bank lending to infrastructure projects. It has refinanced Rs.3,000 crore during the current year and is expected to more than double that amount in 2010-11. The take-out financing scheme announced in the last Budget is expected to initially provide finance for about Rs.25,000 crore in the next three years.

Energy

60. Government accords the highest priority to capacity addition in the power sector. The framework for induction of super critical technology in large capacity power plants of National Thermal Power Corporation is now in place. The Mega Power Policy has been modified and is now consistent with the National Electricity Policy, 2005 and Tariff Policy, 2006. It will help in lowering the cost of generation and the cost of power purchased by distribution utilities. I have more than doubled the plan allocation for power sector from Rs.2,230 crore in 2009-10 to Rs.5,130 crore in 2010-11. This does not include allocations for RGGVY, which is a part of Bharat Nirman.

61. Coal is the mainstay of India's energy sector and 75 per cent of the power generation is currently coal based. It is proposed to introduce a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks.

62. Government proposes to take steps to set up a "Coal Regulatory Authority" to create a level playing field in the coal sector. This would facilitate resolution of issues like economic pricing of coal and benchmarking of standards of performance.

63. The Jawaharlal Nehru National Solar Mission envisages establishing India as a global leader in solar energy. An ambitious target of 20,000 MW of solar power by the year 2022 has been set under the mission. I propose to increase the plan outlay for the Ministry of New and Renewable Energy by 61 per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.

64. The Ladakh region of Jammu and Kashmir faces an extremely harsh climate and suffers from energy deficiency. To address this problem, it is proposed to set up solar, small hydro and micro power projects at a cost of about Rs.500 crore.

Environment and Climate change

65. To ameliorate the negative environmental consequences and increased pollution levels associated with industrialisation and urbanisation, I propose to take a number of proactive steps in the Budget 2010-11.

National Clean Energy Fund (NCEF)

66. There are many areas of the country where pollution levels have reached alarming proportions. While we must ensure that the principle of "polluter pays" remains the basic guiding criteria for pollution management, we must also give a positive thrust to development of clean energy. I propose to establish a National Clean Energy Fund for funding research and innovative projects in clean energy technologies. I shall outline the mode of funding for this initiative in Part B of my speech.

Effluent Treatment Plant, Tirupur

67. The textile cluster for knitwear in Tirupur in Tamil Nadu is a major contributor to the country's hosiery exports. I propose to provide a one-time grant of Rs.200 crore to the Government of Tamil Nadu towards the cost of installation of a zero liquid discharge system at Tirupur to sustain this industry, which provides livelihood to lakhs of persons, without undermining the environment.

Special Golden Jubilee Package for Goa

68. I propose to provide a sum of Rs.200 crore as a Special Golden Jubilee package for Goa to preserve the natural resources of the State by restoring Goa's beaches which are prone to erosion, and increasing its green cover through sustainable forestry.

National Ganga River Basin Authority (NGRBA)

69. The "Mission Clean Ganga 2020" under the National Ganga River Basin Authority (NGRBA) with the objective that no untreated municipal sewage or industrial effluent will be discharged into the national river has already been initiated. I propose to double the allocation for NGRBA in 2010-11 to Rs.500 crore.

70. I am happy to inform the Honourable Members that schemes on bank protection works along river Bhagirathi and river Ganga-Padma in parts of Murshidabad and Nadia district of West Bengal have been included in the Centrally Sponsored Flood Management Programme. I also propose to provide budgetary support for drainage scheme of Kaliaghai-Kapaleswari Baghai basin in the district of Purba and Paschim Midnapore, and Master Plan of Kandi sub-division in Murshidabad, West Bengal.

71. Recognising the need for developing an alternate port facility in West Bengal, it is proposed to develop a project at Sagar Island. Necessary funds will be provided in due course.

INCLUSIVE DEVELOPMENT

72. For the UPA Government, inclusive development is an act of faith. In the last five years, our Government has created entitlements backed by legal guarantees for an individual's right to information and her right to work. This has been followed-up with the enactment of the right to education in 2009-10. As the next step, we are now ready with the draft Food Security Bill which will be placed in the public domain very soon. To fulfil these commitments the spending on social sector has been gradually increased to Rs.1,37,674 crore which now stands at 37 per cent of the total plan outlay in 2010-11. Another 25 per cent of the plan allocations are devoted to the development of rural infrastructure. With growth and the opportunities that it generates, we hope to further strengthen the process of inclusive development.

Education

73. The Right of Children to Free and Compulsory Education Act, 2009 creates a framework for legal entitlements for all children in the age group of 6 to 14 years to education of good quality, based on principles of equity and
non-discrimination. In recent years, Sarva Shiksha Abhiyan (SSA) has made significant contribution in improving enrolment and infrastructure for elementary education. About 98 per cent of habitations are now covered by primary schools. I propose to increase the plan allocation for school education from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11. In addition, States will have access to Rs.3,675 crore for elementary education under the Thirteenth Finance Commission grants for 2010-11.

Health

74. An Annual Health Survey to prepare the District Health Profile of all Districts shall be conducted in 2010-11. The findings of the Survey should be of immense benefit to major public health initiatives particularly the National Rural Health Mission, which has successfully addressed the gaps in the delivery of critical health services in rural areas.

