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Finance Minister Yashwant Sinha's Budget Speech (June 1, 1998) Part A Part B Sir, I rise to present the budget for the year 1998-99. 2. This is the first budget of the Government led by Prime Minister Shri Atal Bihari Vajpayee. It is a defining moment in history. It is an occasion fraught with expectation. I am very grateful to the Prime Minister for the confidence he has reposed in me and the guidance he has given me. 3. It has been just over ten weeks since this Government took office. But we know already that a new India is rising. And as May 11 was surely the first step, today is yet another. Certainly, a long journey lies ahead, but as history will prove, we have now begun to build a new India. This will be a strong and prosperous India - a nation self-reliant, but not autarchic, rather a nation keen to deal with the world as an equal partner with other countries. As the saying goes, "only the strong can be free. And only the productive can be strong". This is the new India we propose to build. 4. The dimensions of the economic challenges that confront us today have come into sharper focus since the time I presented the interim budget before this House. While the people of India have reacted with pride over the events of May 11, some of our friends abroad have responded negatively. I am confident that these initial negative responses will be moderated as our position gets better understood, and will not have any significant impact on our economic development. On our part, our policies have to be clearly directed and firm. As Gurudev Rabindranath Tagore said "You cannot cross the sea by standing and staring at the water". We intend to cross the sea and I seek the cooperation of this august House in this national endeavour in the weeks and months ahead. 5. In preparing this budget I have been guided by the famous talisman of Gandhiji. I have recalled to myself the face of the poorest and the weakest man I have seen and made sure that this budget is of use to him. This budget is rooted in Swadeshi which will be unfolded as we go along. But I shall hasten to add that Swadeshi does not mean isolation, Swadeshi means making India strong and self-reliant so that we can compete with the world and win. As our courageous Prime Minister has himself said : A few days ago the Economic Survey, 1997-98 was tabled in Parliament. It provides a comprehensive analysis of the economy’s performance during 1997-98. In my interim budget speech I had already drawn attention to some disquieting trends: overall economic growth slowed to 5 per cent in 1997-98; agricultural growth was negative, with foodgrain production dropping to194 million tonnes from199 million tonnes in the previous year; growth of industrial production slackened to 4.2 per cent; export performance was weak for a second successive year, recording growth in dollar terms of less than 3 per cent; the fiscal deficit worsened to 6.1 per cent of GDP; the capital market remained in the doldrums and infrastructure bottlenecks continued to plague the economy. But I am not daunted by the situation. Only the weak are tamed by adversity, the strong rise above them.
7. Drawing on the National Agenda for Governance and policy statements of the Prime Minister, I believe the key objectives of this budget should be to: Strengthen the foundations of the Indian
economy to deal effectively with an inherently uncertain external environment. Free the productive energies of our people from unnecessary bureaucratic hurdles and undertake reforms to raise the productivity of our land, labour and capital.
Agriculture and Rural Development 8. As I stand here and address this august House, my thoughts wander naturally to the remote villages of India and to millions of our toiling farmers. I have no doubt in my mind that the health and dynamism of the rural economy is central to India’s economic and social development. I propose to do the following for agriculture and rural development: Water is a critical input for agriculture. Yet, after all these years of development only 37 per cent of our cultivable area is under assured irrigation. The bulk of our poor people live in rainfed areas. We propose to accord top priority for development of rainfed areas on a watershed basis and thereby enhance agricultural productivity in a sustainable manner. Watershed Development Programmes, currently spread across several ministries and departments, will be unified and the plan allocation stepped up to Rs.677 crore from Rs.517 crore in RE 1997-98. Furthermore, there is an increase in the provision for the Accelerated Irrigation Benefit Programme by 58 per cent over 1997-98. Next only to water is the question of rural credit and rural infrastructure. Under the Rural Infrastructure Development Fund (RIDF) managed by NABARD moneys are made available to the State Governments for rural infrastructure. During the past three years about Rs. 2,500 crore has been allocated to it annually. I am pleased to announce RIDF IV with an enhanced allocation of Rs.3,000 crore. I invite the States to come forward to utilise this important facility. I propose to augment NABARD’s share capital by Rs.500 crore in the current year. Government will allocate Rs.100 crore from the budget and the RBI will contribute the balance of Rs.400 crore. This will enable NABARD to leverage additional resource from the market to meet the credit needs of agriculture. The problem of rural unemployment and under-employment is a massive one. This can only be solved through self-employment. There is no reason why every craftsman, artisan and weaver cannot become an entrepreneur and run his own little enterprise. A major bottleneck however has been lack of credit facilities. Earlier NABARD had launched a limited scheme for promotion of Self Help Groups (SHG) as a channel for the flow of funds to the micro enterprises. I am asking NABARD to greatly extend the scope and coverage of the scheme so that 2 lakh Self Help Groups covering 40 lakh families can be assisted over the next five years through this scheme of micro credit. 