Subject NOT available

domestic requirements, customs duties are expected to yield Rs. 250 crorps mqie fh;in the Budget Estimate of Rs, I860 crores, Union excise duties, on the other hand, will fetch Rs. 105 crores less than the Budget Estimate of Rs. 5229 crores. This shortfall is, among other things, due to lower realisation on sugar consequent on withdrawal of duty on khandsari sugar and fall in sugar pi ices after decontioi. There has been shortfall in excise revenue from kerosene, man-made fibre•>, aluminium and copper, which is, however. more than made up by larger receipts of import duties on these commodities.

28. Utilisation of external aid has slowed down due_ to a shift from programme to project assistance by multilateral aid giving agencies and also allocation of a greater proportion of bilateral assistance from some countries to specific pro- jects. In both cases, the concerned projects are slow moving and, consequently, gross aid receipts aie expected to be Rs. 447 crores less than the Budget Estimates. Steps are however being taken to accelerate the pace of disbursements.

29. Taking other variations in receipts and expenditure into account the overall deficit in the current year is estimated to be Rs. 1590 crores as against the original estimate of Rs. 1071 crores. This is exclusive of the additional burden of Rs. 555 crores cast on the Centre by the loans to certain States for clearing their past deficits which, being in the nature of a book adjustment, will not have an economic impact in the current year. *

irt As the Hon'ble Members are aware, the objective of e, ulicnting pn^eiiy rind unemployment is basic to our'new development strategy. This calls for a radical restructuring of the priorities in our Plans. Agricultural and rural develop- ment have therefore been assigned the pride of place in our Plans. But Government recognises that the requisite decree of reorientation of development plans can be achieved only over a period of time. We propose, however, to accelerate'the pace and thrust of programmes which have a material bearing on agricultural growth and promotion ot employment.

37 The Plan outlay on agriculture and rural development has been raised from Rs. 1754 crores in 1978-79 to Rs. 1811 crores in 1979-80. An onlay of Rs. 258 crores has been provided for accelerating the integrated rural development proeramme in 2000 blocks covered by any of the special programmes and in 300 other Mocks not covered by any of the special programmes so far. The focus will be on the improvement of the economic conditions of small and margi- nal farmers, agricultural labourers, rural artisans and scheduled castes and scheduled tribes. A provision of Rs. 50 crorea is being made for the food for work programme. I have no doubt that I shall have to raise this figure steeply taking into account the experience in the current year. Such an increase will, however, have no inflationary impact as we will b? drawing upon accumulated stocks of foodgrains.

Budget Estimates for 1979-80

30. I shall now present the estimates of expenditure for

1979-80.

31. This budget reflects the impact of the recommendations of the Seventh Finance Commission which have been accepted by Government. While a larger transfer of resources to States in pursuance of the award of the Commission is eminentry desirable for strengthening our federal polity, it creates seri- ous problems for the Centre's finances in the short run. This budget seeks to cope with these problems.

32. The annual Plan of the Centre, States and Union Territories for 1979-80 would be Rs. 12511 crores compared with an approved total" outlay of Rs. 11649 crores in 1978-79. This represents an increase of 7.4 per cent. However, in assessing these figures Hon'ble Members should bear in mind that an estimated sum of Rs. 835 crores has been transferred as committed expenditure from the. Plan side to the non-Plan side in the Central and State Plans. Taking into account this transfer, the step-up in developmental effort in 1979-80 wouM be of a significant order.

33. The Central Budget for 1979-80 provides a sum ot Rs. 7108 crores for the Central¹ Plan and for assistance towards the Plans of States and Union Territories. A provi- sion of Rs. 2300 crores has been made for Central assistance towards outlays of States' Plans, Union Territories' Plans, and the sub-Pfans of Hills and Tribal areas, schemes of North-Eastern Council and Rural Electrification Corporation. Inclusive of their own resources, the Plans of States, Union Territories. North Eastern Council etc. will amount to Rs. 6099 crores, in 1979-80 as against an outlay of Rs 5985 crores in 1978-79.

34. The provision in the Budget for the Central Plan amounts to Rs. 4808 crores. Together with the infernal and other resources of public sector undertakings amounting to Rs. 1604 crores, Central Plan in 1979-80 will, therefore, be • Jn™°™er °f R s' ^{6 4 12} c r o r e s- as apainst Rs. 5664 crores in 1978-79.