75. I propose to increase the plan allocation for the Ministry of Health and Family Welfare, from Rs.19,534 crore to Rs.22,300 crore for 2010-11.

Financial Inclusion

76. To reach the benefits of banking services to the 'Aam Aadmi', the Reserve Bank of India had set up a High Level Committee on the Lead Bank Scheme. After careful assessment of the recommendations of this Committee, and in further consultation with the RBI, it has been decided to provide appropriate Banking facilities to habitations having population in excess of 2000 by March, 2012. It is also proposed to extend insurance and other services to the targeted beneficiaries. These services will be provided using the Business Correspondent and other models with appropriate technology back up. By this arrangement, it is proposed to cover 60,000 habitations.

Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund

77. In 2007-08 the Government had set up a Financial Inclusion Fund and a Financial Inclusion Technology Fund in NABARD, to reach banking services to the unbanked areas. To give momentum to the pace of financial inclusion, I propose an augmentation of Rs.100 crore for each of these funds, which shall be contributed by Government of India, RBI and NABARD.

Rural Development

78. In the words of Mahatma Gandhi "Just as the universe is contained in the self, so is India contained in the villages". For UPA Government, development of rural infrastructure remains a high priority area. For the year 2010-11, I propose to provide Rs.66,100 crore for Rural Development.

79. Mahatma Gandhi National Rural Employment Guarantee Scheme has completed four years of implementation during which it has been extended to all districts covering more than 4.5 crore households. The allocation for NREGA has been stepped up to Rs.40,100 crore in 2010-11. Bharat Nirman has made a substantial contribution to the upgradation of rural infrastructure through its various programmes. For the year 2010-11, I propose to allocate an amount of Rs.48,000 crore for these programmes.

80. Indira Awas Yojana is a popular rural housing scheme for weaker sections. Taking note of the increase in the cost of construction, I propose to raise the unit cost under this scheme to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas. For the year 2010-11, the allocation for this scheme is being increased to Rs.10,000 crore.

81. As a part of the strategy to bridge the infrastructure gap in backward districts of the country, the Backward Region Grant Fund has proved to be an effective instrument. I propose to enhance the allocation to this fund by 26 per cent from Rs.5,800 crore in 2009-10 to Rs.7,300 crore in 2010-11. I have also provided an additional central assistance of Rs.1,200 crore for drought mitigation in the Bundelkhand region in the Budget.

Urban Development and Housing

82. "Swarna Jayanti Shahari Rozgar Yojana" designed to provide employment opportunities in urban areas, has been strengthened with focus on community participation, skill development and self employment support structures. For the year 2010-11, I propose to increase the allocation for urban development by more than 75 per cent from Rs.3,060 crore to Rs.5,400 crore. In addition, the allocation for Housing and Urban Poverty Alleviation is also being raised from Rs.850 crore to Rs.1,000 crore in 2010-11.

83. While presenting the Union Budget for the year 2009-10, I had announced a Scheme of one per cent interest subvention on housing loans up to Rs.10 lakhs where the cost of the house does not exceed Rs.20 lakhs. I propose to extend this Scheme up to March 31, 2011. Accordingly, I propose to provide a sum of Rs.700 crore for this Scheme for the year 2010-11.

84. The Rajiv Awas Yojana (RAY) for slum dwellers and urban poor was announced last year to extend support to States that are willing to provide property rights to slum dwellers. This scheme is now ready to take off. I propose to allocate Rs.1,270 crore for 2010-11 as compared to Rs.150 crore last year. This marks an increase of over 700 per cent. The Government's efforts in the implementation of RAY would be to encourage the States to create a slum free India at the earliest.

Micro, Small & Medium Enterprises

85. Micro, Small and Medium Enterprises (MSMEs) contribute 8 per cent of the country's GDP, 45 per cent of the manufactured output and 40 per cent of our exports. They provide employment to about 6 crore persons through 2.6 crore enterprises. To resolve a number of issues which affect the growth of this sector, Prime Minister constituted a High-Level Task Force which held detailed discussions with all stake holders and drew up an agenda for action. A High Level Council on Micro and Small Enterprises will monitor the implementation of the recommendations and the agenda for action. I propose to raise the allocation for this sector from Rs.1,794 crore to Rs.2,400 crore for the year 2010-11.

86. A loan agreement for US $ 150 million has been signed between the Government of India and the Asian Development Bank on 22nd December, 2009 for implementing the comprehensive Khadi Reforms Programme. This programme will cover 300 selected Khadi institutions.

Micro Finance

87. The programme for linking Self Help Groups (SHGs) with the banking system has emerged as the major micro-finance initiative in the country. It was re-designated as the 'Micro-Finance Development and Equity Fund' in 2005-06 with a corpus of Rs.200 crore. The fund corpus is being doubled to Rs.400 crore in 2010-11.

Unorganised Sector

National Social Security Fund for unorganised sector workers

88. Recognising the need for providing social security to the workers in the unorganised sector, and as a follow up to the Unorganised Sector Workers Social Security Act, 2008, it has been decided to set up a National Social Security Fund for unorganised sector workers with an initial allocation of Rs.1,000 crore. This fund will support schemes for weavers, toddy tappers, rickshaw pullers, bidi workers etc.