10,000 Self Help Groups covering 2 lakh families will be assisted this year. The Reserve Bank of India is also advising commercial banks to design specific loan package to meet the needs of micro enterprises. I have asked the National Housing Bank to finance one lakh rural dwelling units under the Swarna Jayanti Housing Finance Scheme as against 50,000 units last year. I am making a provision of Rs.265 crore to carry forward the process of rehabilitation and recapitalisation of the Regional Rural Banks (RRBs). Sponsor banks are being given an enlarged role in providing management, operational and restructuring support to RRBs. Farmers often face chronic problems of overdue loans due to circumstances beyond their control. They are even committed to civil prison for this default. While the repayment culture must improve, this government is determined to create conditions so that no farmer goes to jail for a loan repayment default or is forced to commit suicide. The Reserve Bank will be issuing appropriate guidelines to the banks for hassle-free settlement of old cases of overdues. Banks will be encouraged to provide appropriate relief on accumulated interest in deserving cases. The new procedure should also help in reducing the outstanding volume of Non-Performing Assets (NPAs) of the banking sector. NABARD is being asked to formulate a model scheme for issue of Kisan Credit Cards to farmers on the basis of their holdings for uniform adoption by the banks so that the farmers may use them to readily purchase agricultural inputs such as seeds, fertilisers, pesticides etc. and draw cash for their production needs. 9. The ingenuity and enterprise of our farmers is today hamstrung by numerous Central and State laws and regulations relating to the production, marketing and movement of agricultural commodities. This is clearly unacceptable. My colleague, the Minister of State for Agriculture, will soon be bringing out, under the guidance of the Prime Minister, the Government’s National Agricultural Policy paper which will address these constraints in a comprehensive manner. The Minister of Commerce is systematically reviewing existing controls on exports of all agricultural commodities except foodgrains. There is no reason why our farmers should not reap the benefits of access to wider global markets. 10. The system of agricultural cooperatives in our country is plagued by bureaucracy and political interference at many levels. As part of a concerted programme to revitalise the cooperative sector, government will shortly bring forward a model cooperative law to replace the Multi-State Cooperative Societies Act of 1984 and will encourage the States to make similar amendments in their own acts. 11. There has been a long standing demand from our farmers and the Ministry of Agriculture for the exclusion of farm implements and tools from the list of items reserved for manufacture by the SSI sector, so that farmers can benefit from a wider range of implements and tools at competitive prices and with requisite after sales service. This proposal had also been recommended by the Advisory Committee of the Ministry of Industry. Government have decided to accept this recommendation. 12. India has made commendable progress in oilseeds production in recent years. In order to establish an efficient market environment and to reduce volatility in prices in this sector, the government is planning to introduce futures trading in edible oilseeds, their oils and their cakes. 13. The existing subsidy schemes for both urea and decontrolled phosphatic and potassic fertilisers are being continued. However, for achieving optimum crop response ratio to fertiliser use, the use of all the three nutrients, nitrogen (N), phosphorus (P) and potassium (K) should be balanced. This balance has been progressively distorted over time because of the low price of urea compared with decontrolled fertilisers. The NPK balance, which was 5.9:2.4:1 in 1991-92, had changed adversely to 10:2.9:1 by 1996-97. An increase in the price of urea would help restore this balance. The increase is also justified on the ground of rising costs, which have led to a more than 50 per cent increase in the subsidy on indigenously produced urea in two years between 1995-96 and RE 1997-98. It is, therefore, proposed to increase the selling price of urea by Re.1 per kilogram with immediate effect. 14. Government is committed to provide safe drinking water to all rural habitations in the next five years. To achieve this ambitious target, a multi pronged approach to rural water supply is being adopted: The allocation for the Accelerated Rural Water Supply Programme is being enhanced from Rs.1,302 crore in RE 1997-98 to Rs.1,627 crore in this regular budget. This enhanced outlay will cover about one lakh habitations. As mentioned earlier, we will give a special thrust to Watershed Development Programmes. This will also ensure better results for ground water availability and conservation. States are being encouraged to institutionalise community-based rural water supply programmes, which secure active participation of beneficiaries to own, operate and maintain rural water supply facilities. Over the years, programmes for alleviation of poverty and employment generation have proliferated. Each scheme is well intentioned but their multiplicity has led to needless duplication, high overhead costs, confusion at field levels and insufficient benefit to the people. It is proposed to unify the various programmes under two broad categories of Self Employment Schemes and Wage Employment Schemes. Funding and organisational patterns will be rationalised to achieve maximum beneficial impact of these programmes.