35. Subsequent to the determination of the outlays foi the Central Plan and the Plans of the States for 1979-80 a decision has been taken at the recent meeting of the Na- tional Development Council to effect some modifications in respect of Centrally sponsored schemes. The funds now allocated for some of the Centrally sponsored schemes will be released for distribution among the States on the b.isis of a new formula. Consequential adjustments, in the Budeet provisions for 1979-80 for these schemes, will be made in the course of the year

38*. Government does not have to stress in this House the importance of irrigation for agricultural development. The out- lay on major, medium and minor irrigation projects including flood control for 1979-80 will be Rs. 1488 crores compared to Rs. 1401 crores in 1978-79. Most of this outlay will be in the budgets of the State Governments. The target for the creation of additional irrigation potenial in 1979-80 has been fixed at 3.2 million hectares as against a target of 2.8 million hectares in 1978-79. In order to increase the pace of development of minor irrigation, a scheme is being worked out for extending the subsidy on minor irrigation, given at present only to small and marginal farmers, to farmers whose land holding is between 2 and 4 hectares, but at a reduced rate. To this end a provisio of Rs. 10 crores is being made. The Plan provision for the minor irrigation programme will be supplemented with resources available from the Agricul- tural Refinance and Development Corporation. The financial support made available to the Agricultural Refinance and Development Corporation from the Central budget has been increased from Rs. 133 crores in 1978-79 to Rs. 159 crores in 1979-80.

39. In the context of the great importance we attach to rural development and employment-oriented programmes in rural areas, it is necessary to ensure that in the coming years the flow of institutional finance to rural areas will be smooth, cteadv and at reasonable rates of interest. In addition to many steps already taken, Government has decided to exempt the Agricultural Refinance and Development Corporation, the premier refinancing agency for agricultural term loans, from income-tax. This concession, together with other measures we are contemplating, will enable the Agricultural Refinance and Development Corporation to reduce the rate of interest nt which it r-f.nances loans for minor irrigation and land development by about 1 per cent ; the Reserve Bank willtaks corrr-spondins steps to ensure that the full benefit of this reduction of about one per cent is passed on by the commercial Irmks to the u/timnte borrower. As a result far- mers will find it cheaper and therefore more attractive to mve t m minor irrigation and land development.

40. Hon'ble Members nre aware that as part of the strategy ot rural development, a National DaW Development Pro- .sramrne. known as Operation Flood II, intended to raise the nutritional standards of the people, generate employment and augment incomes in rural areas throuch a viable subsidiary occupation had been approved earlier this year. An ontlav of 1979 *) ' r T 7 h- e e" n r o v M cd in t hp Central Plan'for ' ,• f , , tfl!s proeramme. On completion it will provide cupful employment for ,bouf 10 mUVon farm families and a'sure increased availability of milk to our people.

41. Rural electrification plays an important part in aeri-

rn , i a?*" rU-ral devel0P"ient. The total outlay for the rural electrification programme will be Rs. 285 crores in

1979-80 An additional sum of Rs, 50 crores will be mobi- lised for this purpose through commercial banks, the Agri- cultural Refinance and Development Corporation and the Rural Electrification Corporation. Comparable figures in 1978-79 ore Rs. 277 crores and Rs. 20 crorcii respectively. As again t 22000 villages expected to be electrified in 1978-79, the target for 1979-80 has been set at 25000 villages.

42. With the increase in agricultural ouput there 19 an obvious need for increased storage to minimise wastage. A scheme is theiefore being worked out to have subsidised sto- rage facilities in rural areas. This will have two fold benefits: grain can be stored near the place of production thus reduc- ing wastage and it will reduce the cost of storage for Govern- ment because godowns can be built cheaper and the cost of holding inventories will be borne by the farmers.

43. This Government is committed to the acceleration of the rural water supply programmes so as to make safe and reliable drinking water available in all problem villages. The Central Plan for 1979-80 includes a provision of Rs. 80 crores for this programme as against Rs. 60 crores allocated in 1978-79. After this Government came to power in March 1977, 180O0 villages were provided with water supply in 1977-78. The target for 1978-79 it, 27000. 1 wish to assure the House that Government will have no hesitation in allo- cating mare funds for this purpose if the programmes make faster progress.

44. Economic exploitation and social discrimination againsi scheduled casts and scheduled tribes will not cease unless programmes for their development arc built upon a sound economic basis. Therefore Central ministries and State Govern^ ments have been asked to incorporate a special component in their Plans for 1979-80 for these categories so that they may secure an adequate flow of benefits from the varioiw sectoral programmes. The outlay on welfare programmes for scheduled casts and other backward classes will be Rs. 117 crorcs in 1979-80.

45. A provision of Rs. 70 crores has been made for thr tribal sub-plan for 1979-80. This will supplement the flow of funds from Stnte Governments under different heads of development. The States would also be receiving grants under the recommendations of the Seventh Finance Commission for providing incentives to their staff working in the difficult conditions in the tribal areas.

46 The development of village industries is an important component of the Central Plan. A provision of Rs. 193 crores has been made in 1979-80 in the Central sector as against Rs. 140 crores originally provided for in the current year. This outlay would be supplemented by suitable provisions in the State Plans and by institutional resources available on easy terms and conditions.