89. The Government had launched Rashtriya Swasthya Bima Yojana on October 1, 2007 to provide health insurance cover to below poverty line workers and their families. It became operational on April 1, 2008 and so far more than 1 crore smart cards have been issued under this scheme. In view of the success of the scheme, it is now proposed to extend its benefits to all such Mahatma Gandhi NREGA beneficiaries who have worked for more than 15 days during the preceding financial year.

90. To encourage the people from the unorganised sector to voluntarily save for their retirement and to lower the cost of operations of the New Pension Scheme (NPS) for such subscribers, Government will contribute Rs.1,000 per year to each NPS account opened in the year 2010-11. This initiative, "Swavalamban" will be available for persons who join NPS, with a minimum contribution of Rs.1,000 and a maximum contribution of Rs.12,000 per annum during the financial year 2010-11. The scheme will be available for another three years. Accordingly, I am making an allocation of Rs.100 crore for the year 2010-11. It will benefit about 10 lakh NPS subscribers of the unorganised sector. The scheme will be managed by the interim Pension Fund Regulatory and Development Authority.

91. I also appeal to the State Governments to contribute a similar amount to the scheme and participate in providing social security to the vulnerable sections of the society.

Skill development

92. Prime Minister's Council on National Skill Development has laid down the core governing principles for operating strategies for skill development. The Council has a mission of creating 50 crore skilled people by 2022. Of these, the target for the National Skill Development Corporation, which has started functioning from October, 2009, is 15 crore. It has completed a comprehensive skill gap study of 21 high growth sectors and approved three projects worth about Rs.45 crore to create 10 lakh skilled manpower at the rate of one lakh per annum. Other projects are in advanced stages of consideration.

93. It is proposed to launch an extensive skill development programme in the textile and garment sector by leveraging the strength of existing institutions and instruments of the Textile Ministry. The resources of the private sector will also be harnessed by incentivising training through an outcome - based approach. Through these instruments, the Ministry of Textiles has set an ambitious target of training 30 lakh persons over 5 years.

Social Welfare

94. I propose to step up the plan outlay for Women and Child Development by almost 50 per cent. Several new initiatives that were launched in 2009-10 are now ready for implementation. A mission for empowerment of women is being set up. The ICDS platform is being expanded for effective implementation of the Rajiv Gandhi Scheme for Adolescent Girls.

95. To further improve female literacy rate, the Government has recast the earlier National Literacy Mission as a new programme "Saakshar Bharat". It was launched in September, 2009 with a target of 7 crore non-literate adults which includes 6 crore women.

96. A Mahila Kisan Sashaktikaran Pariyojana to meet the specific needs of women farmers is being launched. I have provided Rs.100 crore for this initiative as a sub-component of the National Rural Livelihood Mission.

97. I am happy to inform the Honourable Members that I propose to enhance the plan outlay of the Ministry of Social Justice and Empowerment to Rs.4500 crore. This amounts to an increase of 80 per cent as compared to 2009-10. This will support the programmes being implemented for the target population groups covering the Scheduled Castes, Other Backward Classes, persons with disabilities, senior citizens and victims of alcoholism and substance abuse. With this enhancement, the Ministry will be able to revise rates of scholarship under its post-matric scholarship schemes for SCs and OBC students, which is long overdue.

98. The allocation will also assist in establishing an Indian Sign Language Research and Training Centre for the benefit of the hearing impaired. District Disability Rehabilitation Centres are being set up in 50 additional districts along with two composite regional centres for persons with disabilities.

99. I also propose to raise the plan allocation for the Ministry of Minority Affairs from Rs.1,740 crore to Rs.2,600 crore for the year 2010-11. This marks an increase of nearly 50 per cent. I am happy to inform the Honourable Members that we are close to achieving the target of 15 per cent priority sector lending to minorities in the current year. This will be maintained for the next three years.

STRENGTHENING TRANSPARENCY & PUBLIC ACCOUNTABILTY

100. The UPA Government has made a serious attempt to create an environment that supports transparency and accountability in the working of the public institutions in the country. As Honourable Members are aware, a number of legislative and administrative measures have been taken in this regard.

Financial Sector Legislative Reforms Commission

101. Most of our legislations governing the financial sector are very old. Large number of amendments to these Acts made at different points of time has also increased ambiguity and complexity. The Government proposes to set up a Financial Sector Legislative Reforms Commission to rewrite and clean up the financial sector laws to bring them in line with the requirements of the sector.

Administrative Reforms Commission

102. The Administrative Reforms Commission constituted by the UPA Government in its first term has submitted 15 reports, of which 10 reports have been examined by the Government. Out of the 800 identified recommendations for implementation so far, 350 recommendations have been implemented and 450 are under implementation.

Unique Identification Authority of India (UIDAI)

103. In my last Budget Speech, I had announced the constitution of the Unique Identification Authority of India, its broad working principles and the timelines for delivery of the first UID numbers. I am happy to report that the Authority has been constituted and it will be able to meet its commitments of issuing the first set of UID numbers in the coming year. It would provide an effective platform for financial inclusion and targeted subsidy payments. Since the UIDAI will now get into the operational phase, I am allocating Rs.1,900 crore to the Authority for 2010-11.