16. The SSI sector makes a valuable contribution of about 40 per cent to our total manufacturing sector production, 35 per cent to exports and employs over 160 lakh workers. Our commitment to the SSI sector is total. The commonest complaint of SSI entrepreneurs and associations are the insufficiency of timely credit and the harassment of the "Inspector Raj". 17. On the credit problems of the SSI sector, I propose the following initiatives: At present, for SSI units having aggregate working capital requirements up to Rs.2 crore, the working capital limit is determined by the banks on the basis of a simple calculation of 20 per cent of their annual turnover. This facility is being doubled to Rs.4 crore. This will ease the flow of bank credit to SSI. To moderate the cost of credit to SSI units, RBI will advise the banks to accord SSI units with a good track record, the benefit of lower spreads over the prime lending rate. Enhanced powers would be delegated to bank managers of specialised SSI branches to ensure that most credit proposals are decided at the branch level. At present, Small Industrial Development Bank of India (SIDBI) is a subsidiary of IDBI and IDBI is the major shareholder in State Finance Corporations (SFCs). To equip SIDBI to play its apex role in SSI credit provision more effectively, SIDBI will be delinked from IDBI and IDBI shareholding in SFCs will be transferred to SIDBI. SSI units are often handicapped by delays in the settlement of their dues from larger companies. To tackle this problem, I am asking RBI to strengthen the existing mechanisms available to SSI for discounting of bills. RBI will also modify its guidelines to commercial banks on credit appraisal to give greater weight to the amount of overdue outstandings that large units have in respect of SSI supplier. My colleague, the Minister of Industry is separately bringing amendments in the Interest on Delayed Payments to Small Scale and Ancillary Industry Undertaking Act,1993 to make the existing legislation more effective. 18. As for the pervasive problem of the "Inspector Raj", I shall be announcing far reaching changes in the administration of Central Excise which should help SSI units significantly. I urge all States to review their laws and regulations and make necessary changes to lighten the burden of the inspector raj problem of SSI units. I shall also be announcing some tax concessions to the SSI sector later in my speech.
Private Investment in Industry 20. The government accords high priority to boosting private investment, including foreign investment, in industry. We must minimise bureaucratic and procedural hurdles and create an investor friendly environment. Industrial licensing was abolished in most industrial sectors as part of the economic reforms. On reviewing the remaining handful of licensed sectors, the government have further decided to delicense coal and lignite and petroleum products. 21. Industrial deregulation would remain incomplete without reducing the burdens imposed by the "Inspector Raj". The majority of inspectors operate under State level statutes. Government have initiated a dialogue with the State Governments to explore the consolidation of regulatory legislation relating to industry and exchange of best practices across States in carrying out the necessary inspections in the least burdensome way. I will return to this subject when I present my excise proposals. 22. The Foreign Investment Promotion Board (FIPB) has done a good job in promoting foreign investment and streamlining the procedures at the Central government level. Foreign investment flows have increased substantially and were estimated to be $3.1 billion in 1997-98. About 60 per cent of investment approvals are in the energy and infrastructure sectors. It will be our objective to create conditions in which foreign investors will find India an attractive investment destination. We hope to double the inflow of foreign direct investment within two years. Foreign investors are frequently inhibited by lack of familiarity with our systems and statutes and particular problems at the State level. To reduce such problems, we will implement a system whereby, an officer of the administrative Ministry would be designated as a monitoring officer to help processing and implementation of the project in conjunction with Central and State authorities for every foreign investment proposal exceeding Rs.100 crore. We are committed to creating a hassle-free procedure and I would like to assure all foreign investors that a decision on their investment proposals shall be taken within a period of 90 days. It will be the personal responsibility of the monitoring officer to ensure this.