47. Handloom is our most important village indusry. There are nearly 4 million handlooms providing employment to about 10 million people. They produced 2500 million metre* of cloth in 1978-79 and the target for 1979-80 is 2700 million metres. A provision of Rs. 28 crores is being made in 1979-80 to organise weavers into cooperative societies, to enbale apex cooperative bodies in this sector to do better marketing and to promote intensive development for export.

48. In keeping with the Government's policy of extendinfl postal services in rural areas, it is proposed to open 5000 new post offices and provide 10,000 postal counters through mobile post offices in 1979-80. Outlay on telecommunications will be Rs. 359 crores in 1979-80 with greater emphasis than hitherto on extending these facilities to rural areas.

49. Care has also been taken to provide adequately for the development of the basic infrastructure on which the progress of agriculture and Industries alike would be dependent. Thus the provision for power, coal, fertilize™ and chemicals, mine- rals, petroleum, steel and roads and railways has been in- creased from Rs. 2733 crores In the Central Plan for 197R-79 to Rs. 3122 crores in 1979-80.

50. The growth of power produtcion has an important role to play In the development of agriculture as well as Industry. Allocation for the power sector In 1978-79 had been stepped

1256GI/78— 3

, 3 49

up substantially to Rs. 2217 crores. The tempo °f develop- ment is sought to be speeded up still further in 1979-80 and an outlay of Rs. 2466 crores is being provided, The bulk ot the Plan provision for power will be in the State Plans but ;in allocation of Rs. 382 crores is for power projects in the Central sector. A major start in 1979-80 will be the super thermal station at Farakka. Tt is expected that 3000 MW gene- rating capacity will be added in 1979-80 as against 2500 MW in the current year. The facilities for distribution of powet are also being improved.

51. Self-sufficiency in fertilizer production is an important objective of the Government policy. A provision of Rs. 254 crores for investment in fertilizer the plants has been m-de m the Plan for 1979-BO. This will cover expenditure on a number of on-going projects which will raise production in the public sector from 12 lakhs tonnes of nutrients this year to 20 lakh tonnes in 1979-90. Also, starts will be made on two off-shore gas based plants on the west const and an additional gas based unit in Assam.

52. The demand for steel has increased by about 15 pei cent in the current year due to increased activity and invest- ment in the economy. The increased production of mini steel plants has averted a "serious shortage which would have other- wise occurred. An outlay of Rs. 600 crores is being made for the steel sector in 1979-80. Tt has to be viewed in the context of the giowing demand. This provision will enable work on the expansion of Bokaro and Bhilai Plants and on the new plant at Salem to be continued.

53. Coal is as basic to our development as power and there is an urgent need to raise its production. Coal production in the current year is estimated not to exceed a figure of 102 million tonnes as severe floods affected production. The allo- cation for the coal sector has been raised from Rs. 267 crorcs in the current year to Rs. 346 crorcs in 1979-80.

54. Oil is an equally Important source of energy and Government attaches great Importance to the exploration and development of oil fields so that our dependence on Imported oil is minimised. The development of Bombay High will be substantially completed next year. With the commissioning of the 3 million tonne expansion at the Koyali refinery, the country's refining capacity has touched 30 million tonnes Per year. Allocations to this sector in 1979-80 will be Rs. 622 crores.

55. Roads are of vital importance to the nation and a pro- vision of Rs. 120 crores is proposed for 1979-80 for national highways, strategic roads, roads in the border areas In the north and roads of Inter-State economic importance. This will be supplemented bv allocations from the State Plans to cover State highways and district and rural roads.

56 In our country urbanisation has led to a growth of slums and squatter settlements. Essential facilities like water supply, community latrines and baths, wide and paved streets and provision of sreet lighting have been badly lacking for these people. Government has decided therefore to pursue actively a nolicv of slum improvement. Against a total ex- penditure of Rs. 43 crores on slum improvement in 1974—78. an outlav of Rs. 190 crores has been envisaged in the period 1978—83. The States will have to push through this- pro- gramme in a bic wav. Tf thev undertake to mobilise additional resources for this purpose by taxing the affluent sections In the urban areas, Government will be happy to supplement their efforts. Government will examine in consultation with the States how the slum imnrovement r>ro

57, In realifinine the priorities in the educational sector, Government attaches the highest Importance to the education of the masses. The provision for adult education in the Central Plan for 1979-80 is being accordingly increased and comes to nearly 20 per cent of the total outlay of Rs. 84 crores for education in the Central Plan.

58. It is now widely accepted that the programmes of development of agriculture or rural industries will not make sufficient progress unless the rural population acquires the relevant skills. Very little headway has, however, been made in (he training of rural vouth to acquire these skills. This is pnrtlv because of a lack of an effective tralninc programme and partly a lack of proper organisation linking skills with

capital. Since such training is an essential precondition of the success of the production programme, Government proposes to make financial provision For a programme of 'training rural youth for self employment' in the course of the year tw soon as the details of such H programme are worked out.