Technology Advisory Group for Unique Projects (TAGUP)

104. An effective tax administration and financial governance system calls for creation of IT projects which are reliable, secure and efficient. IT projects like Tax Information Network, New Pension Scheme, National Treasury Management Agency, Expenditure Information Network, Goods and Service Tax, are in different stages of roll out. To look into various technological and systemic issues, I propose to set up a Technology Advisory Group for Unique Projects under the Chairmanship of Shri Nandan Nilekani.

Independent Evaluation Office (IEO)

105. The Government had announced the setting-up of an Independent Evaluation Office to undertake impartial and objective assessments of the various public programmes and improve the effectiveness of the public interventions. It has been decided that it would be an independent entity under a Governing board chaired by the Deputy Chairman, Planning Commission. The IEO would evaluate the impact of flagship programmes and place the findings in the public domain. It would be funded by the Planning Commission.

Symbol for Indian Rupee

106. In the ensuing year, we intend to formalise a symbol for the Indian Rupee, which reflects and captures the Indian ethos and culture. With this, Indian Rupee will join the select club of currencies such as the US Dollar, British Pound Sterling, Euro and Japanese Yen that have a clear distinguishing identity.

Security and Justice

107. Secure borders and security of life and property fosters development. I propose to increase the allocation for Defence to Rs.1,47,344 crore. This would include Rs.60,000 crore for capital expenditure. Needless to say, any additional requirement for the security of the nation will be provided for.

108. In 2009-10, the overall internal security and law and order situation in the country remained largely under control. Several new measures were taken by the Government to strengthen the security apparatus of the country. These include operationalisation of the National Investigation Agency (NIA), establishment of four NSG Hubs, augmentation of the Intelligence Bureau and its Multi-Agency Centre.

109. There was decline in violence in Jammu and Kashmir in the year 2009. We have taken a number of confidence building measures. As one more such measure, Government proposes to recruit about 2,000 youth as constables in five Central Para Military Forces in the year 2010.

110. To address the development problems of the thirty three left wing extremism affected districts, a Task Force headed by the Cabinet Secretary was formed for promoting coordinated efforts across a range of development and security measures. It has been decided that Planning Commission will prepare an integrated action plan for the affected areas. Adequate funds will be made available to support the action plan. I appeal to the misguided elements to eschew violence and join the development process.

National Mission for Delivery of Justice and Legal Reforms

111. To provide timely delivery of justice to all, the Government has approved the setting up of the National Mission for Delivery of Justice and Legal Reforms. The objective of the mission is to help reduce legal backlog in courts from an average of 15 years at present to 3 years by 2012. It would also help in improving the legal environment for business. The Thirteenth Finance Commission has provided grants amounting to Rs.5,000 crore for the States to improve the delivery of justice, including strengthening of alternate dispute resolution mechanisms.

Budget Estimates 2010-11

I now turn to the Budget Estimates for 2010-11.

112. The Gross Tax Receipts are estimated at Rs.7,46,651 crore. The Non Tax Revenue Receipts are estimated at Rs.1,48,118 crore. The net tax revenue to the Centre as well as the expenditure provisions in 2010-11 have been estimated with reference to the recommendations of the Thirteenth Finance Commission.

113. The total expenditure proposed in the Budget Estimates for 2010-11 is Rs.11,08,749 crore, which is an increase of 8.6 per cent over the total expenditure in BE 2009-10. The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs.3,73,092 crore and Rs.7,35,657 crore, respectively. While there is a 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the BE of previous year. With this level of Plan expenditure, I am confident that the total Plan expenditure would be very close to 100 per cent of the expenditure envisaged in the Eleventh Five Year Plan.

114. Honourable Members will agree that fiscal policy has to be guided by the required framework for fiscal prudence. In the Medium Term Fiscal Policy Statement presented along with Budget 2009-10, I had laid down a road map for fiscal deficit. I am happy to report that in keeping with my commitment, I have been able to present the Budget for 2010-11 with a fiscal deficit of 5.5 per cent. In the Medium Term Fiscal Policy Statement being presented to the House today, along with other Budget documents, the rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for 2011-12 and 2012-13, respectively. These projections improve upon the recommendations of the Thirteenth Finance Commission.

115. While presenting the Budget for 2009-10, I had expressed my concern about the high level of fiscal deficit. I had also stated that the Government will address this issue in right earnest to come back to the path of fiscal consolidation at the earliest. I am happy to report that against a fiscal deficit of 7.8 per cent in 2008-09, inclusive of oil and fertiliser bonds, the comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for 2009-10. Both these deficit figures are based on the revised GDP numbers published by the Central Statistical Organisation and include what were earlier referred to as below the line items. This marks an improvement of about one per cent in fiscal deficit during the current year. I have made a conscious effort to avoid issuing bonds to oil and fertiliser companies. I would like to continue with this practice of extending Government subsidy in cash, thereby bringing all subsidy related liabilities into our fiscal accounting.