24. The acuteness of our infrastructure problems is equalled only by our resolve to tackle them. One of the major planks of this budget is to provide strong stimulus to the infrastructure sector through larger public and private investment in these sectors. This will also help to boost industrial growth and overall economic activity. 25. The plan outlay for the key infrastructure sectors of Energy, Transport and Communications in the revised estimates for 1997-98 was Rs.45,252 crore. I am happy to announce that the outlay for these sectors for the current year will be Rs.61,146 crore. This is an increase of 35 per cent. I am hopeful that this steep increase in investments will trigger industrial activity and revive rapid economic growth. 26. Within a few weeks of taking office, the government passed an important ordinance for establishing Central and State Electricity Regulatory Commissions with the primary objective of rationalising electricity tariffs. This will go a long way towards enhancing investor confidence in the power sector and facilitate raising resources for higher public and private investment. We have also simplified the procedures for extending sovereign counter guarantees for a few "Fast Track" power projects which were held up for long. We now expect early financial closure of these projects. The total plan outlay for Ministry of Power is being increased to Rs.9,500 crore as against Rs.6,738 crore in RE 1997-98. 27. The outstanding dues from State Electricity Boards to major public sector undertakings such as NTPC and Coal India amount to about Rs.10,000 crore. These large outstanding dues are serious impediments to investment by these public sector undertakings. The government will evolve a guarantee scheme to cover such dues. On the strength of such guarantees, the PSUs concerned will be able to raise resources either by securitising these debts or directly entering the market for tapping resources. This would help these enterprises to raise resources to fund large projects in the power and coal sectors. The resulting investment will also boost industrial growth and investment through linkage effects. 28. We must build more roads and the quality of our roads must also improve. Our National Highways must be brought up to international standards. I am providing Rs.500 crore for the National Highways Authority of India to catalyse new road projects including four-laning of existing National Highways. I shall announce some more measures for this sector in Part B of my speech. 29. To enhance long-term finance for infrastructure investment in the private sector, the Infrastructure Development Finance Company Limited (IDFC) was incorporated as a non-government company in 1997. I am happy to inform the House that the IDFC has tied up its paid up equity capital of Rs.1,000 crore, including equity participation of Rs.400 crore by nine foreign investors and has now commenced operation. In order to put IDFC on par with other all India public Financial Institutions in the matter of fiscal incentives and fund raising benefits extended to these institutions, it is proposed to make necessary amendments to the Companies Act. 30. Provident funds are a potentially important source of funding for private sector infrastructure projects. The present pattern of investment prescribed for provident funds does not permit any investment in securities of private sector infrastructure projects. I propose to provide some flexibility in this regard by allowing upto 10% of the new accretion to provident funds to be invested in private sector securities which have an investment grade rating from at least two credit rating agencies. This is an enabling provision which will allow the Board of Trustees managing these funds to invest in these securities subject to their assessment of the risk-return prospects of each security.
31. Education is the key vehicle for social transformation. Universalisation of elementary education and eradication of illiteracy are central elements of our social policy. Government also plans to implement the Consitutional provision for making primary education free and compulsory up to fifth standard and for girls up to the college level. 32. This budget provides for a nearly 50 per cent increase in the total budgetary allocation to Education, from Rs.4,716 crore in RE 1997-98 to Rs.7,047 crore in this budget. We are committed to raising the total resource allocation for Education to 6 per cent of GDP in a phased manner. 33. The allocations under the Kasturba Gandhi Shiksha Yojana and the Mahila Samiridhi Yojana will be integrated to support a unified Action Plan for accelerating female education. Swami Vivekanand while exhorting the youth had said "A far greater work is the sacrifice of yourself for the benefit of your race, for the welfare of humanity." In order to harness the limitless energy of the youth, government will formulate a scheme for creation of a National Reconstruction Corps, which will mobilise youth for community-based nation building activities. The scheme will also promote self-employment of youth whereby the volunteers would simultaneously be given training in vocations and entrepreneurship development for taking up self-employment vocations. An inter-Ministerial Committee is being set up to work out the details.
35. The Prime Minister has underlined the crucial importance of Information Technology for India. It is the fastest growing sector of the Indian economy as indeed of the world economy. It has tremendous potential for the generation of employment, incomes and export earnings. It can also provide millions of skilled jobs for women. Our Information Technology specialists and software creators are second to none in the world. 36. The government have set itself a target of making India a Global Information Technology Power and one of the largest generators and exporters of software in the world within ten years. A National Information Technology Task Force, headed by the Deputy Chairman, Planning Commission has been set up, to formulate a National Informatics Policy which will help achieve our objectives. 37. Our software companies operate in a highly competitive global market and the skilled professionals working in these companies have attractive opportunities abroad. Our companies need flexible systems of incentives to retain their human resources. They have sought permission to offer stock option schemes to their Indian employees linked to ADR/GDR issues abroad, under which their employees will be eligible for ADR/GDR stock options. In recognition of the excellent work being done in this sector, and its very special circumstances, the government have decided to formulate a special scheme to allow such options for the software sector. The details of the scheme will be notified separately. 38. I also have some fiscal proposals to support rapid development of this crucial sector which I will present later in my speech.