59. There is little doubt that the growth of population at the present rate needs to be checked if economic development Is to lead to a perceptible, increase In the standard of living of our people. Unfortunately, as a result of the wrong approach to family planning followed in the past, this programme has suffered a serious set back. It should be our endeavour to put the newly introduced family welfare programme on a sound footing so that the national objective of reducing the birth rate to 30 per thousand in 1982-83 from the current level of 33 per thousand may be achieved. The Community Health Workers Scheme which was started In October 1977 in 741 primiiry health centres waft a significant innovation of the Janata Government In extending elementary medical care to rural areas. It is proposed to cover a third of the country under the scheme in 1979-80 and the entire country hv 1982-83.

60. Non-Plan expenditure has been limited to what Is strictly necessary keeping In view the need for economy consistent with efficiency.

61. Defence expendiure is estimated at Rs, 3050 crorex an

against Rs. 2845 crores in the current year.

62. Provision for food subsidy at Rs. 560 crores will bo Rs. 10 crores less than in the current year. Rs. 448 croren have been provided next year for fertilizer subsidies as against Rs. 319 crores in the current year,

63. Debt service charges at Rs. 2161 crores will be about Rs. 304 crores more than in the current year, the Increase being mainly on account of internal debt.

64. Statutory grants to States will be Rs. 232 crores as compared to Rs. 514 crores in the current year. The provi- sion next year is based on the recommendations of the Seventh Finance Commission. The Commission has also recommended addition.il grants to certain States to cover their net interest liability and for upgradation of standards of administration. T have not, at this stage, included any provision for payment of grant-In-aid for these purpo'tti and shalr come before the House with request for supple- mentary funds after the action nrogrammes for schemes of uperadatiorr are drawn ur> and finalised bv the State Govern- ments concerned and the net In'crest liability assessed ns recommended by the Commission,

65. Government is sure that Hon'ble Members will share its concern at the gro\ying volume of Government expendi- ture. It is therefore important to contain the growth of this expenditure and also to ensure that the funds are utilised effectively folr the promotion of the common good. Govern- ment has therefore decided to appoint a Commission with suitable terms of reference to conduct a comprehensive in- quiry into Government spending, It will, among other things, examine the impact of public expenditure on the promotion of growth and reduction of poverty and recommend ways and means of making public expenditure more effective In solving the problem of poverty.

66. Coming now to Receipts, gross tax revenue In 1979-80 at existing rates of taxation Is estimated at Rs. 10822 crores, showing an increase of Rs. 658 crores over the Revised Esti- mates for the current year, Of this Increase, Union excise duties will contribute Rs. 381 crorei and corporation and income taxes Rs. 248 crores.

67. As mentioned earlier, substantially larger devolution of Central taxes and duties will have to be made to the States from the next financial year in, accordance with the recommendations of the Seventh Finance Commission. At the present Tevel of taxation, States' share next year is estimated at Rs. 3235 crores which is Rs. 1278 crores more than In the- current year. Consequently, Centre's net tax reve- nue, at Rs, 7587 crores, will be Rs, 620 crores less than in the current year.

68. Market loans will yield Rs. 1850 crores as against Rs. 1653 crores in the current year. Net external assistance, after meeting repayment and interest liabilities, is estimated at Rs. 878 crores, including drawals against new credits, Small¹ savings collections will fetch Rs. 650 crcres. Loan repayments by States, excluding ways and means advances, are placed at Rs. 554 crorcs as against Rs, 754 crores in the current year. The decline Is due to debt rescheduling recom- mended by the Seventh Finance Commission.

69. The total receipts of the Central Government for 1979-80 will be Rs. 16551 crores, Totall expenditure for the coming year will be Rs. 18526 crores. The overall budgetary gap at the existing rates of taxation will thus bo Rs. 1975 crores.

PART B

70. I now come to my proposals on fresh taxation.

71. A gap of this magnitude cannot obviously be covered without a large tax effort. However, in addition fo mobilis- ing the require resources, my tax proposals aim at three objectives which, 1 think would be acceptable, to everyone in this House. In a country in which the bulk of the popu- lation lives below the poverty line disparities in income have to be minimised. Such disparities lead to luxury consump- tion which alfects the propensity to save and the will to work hard. Therefore, tax policy should seek to reduce such disparities.

72. Secondly, they aim at increasing production and avoid- ing waste. Poverty elimination requires primarily an In- crease in production. Since resources are scarce, tax policy should prevent a diversion of resources to wasteful and un- productive uses and conserve them for productive purposes. It should also discourage such consumption as Is positively injurious to people's health.