116. The fiscal deficit of 5.5 per cent of GDP in 2010-11 works out to Rs.3,81,408 crore. Taking into account the various other financing items for fiscal deficit, the actual net market borrowing of the Government in 2010-11 would be of the order of Rs.3,45,010 crore. There will be enough space to meet the credit needs of the private sector. The Government will plan the borrowing programme in consultation with the RBI.

PART - B

Madam Speaker,

I shall now present my tax proposals.

117. While formulating them, I have been guided by the principles of sound tax administration as embodied in the following words of Kautilya:

"Thus, a wise Collector General shall conduct the work of revenue collection.... in a manner that production and consumption should not be injuriously affected.... financial prosperity depends on public prosperity, abundance of harvest and prosperity of commerce among other things."

118. I had stated last year that tax reform is a process and not an event. The process I had outlined in the area of direct taxes was to release a draft Direct Taxes Code along with a Discussion Paper. In the area of indirect taxes, the reform initiative was the introduction of a Goods and Services Tax. I have presented the developments in both reform initiatives in Part 'A' of my Speech.

119. We have continued on the path of computerisation in core areas of service delivery in the administration of direct taxes. This will reduce the physical interface between taxpayers and tax administration and speed up procedures and processes. The Centralised Processing Centre at Bengaluru is now fully functional and is processing around 20,000 returns daily. This initiative will be taken forward by setting up two more Centres during the year.

120. As a part of Government's initiative to move towards citizen centric governance, the income tax department has introduced "Sevottam", a pilot project at Pune, Kochiand Chandigarh through Aayakar Seva Kendras. These provide a single window system for registration of all applications including those for redressal of grievances as well as paper returns. This year the scheme will be extended to four more cities.

121. To achieve the roll-out of GST by April 2011, the indirect tax administrations at the Centre and the States need to revamp their internal work processes based on the use of Information Technology. I am happy to inform Honorable Members that project ACES - Automation of Central Excise & Service Tax, has already been rolled out throughout the country this year. This will impart greater transparency in tax administration and improve the delivery of taxpayer services. Similarly, a Mission Mode Project for computerisation of Commercial Taxes in States has been approved recently. With an outlay of Rs.1133 crore of which the Centre's share is Rs.800 crore, the project will lay the foundation for the launch of GST.

122. I mentioned last year, that the income tax return forms should be simple and user friendly. The income tax department is now ready to notify SARAL-II form for individual salaried taxpayers for the coming assessment year. This form will enable individuals to enter relevant details in a simple format in only two pages.

123. To expeditiously resolve disputes with taxpayers I propose to expand the scope of cases which may be admitted by the Settlement Commission to include proceedings related to search and seizure cases pending for assessment. I also propose to expand the scope of Settlement Commission in respect of Central Excise and Customs so that certain categories of cases that hitherto fell outside its jurisdiction may be admitted.

124. Last year, amendments to the statute enabled Government to enter into tax treaties with specified territories besides sovereign states. We have commenced bi-lateral discussions to enhance the exchange of bank related and other information to effectively track tax evasion and identify undisclosed assets of resident Indians lying abroad.

Direct Taxes

I shall now deal with direct taxes.

125. Last year I provided relief to individual taxpayers by enhancing the exemption limit for all taxpayers and withdrawing the surcharge on personal income tax. Taxpayers have responded positively to these concessions by contributing a higher level of taxes. There is a persuasive case for further relief by broadening the current tax slabs which I propose as follows:

Income upto Rs.1.6 lakh Nil

Income above Rs.1.6 lakh and upto Rs.5 lakh 10 per cent

Income above Rs.5 lakh and upto Rs.8 lakh 20 per cent

Income above Rs.8 lakh 30 per cent

126. The proposed broadening of tax slabs will provide substantial relief to a large number of taxpayers.

127. To promote savings as well as to ensure their utilisation for the thrust area of infrastructure, I propose to allow a deduction of an additional amount of Rs.20,000 for investment in long-term infrastructure bonds as notified by the Central Government. This would be over and above the existing limit of Rs.1 lakh on tax savings. I am sure that these reliefs will put more money in the hands of individual taxpayers for both consumption as well as saving.

128. Besides contributions to health insurance schemes which is currently allowed as a deduction under the Income-tax Act, I propose to allow contributions to the Central Government Health Scheme also as a deduction under the same provision.

129. Taking forward my initiative of phasing out surcharge, I propose to reduce the current surcharge of 10 per cent on domestic companies to 7.5 per cent. At the same time, I propose to increase the rate of Minimum Alternate Tax (MAT) from the current rate of 15 per cent to 18 per cent of book profits. This will further promote inter-se equity among corporate taxpayers.

130. The President, in her address to the Parliament in June 2009, had declared this decade as the Decade of Innovation. Last year, I extended the scope of weighted deduction on expenditure incurred on in-house research and development (R&D) to all manufacturing businesses except for a small negative list. To further encourage R&D across all sectors of the economy, I now propose to enhance the weighted deduction on expenditure incurred on in-house R&D from 150 per cent to 200 per cent. I also propose to enhance the weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research from 125 per cent to 175 per cent.