39. A mature and well functioning financial system is essential for promoting savings, channelling investment into the most productive activities and ensuring an efficient payments mechanism. The East Asian financial crisis has highlighted the importance of prompt action to strengthen our financial system. The recently submitted Narasimham Committee Report has provided many recommendations which are being examined in consultation with RBI. However, I am happy to announce that decisions have been taken on some important recommendations. The relatively high level of Non-Performing Assets (NPAs) in our public sector banks is a cause for concern. Net NPAs, averaging 9 per cent in 1996-97, must be brought down to below 5 per cent by the year 2000-2001. As one way of reducing NPAs, Debt Recovery Tribunals will be strengthened and more Tribunals will be set up to cover all States. A few banks have particularly high NPAs. These banks will be encouraged, on an experimental basis, to establish Asset Reconstruction Companies, which will takeover the NPAs of the bank at their realisable value and swap them with special bonds to be held by the bank. The Asset Reconstruction companies will concentrate on recovery of dues to realise the maximum value for the assets transferred to them. To strengthen the underlying health of our banks, RBI is raising the minimum required Capital Adequacy Ratio for banks from the present 8 per cent to 9 per cent by March 31, 2000 and to 10 per cent by as early as possible thereafter. RBI will also announce certain other enhancements of prudential norms in regard to asset classifications, income recognition, risk weights, etc. Our financial system today works under the burden of several archaic laws regarding transfers of and transactions in properties and financial instruments. An Expert Group is being set up to propose precise legal amendments in the key laws to make the provisions consistent with modern financial and banking practices. 40. Non-Bank Finance Companies (NBFCs) perform an important role in our financial sector. But regulation of this sector has to improve to protect unwary small investors. The Reserve Bank of India Act was amended last year with a view to laying down a framework for improved regulation of NBFCs. RBI has recently issued guidelines for registration as also for effective regulation of NBFCs. Our objective will be to develop a framework of prudential regulations and a supervisory system which will foster the development of a healthy financial system and also provide transparent disclosure norms leading to greater depositor awareness to enable the investors to take well informed investment decisions. Along with reform of the banking sector, it is necessary to move forward with reforms in insurance which has hitherto been a public sector monopoly. In order to provide better insurance coverage to our citizens and also to augment the flow of long-term resources for financing infrastructure, I propose to open the insurance sector to competition from private Indian companies. The Insurance Regulatory Authority will also be converted into a statutory body. Necessary legislation will be introduced later in the year.
42. The present Foreign Exchange Regulation Act, 1973 is outdated and is no longer in keeping with the needs of the economy and the changes that have taken place in foreign exchange markets and transactions. We have moved to full current account convertibility. It is no longer appropriate to deify foreign exchange as something special and maintain a burdensome and highly regulatory structure around this deity. Accordingly, government have decided to repeal FERA and replace it with a new Foreign Exchange Management Act (FEMA), which would be consistent with the needs of a modern economy. The new Bill will be introduced in this session of Parliament. 43. At the same time, I want to assure the House that the replacement of FERA by FEMA is in no way intended to give license for illegal transactions to drug peddlers, terrorists, arm smugglers and other perpetrators of heinous economic crimes. Indeed, to protect our society from the globally recognised and, growing problem of money laundering, I will also bring an anti Money Laundering Bill before the House simultaneously with FEMA.
44. I am proposing a number of measures to strengthen our capital markets: The Securities and Exchange Board of India (SEBI) has approved the introduction of trading in stock index futures as a way of providing greater opportunities for hedging and inducing more liquidity into the market. The government will bring forward the necessary amendment to the Securities Contracts (Regulation) Act to enable derivative instruments to be treated as securities. Foreign institutional investor (FII) debt funds are today allowed to invest only in listed debt securities. I propose to allow them to invest in unlisted domestic debt securities also; the risk of default would be borne by the FIIs. To encourage modernisation of broker services, a one time permission was given last year to stock brokers to corporatise their businesses without attracting capital gains tax. I propose to extend this exemption by one year. To encourage more primary public issues, I am proposing certain changes to expand the income tax deductibility of expenses incurred on public issues. After some of the turbulent events in the stock markets in recent years, a special effort must be made to restore the confidence of small investors. I am asking SEBI to devote special attention to strengthening the institutional arrangements for protecting small investors from defaults and financial failures of brokers and other market intermediaries.
45. Whenever I have travelled outside India, Non-Resident Indians (NRIs) have expressed a sincere desire to contribute meaningfully to the development of India. I believe NRIs constitute a huge, untapped potential for India’s development. I propose the following steps to encourage NRIs to participate in the development of their country of origin: At present NRIs are allowed to purchase shares in Indian companies in the secondary market subject to a limit of 1 per cent of the company’s total equity for individual NRIs and NRI overseas corporate bodies, with a 5 per cent limit for aggregate NRI/OCB investments in the company. These limits were imposed many years ago when our capital market regulations were much weaker and there were no rules governing acquisition and takeovers. The situation has changed materially in both these respects. I, therefore, propose to raise the individual investment limit of 1 per cent for NRIs to 5 per cent and the aggregate limit for all NRI investments in a company from 5 per cent to 10 per cent. NRIs have also complained to me that the procedures governing their participation in our share markets are extremely cumbersome and onerous. I am having these procedures thoroughly reviewed with a view to modifying them to facilitate investment by NRIs in our capital markets. The Unit Trust of India will launch a new India Millennium Scheme which will be open for subscription in dollars only by NRIs. The money collected under this scheme would be invested in shares of Indian companies with high potential for growth and in high quality Indian debt. The details of the scheme will be announced shortly. The State Bank of India is launching a new Resurgent India Bond denominated in foreign currencies for subscription by NRIs. This will enable NRIs to contribute to the flow of resources for our country’s development, especially for building up infrastructure. The bond will be fully repatriable and the government will extend tax concessions similar to those currently available to NRI deposits to this new bond. The details of the scheme will be notified separately. I am confident that NRIs will welcome this initiative and will contribute liberally to these Bonds. I have one more significant announcement to make for NRI’s. Government have decided to draw up a scheme for issuance of a Persons of Indian Origin (PIO) Card for those living abroad and having foreign passports. The PIO Card, which would be extended to persons of Indian Origin settled in countries to be specified by government would besides introducing a visa-free regime, also confer some special economic, educational, financial and cultural benefits. The details are being worked out.