73. Thirdly, they aim at eliminating unemployment and underemployment by stimulating agricultural production, by encouraging labour Intensive techniques of production and by Improving the competitive capacity of small scale and cottage industries in relation to large scale industry,

74. I-et me take up direct taxes first.

75. I propose to raise only the rate of surcharge for Union purposes on income-tax in the case of all categories of .non- corporate taxpayers from 15 per cent to 20 per cent. The effect of this proposal will be to raise the marginal rate of personal income-tax from 69 per cent at present to 72 per cent. This measure will yield an additional revenue of Rs. 46 crores in a year. The accretion during 1979-80 will, however, be of the order of Rs. 37 crores only. This Is a small sacrifice I am asking the 35 lakh taxpayers, who con- stitute an insignificant proportion of the total population, and who receive a substantial share of the country's income, to make for their poorer fellow citizens.

76. I am aware of the views of the State Governments against recourse to surcharge for Union purposes as the revenue accruing from surcharge Is not shareable with the States. But in framing my other fiscal proposals I have taken care to see that States get their legitimate share of the gains from the additional tax effort of the Centre.

77. Under the rate of schedule prescribed in the Finance Act, 1978, in cases where the taxable income exceeds the exemption limit by a small margin, the tax liability Is Hmii- ed to 70 per cent of the excess over Rs. 10,000. This pro- vision operates rather harshly in some cases. In order to provide for a smoother progression In marginal cases, I propose to limit the tax payable in such cases to 30 per cent of the excess over Rs. 10,000. This will benefit Indi- viduals having incomes up to Rs. 12,000.

78. In view of the Imperative need for resources, I pro- pose ta continue the Compulsory Deposit Scheme for Income- tax Payers for a further period of two years. This will generate additional resources to the tun© of Rs. 160 crores during the financial year 1979-80,

79. Inequalities of wealth have even less justification than Inequalities of income, I, therefore, propose to raise the rates of wealth-tax on high slabs of net wealth. The rate will now be 3 per cent, as against the current rate of 2.5 per cent, on the net wealth between Rs. 10 lakhs and Rs. 15 lakhs and 5 per cent, as against 3.5 per cent, on the net wealth over Rs. 15 lakhs. The rates of wealth tax on slabs upto Rs. 10 lakhs will remain unchanged. There will be

corresponding changes in the rates applicable to Hindu un- divided families having one or more members with in- dependent nel wealth exceeding the exemption limit. These changes will yield an additional revenue oi Rs. 6.6 crores in a year. Since, however, trie new rales of wealth-tax will apply prospective^ from the assessment year 1980-81, there will be no accretion to revenue during 1979-80.

80. 11 h.is lo be recognised that by merely adjusting direct Ux r.ilcs we cannot reduce disparities in income and wealth to tollable levels. As the House knows, tax evasion which is the hasic- cause of generation of black money greatly iniects the progressive impact of direct taxes, Black money L a corrosive influence which works through the entire eco.iomy. It is important that this scourge is fought through the elLcctive implementation of our tax laws. 1 wish to assure the House that 1 shall address myself to this task with the utmost zeal and vigour.

81. As 1 am raising the surcharge on income-tax on per- sonal incomes, I think the corporate sector should also be required to contribute a little more to the exchequer. I accordingly propose to raise the surcharge on income-tax in the case of companies from 5 per cent to 7.5 per cent. This will not cast a heavy burden on them, because the effective rate of taxation on corporations is lower than the nominal rates. Thia measure will yield an additional revenue of about Rs. 35 crores in a year. The accretion during the year 1979-80 will, however, be of the older of Rs, 28 crores only.

82. I'he sencme of taxation ol capital gains WBM modified in 1977 in several directions. One ot vhe changes made was to provide for exemption from income-tax on long-term capital gains if the sale proceeds of any asset were re- invested williin six months in certain preferred assets. Since asset owners secure capital gains largely through no effort on their own part, thin exemption confers an unfair advantage on as;et holders as compared to Income earners and tnus contributes to the disparity in society. I, therefore, propose to wi hdraw this exemption of capital gains in respect of transfers made after 28th February, 1979. This measure will yield an additional revenue of Rs. 14 crores annually. Since, however, advance tax is not payable In respect of capital gains, there will be no accretion to revenue during the year 1979-80.

83. The present concessions in respect of long-term savings through life Insurance premia, provident fund contributions and other approved forms of savings, though they subserve certain desirable social and economic objectives, give 'i dis- pi oportlonatcly large tax benefit to taxpayers in higher in- come brackets, At present, 100 per cent deduction is allow- ed in respect of first Rs. 5,000 of qualifying savings, 50 per cent on the next Rs. 5,000 of such savings and 40 per cent on the balance. Under my proposal, while the first Rs. 5,000 of qualifying savings will continue to be eligible for J00 per cent deduction the deduction in respect of the next Rs, 5,000 of such savings will be reduced to 35 per cent and in respect of the balance to 20 per cent. This measure will yield Rs. 9.6 crores annually. The accretion during the financial year 1979-80 will, however, bo Rs. 7.6 crores,

84. ) propose to lower the threshold tor payment of ad- vance tax by the registered firms from Us. 30,000 to Rs. 20,000. This measure, will yield an additional revenue of Rs. 12 crores during 1979-80.