131. Currently, any payment made to an approved scientific research association is eligible for weighted deduction. The income of the approved scientific research association is exempt from tax. I propose that payments made to approved associations engaged in research in social sciences or statistical research would be allowed a weighted deduction of 125 per cent. The income of such approved research associations shall be exempt from tax.

132. In my Budget Speech last year, I stated that profit linked deductions are inherently inefficient and liable to misuse. To incentivise businesses in priority sectors, I introduced investment linked deduction as an alternative to profit linked deduction. To give a boost to investment in the tourism sector which has high employment potential, I propose to extend the benefit of investment linked deduction under the Act to new hotels of two-star category and above anywhere in India.

133. To provide one time interim relief to the housing and real estate sector which was impacted by the global recession, I propose to allow pending projects to be completed within a period of five years instead of four years for claiming a deduction on their profits. I also propose to relax the norms for built-up area of shops and other commercial establishments in housing projects to enable basic facilities for their residents.

134. All businesses with a turnover exceeding Rs.40 lakh are currently required to have their accounts audited. A similar provision also applies to all professions whose receipts exceed Rs.10 lakh. I, as Finance Minister, had introduced these limits in my budget of 1984. It is high time to reduce the compliance burden on small taxpayers. I, therefore, propose to enhance these limits to Rs.60 lakh in the case of businesses and Rs.15 lakh in the case of professions.

135. To facilitate the business operations of small taxpayers, I had extended the scope of presumptive taxation to all small businesses with a turnover of up to Rs.40 lakh. To further reduce the compliance burden on small taxpayers, I now propose to enhance this limit to Rs.60 lakh.

136. The threshold limits of payments below which tax is not deductible at source have remained unchanged for a long time. I propose to rationalise these thresholds.

137. Relaxing the current provisions on disallowance of expenditure, I propose to allow deduction of such expenditure, if tax has been deducted at any time during the financial year and paid before the due date of filing the return. This will allow most deductors additional time up to September of the next financial year. At the same time, I propose to increase the interest charged on tax deducted but not deposited by the specified date, from 12 per cent to 18 per cent per annum.

138. Last year, I had provided for the taxation of the newly introduced Limited Liability Partnership (LLP) on the same lines as exists for a general partnership firm. To facilitate the conversion of small companies into LLPs, I propose that this will not be subject to capital gains tax.

139. Under the current provisions of the Act, "the advancement of any other object of general public utility" cannot be considered as "charitable purpose" if it involves carrying on of any activity in the nature of trade, commerce or business. I have received representations from many organisations seeking some relaxation in this restriction. I propose that this restriction would not be applicable if the receipts from such activities do not exceed Rs.10 lakh in the year.

140. My proposals on direct taxes are estimated to result in a revenue loss of Rs.26,000 crore for the year.

Indirect Taxes

141. The major objectives that have guided me in the formulation of my proposals on indirect taxes are the need to achieve some degree of fiscal consolidation without impairing the recovery process and moving forward on the road to GST.

142. Unlike the time I presented the last Budget, symptoms of economic recovery are more widespread and clear-cut now. The three fiscal stimulus packages that the Government introduced in quick succession have helped the process of recovery significantly. The improvement in our economic performance encourages a course of fiscal correction even as the global situation warrants caution. Therefore, I propose to partially roll back the rate reduction in Central Excise duties and enhance the standard rate on all non-petroleum products from 8 per cent to 10 per cent ad valorem. The specific rates of duty applicable to portland cement and cement clinker are also being adjusted upwards proportionately. Similarly, the ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles which was reduced as part of the first stimulus package, is being increased by 2 percentage points to 22 per cent.

143. In the wake of spiralling petroleum prices, Government provided full exemption from basic customs duty to crude petroleum and proportionately reduced the basic duty on refined petroleum products in June, 2008. Compared to the international price of the Indian crude basket of US$ 112 per barrel at that time, the prices are much softer at present. In view of the pressing need to move back to a fiscal consolidation path, I propose to restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. I also propose to enhance the Central Excise duty on petrol and diesel by Re.1 per litre each.

144. Since I quit smoking many years ago, I would urge others to also follow suit, as smoking is injurious to health. To this end, I am making some structural changes in the excise duty on cigarettes, cigars and cigarillos coupled with some increase in rates. I also propose to enhance excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc. In addition, I propose to introduce a compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines.

145. Let me now turn to some much-needed incentives in thrust areas for sustainable growth and development.

Agriculture & Related Sectors

146. In supporting the strategy outlined for development of agriculture earlier in my speech, I propose to address a few key areas that call for focused attention. These are:

(i) A strong supply chain for perishable farm produce to reach consumption and processing centres promptly;

(ii) Infrastructure and technology to convert such produce into value-added products; and

(iii) Infusion of technology to augment agricultural production.

147. Similar attention needs to be paid to related sectors such as apiary, horticulture, dairy, poultry, meat, marine and aquaculture.

148. For achieving these objectives, I propose to provide:

• project import status with a concessional import duty of 5 per cent for the setting up of mechanised handling systems and pallet racking systems in 'mandis' or warehouses for food grains and sugar as well as full exemption from service tax for the installation and commissioning of such equipment.

• project import status at a concessional customs duty of 5 per cent with full exemption from service tax to the initial setting up and expansion of

» Cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce ; and

» Processing units for such produce.