Decentralisation and Expenditure Restructuring 47. Government have already appointed a Special Task Force on Devolution of Powers to States, under the Chairmanship of Shri Bhairon Singh Shekhawat, to examine and recommend measures for devolution of additional financial powers to the States and additional or alternative means by which States can raise more resources. The first report of the Task Force has been received. We are examining the recommendations in consultation with the RBI. 48. The distinction between plan and non-plan expenditures in our budgetary system has created several problems. It has led to an excessive focus on so called plan expenditures with a corresponding neglect of items such as maintenance which is classified as non-plan. Various bodies, including the Finance Commission, have advocated the elimination of the plan and non-plan distinction in the budget. I propose to constitute a Task Force, including representatives of Planning Commission, Finance Ministry, Comptroller and Auditor-General of India and State Governments to examine these issues in a comprehensive manner and to make recommendations for a functionally viable and more focussed presentation of government expenditure in the budget. 49. A related problem is the proliferation of Central Sector and Centrally Sponsored Schemes over the years. There is a need to rationalise these, with the objective of reducing overlaps and duplication, modifying procedures and norms and making them more easily accessible to the intended beneficiary. The Task Force, mentioned above, will also advise on this issue.
Development of North Eastern Region 50. The government have already decided to restructure the North Eastern Council (NEC) for speedy implementation of important infrastructural programmes in this region. Sikkim will also be included in the Council. Necessary legislation will be introduced in Parliament to effect these changes. 51. Furthermore, it has been decided that a non-lapsable Central Resource Pool will be created for deposit of funds from all Ministries where the plan expenditure on the North Eastern region is less than 10 per cent of the total plan allocation of the Ministry. The difference between 10 per cent of the allocation and the actual expenditure incurred on the North Eastern region will be transferred to the Central Pool, which will be used for funding specific programmes for economic and social upliftment of the North Eastern States. 52. The North-Eastern Development Finance Corporation Limited (NEDFi) promoted by public sector financial institutions and banks was incorporated in 1995. NEDFi strives to respond to the specific needs of industries in the North-East. At present there is one State Financial Corporation (SFC) in Assam and twin function Industrial Development Corporations (IDCs) in some other States. In order to foster healthy and efficient growth of these institutions, I am proposing that the refinancing function for industrial loans of SFC/IDCs of the North-East will be undertaken henceforth by NEDFi, rather than IDBI/SIDBI as at present.
Disinvestment/Privatisation/PSU Reform 53. The regular budget takes credit for a receipt of Rs.5,000 crore from disinvestment in the current year. In order to expedite the process the government have decided to disinvest specified portions of equity from IOC, GAIL, VSNL and CONCOR. As part of an overall strategy to restructure Indian Airlines and expand its capacity, government have decided to restructure the capital of Indian Airlines and also to undertake a phased disinvestment in this company, over three years, bringing the government’s equity holding down to 49 per cent. 54. Some public sector undertakings have consistently incurred large losses. Experience and studies by independent organisations, have conclusively established them to be unrevivable. Nevertheless, a decision on their closure has been delayed only on account of the concern for the interest of the workers. In order to find a viable and satisfactory solution to this dilemma, the government have decided to provide a safety net to the workers of enterprises destined for closure by providing a liberal and attractive compensation package prior to closure. At present, when a unit is closed, the workers are only entitled to retrenchment compensation under the Industries (Development and Regulation) Act, which is only 15 days wages for each completed year of service. To make the compensation package attractive, it is proposed to make applicable the benefits of VRS package, namely 45 days wages for each completed year of service, subject to the maximum wage or salary accruable on the basis of the balance of years of service left to all the workers of these public sector units. As a further improvement to the package, the workers of these units will also be eligible for a maximum of 60 months or 5 years salary or wages as compensation in the case of all those who have completed not less than 30 years of service. This would mean that all those who have put in more than 30 years of service will get more than the normal VRS. The other conditions of the VRS will apply and this offer will be made time bound. 55. A separate Restructuring Fund is being constituted for this purpose and these public sector enterprises will be advanced funds from the budget to offer a compensation package to the workers. Once the labour is separated, the assets of the company will be available for disposal at the best economic price. The proceeds of the disposal, after settling all pending liabilities, will be credited to the restructuring fund which will get recouped to that extent. This would enable the fund to operate on atleast a partially self-sustaining basis and it is expected that, in the course of time, budgetary support for the fund will gradually diminish. 56. Government have also decided that in the generality of cases, the government shareholding in public sector enterprises will be brought down to 26 per cent. In cases of public sector enterprises involving strategic considerations, government will continue to retain majority holding. The interest of workers shall be protected in all cases.