85. The large scale unemployment in the country requires the promotion of labour intensive techniques instead of capi- tal intensive techniques. While it may be true that In som" industries the choice of techniques is limited, our Difference should be for labour intensive methods of production where- ver feasible. Our fiscal laws and tax concessions in parti- cular should be so designed as to foster production tech- niques which enlarge opportunities for employment.

86. I, therefore, propose to appoint an Expert Committee of economists and tax administrators to study the impact of concessions provided for in our tax laws—particularly those relating to corporation tax and Central Excise-—on the tech- niques of production used in industry and make recommen- dations which will encourage the adoption of labour Inten- sive methods of production. The composition of the Com- mittee and its terms of reference will be settled soon and it will be asked to submit its Report with the least possible delay.

87. One ot the tax concessions wnich is related lo tno employment ot capital is tho "tax holiday" provision in the iKcoine-UiA Act, I his concession is at present available in respect of all industrial undertakings that go into production belorc 1st April, 1981. 1 propose to withdraw this conces- sion in the case of industrial undertakings engaged in non- prionty industries listed ID the Eleventh Schedule to the income-tax Act, it they go into production after 31st [Viarch, 1979.

£8, In recent years, commercial banks, partieulai ly public sector banks have been asked to reach out into the rural areas and to expand rural credit. In order to promote rural banking and lo assist the scheduled commercial banks in making adequate pruvisions from liwir current income to provide for risks in rural advances, 1 propose to amend the li'coine-tAx Act to grant a deducuou in respect of provisions made for bad and doubtful debts by scheduled commercial banks ielating to advances made by iheir rural branches. iJuch a deduction will, however, be limited to 1.5 per cent or the aggregate average advances made by the rural branch- ts. This measure will result in a revenue loss of Rs. 12 crores during 1979-80 but it will be in a good cause.

89. 1 have earlier referred to the exemption from the cor- vx>ra'aon tax which 1 wish to extend to the Agrlculuuat Re- hnance and Development Corporation. This is in line with a similar exemption already being enjoyed by the Industrial Development Bank of India, This decision will result in u revenue loss of Rs. 5 croies annually. The loss during 1979-HU is estimated at Rs. 10 crores because advance tax paid during 1978-79 also is refundable.

90. At present, expenditure incurred by companies and co- opciative societies on approved programmes of ruitil deve- lopment qualifies for deduction in computing their taxable piohts. hor this purpose, the programme has to be approv- ed by the "prescribed authority", which is an Inter-Minisleriat Committee headed by the Secretary, Ministry of Agriculture and irrigation. Companies and co-operative societies have shown considerable interest in rural development program- mes. To expedite the clearance of such schemes of rural development, I propose to provide that they will henceforth be approved at the State level by a Committee consisting of the Commissioner of Income-tax and a senior officer of the State Government nominated by it,

91. I also propose to exempt from income-tax donations made bv tax-payers to approved institutions engaged in im- parting training to persons to equip them for implementing uiral development programmes.

92. At present, taxpayers engaged in business or profession alone arc entitled to 100 per cent deduction in respect of donations made to approved institutions enaged in carrying out programmes of rural development. 1 propose to extend this concession to other categories of taxpayers as well. A similar dispensation will be extended to donations fm¹ scienti- fic research made to approved scientific research associations, universities, colleges and other institutions.

93. It is also proposed to provide that insurance premia paid by federal milk co-operative societies for insuring cattle belonging to members of afilJiated primary co-operative socie- ties shall be allowed to be deducted in computing their tax- able profits,

94. In order to promote, the cultivation of mushrooms, it is proposed to exempt from income-tax one-third of the income derived from the business of mushroom growing under con- trolled conditions, or Rs. 10,000 whichever is hihger.

95. As Hon'blc Members are aware, the Finance (No, 2) Act, 1977 has) conferred exemption from income-tax on the lvhadi and Village Industries Commission. It is now pro- posed to exempt from income-tax the income of the State Khadi and Village Industries Roards set up under the State Acts.

96. Consumer co-operative societies have been doing com- mendable work in supplying goods to consumers at reason- able pria s. In order to encourage the development of such societies so that they can play a proper part in the public distribution system that is sought to be developed; it is pro- posed to raise the quantum of tax-exempt profits in the case

of such societies from the present level erf Rs. 20,000 tn Rr. 40,000.

97, The scope of section 35B of the Income-tax Act relat- ing to export markets development allowance was curtailed last year. I have referred earlier to the decline in exports in the current year and the need to promote them. There- fore to enable exporters to develop export markets on a long-term basis, it is proposed to liberalise the scope of the export markets development allowance. A weighted deduc- tion under section 35B of the Income-tax Act will now be available to all exporters at a uniform rate of 133.3 per cent of the qualifying expenditure. For this purpose, expendi- ture on advertisement or publicity outside India in respect of the. goods, services or facilities dealt in or provided by the taxpayer in the course of his business will be included in the qualifying expenditure. This concession will result in a revenue loss of about Rs. 5 crorcs annually. The loss in 1979-80 wi.l, however, be of the order of Rs. 4 crores.