• full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks.

149. I also propose to provide:

• concessional customs duty of 5 per cent to specified agricultural machinery not manufactured in India;

• central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce; and

• full exemption from excise duty to trailers and semi-trailers used in agriculture.

150. Concessional import duty was provided to specified machinery for use in the plantation sector in the year 2003. This exemption is to lapse in July 2010. The modernization of this labour-intensive sector is yet to reach the expected level. I propose therefore, to extend it up to March 31, 2011 along with a CVD exemption. I hope this will provide sufficient time for the sector to achieve the desired objective.

151. One of the prerequisites for agricultural productivity is access to good quality and disease-resistant seeds. I propose to exempt the testing and certification of agricultural seeds from service tax.

152. I also propose to exempt the transportation by road of cereals and pulses from service tax. Their transportation by rail would remain exempt.

153. I propose two measures under the Central Excise law to ease the cash flow position for small-scale manufacturers hard hit by the economic slowdown. First, they would be permitted to take full credit of Central Excise duty paid on capital goods in a single instalment in the year of their receipt. Secondly, they would be permitted to pay Central Excise duty on a quarterly, rather than monthly basis. These measures that come into effect on the April 1, 2010 should provide them considerable relief.

Environment

154. Harnessing renewable energy sources to reduce dependence on fossil fuels is now recognised as a credible strategy for combating global warming and climate change. To build the corpus of the National Clean Energy Fund announced earlier, I propose to levy a clean energy cess on coal produced in India at a nominal rate of Rs.50 per tonne. This cess will also apply to imported coal.

155. In pursuance of Government's resolve to implement the National Solar Mission, I propose to provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units. I also propose to exempt them from Central Excise duty. Similarly, ground source heat pumps used to tap geo-thermal energy would be exempt from basic customs duty and special additional duty.

156. Wind energy has shown promising growth in the country in recent years. As a measure of further relief, I propose to exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty.

157. LED lights are staging a debut as a highly energy-efficient source of lighting for streets, homes and offices. Central Excise duty on these is being reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps.

158. Full exemption from Central Excise duty was provided to electric cars and vehicles that offer an eco-friendly alternative to petrol or diesel vehicles. The manufacturers of such vehicles have expressed difficulty in neutralising the duty paid on their inputs and components. I propose to remedy this by imposing a nominal duty of 4 per cent on such vehicles. I also propose to exempt some critical parts or sub-assemblies of such vehicles from basic customs duty and special additional duty subject to actual user condition. These parts would also enjoy a concessional CVD of 4 per cent.

159. The humble cycle rickshaw is now being acclaimed as an environment-friendly means of transport. CSIR has developed an innovative product called 'soleckshaw' to replace manually-operated rickshaws. It runs on batteries which are charged by solar power. I propose to provide a concessional excise duty of 4 per cent to this product. Its key parts and components are also being exempted from customs duty.

160. To encourage the use of bio-degradable materials, I propose to exempt the import of compostable polymer from basic customs duty.

Infrastructure

161. Strengthening the public transport system is another means of reducing dependence on fossil fuels. I propose to grant project import status to 'Monorail projects for urban transport' at a concessional basic duty of 5 per cent.

162. Full exemption from import duty is available to specified machinery for road construction projects on the condition that the machinery shall not be sold or disposed of for a minimum period of five years. In view of representations that this leads to idling of machinery, I propose to allow resale of such machinery on payment of import duty at depreciated value. It is also being clarified that the importer is free to relocate such machinery to other eligible road construction projects.

163. With the subscriber base growing at 14 million per month, India is one of the fastest growing markets for mobile phone connections in the world. Domestic production of mobile phones is now picking up in view of exemptions from basic, CVD and special additional duties granted to their parts, components and accessories. To encourage the domestic manufacture of accessories, these exemptions are now being extended to parts of battery chargers and hands-free headphones. Also, the validity of the exemption from special additional duty is being extended till March 31, 2011.

Medical Sector

164. Medical equipment, instruments and appliances are subjected to a very complex import duty regime based on several long lists that describe individual items. Multiple rates coupled with descriptions not aligned with tariff lines, result in disputes and at times prevent state-of-art equipment from getting the benefit of exemption. I propose to prescribe a uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty on all medical equipment. A concessional basic duty of 5 per cent is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty. Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. is being retained. The concession available to Government hospitals or hospitals set up under a statute is also being retained.

165. The manufacturers of orthopaedic implants have represented that their inputs attract a higher rate of duty than the finished product. I propose to exempt specified inputs for the manufacture of such implants from import duty.

Infotainment

166. India is a nation of movie-goers. The film industry has been experiencing difficulties in importing digital masters of films for duplication or distribution loaded on electronic medium vis-a-vis those imported on cinematographic film, owing to a differential customs duty structure. I propose to rationalise this by charging customs duty only on the value of the carrier medium. The same dispensation would apply to music and gaming software imported for duplication. In keeping with the tradition of Indian cinema, however, I shall provide a surprise ending. In all such cases the value representing the transfer of intellectual rights would be subjected to service tax.