57. As Hon’ble Members are aware details of the revised estimates for 1997-98 were presented along with the interim budget in March 1998. I am, therefore, not going over those estimates again. The figures that are given below are the budget estimates for 1998-99. I shall compare them with the revised estimates for 1997-98, since budget estimates are after all estimates. What really matters is the expenditure in the previous year and the increase proposed in this year’s budget. 58. I shall now briefly go over the budget estimates for 1998-99. For 1998-99, the total expenditure is estimated at Rs.268107 crore. Of this, Rs.72,002 crore has been provided as budget support for Central, States and UT Plans and balance Rs.1,96,105 crore is for non-plan expenditure. Hon’ble Members will be pleased to note that the budget support for the plan has been increased by Rs.11,372 crore from Rs.60,630 crore in revised estimates 1997-98, which is the largest increase ever in absolute terms. Even in percentage terms the 18.8 per cent increase is the highest in the last decade, except for one year.
Plan Expenditure - Central Plan 60. Total Central plan outlay at Rs.1,05,187 crore will be higher by Rs.24,154 crore from the last year’s level of Rs.81,033 crore. Gross budgetary support for the Central plan is being enhanced from Rs.33,629 crore in the revised estimates 1997-98 to Rs.42,464 crore. The balance will be met by the internal and extra-budgetary resources of the Central Public Sector Enterprises. Gross budgetary support for the Central plan includes provision of Rs.5,741 crore for externally aided projects. 61. The plan allocations reflect our dominant priorities. The plan allocation for the Ministry of Agriculture has been increased by 58 per cent from Rs.1807 crore to Rs.2,854 crore. 62. For 1998-99, the plan allocation for Ministry of Rural Areas and Employment is Rs.9,912 crore, an increase of Rs.1,556 crore over RE 1997-98 of Rs.8,356 crore. 63. The plan allocation for Ministry of Health and Family Welfare is Rs.3,684 crore, an increase of 34% over RE 1997-98 of Rs.2,747 crore. 64. The plan allocation for the Department of Education has been increased substantially from Rs.3,351 crore to Rs.4,245 crore. 65. The plan allocation for Ministry of Welfare is being increased by 91 per cent from Rs.804 crore to Rs.1,539 crore. It includes Rs.92 crore for National Backward Classes Finance and Development Corporation, Rs.41 crore for National Minorities Development and Finance Corporation, Rs.60 crore for share capital contribution to State Scheduled Castes Development Corporations, Rs.28 crore for National Handicapped Finance and Development Corporation and Rs.10 crore for National Safai Karmachari Finance and Development Corporation. 66. In order to sustain our quest for excellence in frontier areas of scientific research, the plan allocation for Department of Atomic Energy is being enhanced by 68 per cent from Rs.828 crore to Rs.1,391 crore and the plan allocation for Department of Space is being raised by 62 per cent from Rs.850 crore to Rs.1,381 crore. 67. For tapping the potential of non-conventional energy sources, the plan allocation for the Ministry of Non-Conventional Energy is being more than doubled from Rs.190 crore to Rs.404 crore. 68. The plan allocation for the Ministry of Environment and Forests is being increased by 60 per cent from Rs.440 crore to Rs.704 crore. 69. The budgetary support for the Ministry of Civil Aviation and Tourism is being more than tripled from Rs.122 crore to Rs.379 crore. 70. The plan allocation for the Department of Women & Child Development is being stepped up from Rs.1,026 crore to Rs.1,226 crore.
Central Assistance for States and UTs' Plan 71. I am providing Rs.29,538 crore as Central plan assistance to States and Union Territories in budget estimates 1998-99 compared to Rs.27,001 crore in the revised estimates 1997-98. The normal Central Assistance for State plan is proposed to be enhanced from Rs.12,888 crore to Rs.15,037 crore. The Special Central Assistance for Tribal Sub-Plan is proposed to be enhanced from Rs.330 crore to Rs.380 crore. The Additional Central Assistance for externally aided projects is placed at Rs.5,000 crore. Assistance for Basic Minimum Services and Slum Development schemes is proposed to be enhanced from Rs.2,873 crore to Rs.3,760 crore.