98. In order to encourage the writing of University level text books in Hindi and other Indian languages, 1 propose to allow a deduction equal to 25 per cent of the income derived by the authors of such books. Authors of dictionaries and encycluMiedias in these lancuaaea will also get the bene- fit of a similar deduction in the computation _ of their tax- able income. This concession will be available for the assessment year 1980-81 and four subsequent years.

99. While I want to step up the drive against tax evasion, 1 also would like to promote greater expedition in tile settle- ment of income-tax cases. At present, the Income-tax Settle- ment Commission Is debarred from proceeding with a case il the Commissioner of Income-tax objects to the implication being proceeded with on certain grounds. The Direct Tax Laws Committee has recommended that the application for settlement should be rejected only after the Commission is satisfied that the objection has been raised by the Com- missioner on proper and valid grounds. It is proposed to imploraent this recommendation subject to the safeguard that before overruling the objection raised by the Commissioner ot Income-tax, the Settlement Commission should hear him.

100. The Direct Tax Laws Committee has also proposed certain amendments to the Income-tax Act and the Wealth- tax Act with a view to plugging some loopholes in the pro visions relating to prevention of tax avoidance through intra- family transfers of income and wealth, I have accepted their recommendations and given effect to them through the Finance Bill.

101. As I mentioned earlier the second objective of my proposals is to prevent the life style of the affluent sections from having an adverse impact on saving and investment through the demonstration effect. In this connection, the lavish manner in which expenditure Is incurred on accommodation and entertainment in luxury hotels calls foe serious notice. With a view to checking such conspicuous consumption in luxury hotels, It is proposed to levy a new tax on the gross receipts of hotels. Since it is my intention that States should continue to levy sales tax as hitherto on items of food and drink supplied to guests in hotels, the sale proceeds of these ifems will not be included in the tax base. The details of this new measure are being worked out and the necessary legislation in this regard will be introduced in Parliament soon.

102. Other changes being made in the Income-tax law through the Finance Bill are of minor significance and are largely in the nature ot clarification and rationalisation of existing provision¹).

103. The total addition to revenue from all these tax mea- sures will be Rs, 101.2 crores in a full year and Rs. 58.6 crores during 1979-80. Of this, about Rs. 12 crores will accrue to the Sta'cs as their share in 1979-80. Besides, addi- tional icsources of Rs. 160 crorcs will accrue in 1979-80 from the continuance of the Compulsory Deposit Scheme for Tncome-tax Payers.

104. 1 now turn to indirect taxes

105. T would like to straightaway indicate the more signifi- cant reliefs in excise duties which I nropose to provide. The Central excise duties on all chemical fertilizers, will be re- duced to 50 per cent of the existing rates. This will mean that the basic Central excise dutv on urea, which is the most important chemical fertilizer, will be reduced froni 15 per cent ad valorem to 7-1/2 per cent ad valorem; that on single and triple super phosphate fertilizer will be reduced fiom 7.5 per cent to 3.75 per cent ad valorem. This reduc- tion will also be correspondingly reflected in the counter- vailing duties leviable on imported chemical iertilizeis. With this change, it should be. possible to reduce the price of urea by about Rs, 100 per tonne. The prices of other kinds of fertilisers will also become lower with reference to the excise duty relief now announced. This decision would result in a sacrifice ot revenue of Rs. 75.6 crores under Central excise and Rs. 30 crorcs under customs.

106. Although the number of electric pumpsets is increas- ing rapidly with increasing rural electrification, farmers have still to use pumpscts driven by diesel engines In large parts ot our country. As a measure of relief to this large class it is proposed to reduce the excise duty on light diesel oil from the existing level of Rs. 155.72 per kilolitre to Rs. 73 pci kilolitre. Government is aware that only 45 per cent of this oil is used in the agricultural sector. Since it is difficult to monitor end use and a significant quantity of even the balance is used for generating power and by small industry, it is proposed to extend the benefit of this reduc- tion in excise duty to all users without any dislinc.ion. The loss to the exchequer on account of this concession will be Rs. 12.40 crores per annum.

107. It is also proposed to exempt power tillers imported by Stale Agro-Industries Corporations and the Central Gov- ernment totally fiom customs duly as these implements can promote agricultural production in small holdings. Hon'ble Members may be aware that indigenously munufacluied power tillers are already exempt fiom Central excise duties.

108. Pipes made of PVC resins can reduce seepage and wastage of water in fields and thereby increase the effective- ness of irrigation. Since I wish to make this raw material available at cheaper prices for the manufacture of PVC pipes for irrigation and al the same time prevent a misuse of concession for other purposes, it is proposed as an experi- mental measure, to exempt PVC resins imported for the pur- pose from the customs duties as soon as the modalities of a scheme which will serve both the objectives have been worked out.