167. Cable transmission of infotainment is undergoing a transformation with the adoption of digital technology. The multi-service operators need to invest in "Digital Head End" equipment. To enable this, I propose to provide project import status at a concessional customs duty of 5 per cent with full exemption from special additional duty to the initial setting up of such projects.

Precious Metals

168. The prices of precious metals continue to rise. Since the customs duty is levied on these at specific rates, I propose to index the rates as follows:

• On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams.

• On silver from Rs.1,000 per kg to Rs.1,500 per kg.

169. Gems and jewellery is a traditional item in our export basket. Rhodium - a precious metal used for polishing jewellery attracts a basic customs duty of 10 per cent. This is being reduced to 2 per cent.

170. To encourage domestic refining capacity for gold, I propose to reduce the basic customs duty on gold ore and concentrates from 2 per cent ad valorem to a specific duty of Rs.140 per 10 grams of gold content with full exemption from special additional duty. Further, the excise duty on refined gold made from such ore or concentrate is being reduced from 8 per cent to a specific duty of Rs.280 per 10 grams.

Other Proposals

171. Full exemption from import duty is available to specified inputs or raw materials required for the manufacture of sports goods which are assuming importance as an item of export. This is being expanded to cover a few more items.

172. In order to incentivise the domestic production of microwave ovens, I propose to reduce the basic customs duty on one of its key components, namely magnetrons from 10 per cent to 5 per cent.

173. Presently, there is a value limit of Rs.1 lakh per annum on duty-free import of commercial samples as personal baggage. I propose to enhance this limit to Rs.3 lakh per annum.

174. Industry has represented that the exemption from special additional duty of 4 per cent based on refunds leads to substantial blockage of funds. To ease this difficulty, I propose to provide an outright exemption from special additional duty to goods imported in a pre-packaged form for retail sale. This would also cover mobile phones, watches and ready-made garments even when they are not imported in pre-packaged form. The refund-based exemption is also being retained for cases not covered by the new dispensation.

175. Toy balloons are a source of joy to millions of children. To bring a smile to their mothers' faces, I propose to fully exempt them from Central Excise duty.

176. Some of the other relief measures that I propose are as under:

• Reduction in basic customs duty on long pepper from 70 per cent to 30 per cent;

• Reduction in basic customs duty on asafoetida from 30 per cent to 20 per cent;

• Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4 per cent;

• Reduction in central excise duty on corrugated boxes and cartons from 8 per cent to 4 per cent;

• Reduction in central excise duty on latex rubber thread from 8 per cent to 4 per cent; and

• Reduction in excise duty on goods covered under the Medicinal and Toilet Preparations Act from 16 per cent to 10 per cent.

177. My proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs.43,500 crore for the year.

Service Tax

178. The service sector contributes nearly 60 per cent of the GDP. The service tax to GDP ratio however, is only around 1 per cent. This sector thus, has significant potential to augment revenue.

179. To bridge this gap, I had the option to raise the rate of service tax to 12 per cent as it was before I introduced the third stimulus package. I am not resorting to this option to maintain the growth momentum and also to bring about a convergence in the rates of tax on goods and services. I, therefore, propose to retain the rate of tax on services at 10 per cent to pave the way forward for GST.

180. I had another option - to bring all services under service tax. I am not opting for this either at this stage. I propose, however, to bring certain services, hitherto untaxed, within the purview of the service tax levy. These are being notified separately.

181. I am also proposing certain legislative changes to plug revenue leakages, to remove distortions and to clarify certain doubts that have arisen over a period of time. I do not want to waste the precious time of the House elaborating the details, as they are available in the Finance Bill and other Budget documents.

182. Export of services, especially in the area of Information Technology and Business Process Outsourcing, generates substantial employment and brings in foreign exchange. I propose to ease the process of refund of accumulated credit to exporters of services by making necessary changes in the definition of export of services and procedures.

183. Accredited news agencies which provide news feed online attract service tax. Acknowledging the yeoman services of such news agencies in disseminating news, I propose to exempt such news agencies that meet certain criteria, from service tax.

184. My proposals relating to service tax are estimated to result in a net revenue gain of Rs.3,000 crore for the year.

185. Copies of notifications giving effect to the changes in customs, central excise and service tax will be laid on the Table of the House in due course.

186. My proposals on Direct Taxes are estimated to result in a revenue loss of Rs.26,000 crore for the year. Proposals relating to Indirect Taxes are estimated to result in a net revenue gain of Rs.46,500 crore for the year. Taking into account the concessions being given in my tax proposals and measures taken to mobilise additional resources, the net revenue gain is estimated to be Rs.20,500 crore for the year.

187. We have emerged from the global slowdown faster than any other nation. I did not hesitate in exercising my judgement on the course of action last year and I have no hesitation in my mind now. Our actions today will determine our tomorrow.

188. This Budget belongs to 'Aam Aadmi'. It belongs to the farmer, the agriculturist, the entrepreneur and the investor. The opportunity is great. The time is right. I have placed my faith in the hands of the people who, I know, can be depended upon to rise to any occasion in national interest. I have placed my faith in the collective conscience of the nation that can be touched to scale undreamt of heights in the coming years.

189. Madam Speaker, with these words I commend the Budget to the House.