72. A new experimental crop insurance scheme is being launched in 24 selected districts to cover non-loanee farmers with a provision of Rs.100 crore. 73. A new scheme of Technology Mission on cotton is being launched with a provision of Rs.60 crore. 74. A new scheme for rehabilitation of tribals displaced from National Parks and project areas is being launched with a provision of Rs.25 crore. 75. Total non-plan expenditure in 1998-99 is estimated to be Rs.1,96,105 crore compared to Rs.1,74,615 crore in revised estimates 1997-98. 76. The provision for interest payments has increased from Rs.65,700 crore in RE 1997-98 to Rs.75,000 crore. 77. The provision for Defence expenditure has been increased substantially from Rs.36,099 crore in RE 1997-98 to Rs.41,200 crore. I will consider further increase in the budgetary support during the course of the year, if necessary. There can be no compromise in our defence preparedness. 78. An amount of Rs.9,000 crore is being earmarked for Food subsidy in 1998-99 representing an increase of Rs.1,500 crore over RE 1997-98. The provision for sugar subsidy has been retained at Rs.400 crore. An increase in food subsidy has become necessary due to recent revision of minimum support price for wheat procurement and also to clear arrears pertaining to previous years. 79. Pursuant to the change in the selling price of urea, the provision for subsidy on indigenous nitrogenous fertilisers is being reduced from Rs.6,600 crore in RE 1997-98 to Rs.6,000 crore. The subsidy on decontrolled phosphatic and potassic fertilisers is being increased from Rs.2,600 crore in RE 1997-98 to Rs.3,000 crore. 80. Grants to States is being enhanced in 1998-99 from Rs.4,114 crore in RE 1997-98 to Rs.6,314 crore representing an increase of Rs.2,200 crore. Of this, the increase of Rs.950 crore is due to assistance to the States for improvement in the pay & allowances of the university and college teachers. The balance of the increase is mainly due to grants under Tenth Finance Commission’s award. 81. The provision for pension is being increased by Rs.459 crore over RE 1997-98 to Rs.7,342 crore. This provision takes into account the effect of Government’s decision to raise the age of superannuation from 58 years to 60 years. This will also have an impact on the Small Savings Collections. The provision for loans to States and Union Territories against net small savings collections is being kept at Rs.14,200 crore against the provision of Rs.15,732 crore in RE 1997-98. 82. A provision of Rs.1,482 crore has been made for non-plan loans to public sector enterprises mainly for payment of salaries and wages to the employees of sick and convalescent PSUs. 83. I shall now turn to the revenue receipts. 84. Hon’ble Members are aware that on the basis of a consensus reached in the Third Meeting of the Inter-State Council held on July 17, 1997, the then government had approved in principle to accept the recommendations of the Tenth Finance Commission regarding the alternative scheme of sharing of Centre’s tax revenues with the States. I am happy to announce that we have ratified this decision. Accordingly, I propose to shortly introduce a Constitution Amendment Bill to give effect to this alternative scheme subject only to one modification. The modification is that the percentage share of States’ share in the gross proceeds of Central taxes may be reviewed by successive Finance Commissions instead of freezing it for fifteen years as suggested by the Tenth Finance Commission. 85. Gross tax revenues at the existing rates of taxation are estimated at Rs.1,48,506 crore. As Hon’ble Members are aware, we had made a provision of Rs.7,594 crore in the RE 1997-98 for States’ share in the proceeds of the Voluntary Disclosure of Income Scheme, 1997 as the collections were estimated to be Rs.10,050 crore by March 31, 1998. However, the actual collection is reported to be about Rs.1,000 crore less. After making adjustment for the excess share paid to the States, I am providing Rs.39,074 crore as the share of taxes of the States. Thus, the Centre’s net tax revenue will be Rs.1,09,432 crore over RE 1997-98 of Rs.99,158 crore. Non-tax revenues are estimated to increase from Rs.39,356 crore in RE 1997-98 to Rs.45,137 crore this year. I have taken credit for Rs.2,800 crore as license fee from the operators of cellular and basic telecom services and Rs.4,200 crore as net surplus profits of the Reserve Bank of India. 86. The net revenue receipts for the Centre, including non-tax receipts, are expected to increase from Rs.1,38,514 crore in RE 1997-98 to Rs.1,54,569 crore in 1998-99. 87. In the area of capital receipts, market borrowings are
placed at Rs.55,931 crore. Net external assistance is estimated at Rs.2,337 crore. I am
also taking credit for receipts from disinvestment of equity in public sector enterprises
of Rs.5,000 crore. Home | India Today Group Online | Write to us | Advertising © Living Media India Ltd
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