109. I would also refer to the relief in the field of drugs and medicines. It is proposed to fully exempt from customs duties 22 specified bulk drugs required for the formulation of life saving drags; and to reduce the customs duty on 17 specified bulk drag intermediates from a total of 75 per cent ad valorem to 25 per cent ad valorem. On the exiso side, it is proposed to exempt patent or proprietary medicines, including life saving drugs, from the levy of the special excise duty. Taking these measures together, the revenue sacrifice is estimated to be of the order of Rs, 7.04 croies a year.

110. I now lurn to a proposal of far reaching significance. This concerns unmanufactured tobacco, excise on which dates back to the year 1943, This levy brings the excise machinery into contact with a large number of growers and licenses. It is proposed to completely exempt unmanufactured tobacco from excise duties, including additional excise duties and thus, relieve at one stroke, nearly a million tobacco growers, curers, small dealers and warehouse licensees from excise control. I have no doubt that this bold decision to do away with a vexatious levy—-a legacy of the colonial era-—will be widely welcomed by farmers in (he tobacco growing tracts of our country. This measure would involve loss of central excise revenue of the order of Rs. 121.20 crores. 1, however propose to recoup Rs>, 115.71 crores of this loss through suitable upward adjustments in the rates of duties on manu- factured tobacco products.

111. I shall touch upon cigarettes Inter. For the present, 1 shall deal with the other manufactured tobacco products. In respect of branded biris, the present tobacco stage duty phia bin duty comes to about Rs. 3 per thousand bin's ; it is proposed to fix a consolidated rate of Rs. 3.60 per thou- sand branded birls. Unbramled biris produced by manu- facturers of both branded and unbranded bin's wilj pay the same duty. At present, unbranded bin's are exempt from bin" duty; but they are subject to tobacco stage duty which

works, to about ninety paise per thousand biris. It w pro- posed lo levy a nominal consolidated duty of Rs. l.fiO per thousand on other unbrunded biris. However, to provide relief to the small manufacturers of unbranded biris alone it is proposed to exempt manufacturers who produce only unbranded biris from payment of duty on their cle^t'i uncci of the first 60 lakh biris in a year. It is also proposed to make suitable upward duty adjustments in respect of chewing to- bacco, snuff and smoking mixtures. It is alao proposed to levy a duty of 20 per cent ad valorem on branded manu- factured hookah tobacco.

112. As an interim measu'e, L is proposed to provide for suitable relief in product stage duly in the cuie of those products manufactured out of duty-paid unmanufactured to- bacco except in respect of smoking mhturcs and nianufac- tuisd hookah tobacco.

113. Hon'ble Members will recall that the Indirect Taxa- tion Enquiry Committee under Shri L. K. Jha submitted Part II of its final report in January, 1978. The Committee has indicated Ihc broad lines on which rationalisation of the excise tariff should be attempted both in the short term as well as in the long term. I have given close and careful considera- tion to Ihe Committee's recommendations A major restructur- ing of the excise tariff has to be ruled out in view of the need for resources and on other pragmatic considerations. Also there is reason to apprehend thai a major departure from the present pattern of excise taxation may upset the balance between different sectors of production. However, as part of the follow-up action on the Committee's recommen- dations, I have attempted to restructure the excise duly rales on a wide range of consumer and finished products,

114. Let me slate at the outset that as a result of this restructuring, the number of effective excise duty rates have been reduced from 28 to 16 in respect of commodities covered by the present exercise. I have also availed of this oppor- tunity to introduce further progression in the duty structure and stepped tip the duly on quite a few luxury and semi- luxury items. Excise duties are being increased on cosmetics and toilet preparations (other than perfumed hair oil), from 63 per cent to 100 per cent, on air-conditioners from 105 per cent to 110 per cent, on parts of refrigerating and air-condi- tioning machinery from 105 per cent to 125 per ocnt, on stereo and hi-fi -equipment from 36.75 per cent to 40 per cent, on higher priced television sets from 21 per cent to 30 per cent, on higher priced radios and radiograms from 36.75 per cent to 40 per cent. 1 have maintained the duty differential ol 15 per cent ad valorem in respect of those electronic products where such duty differential exists for email scale units

115. I have also taken this opportunity lo step up suitably the duly rates on durable consumer articles on the considera- tion that the outlay on these items is mostly of a non-recurring nature and the incidence of duty is spread over a period of time. Tn this category, it is proposed to increase excise duties on pressure cookers from 10.5 per cent to 15 per cent, on c.teel furniture from 21 per cent to 25 per cent, on domestic electrical appliances from 26.25 per cent to 30 per cent, and on safes and strong boxes from 21 per cent to 35 per cent.

116. 1 have also selected some consumer items like soap tooth paste, tooth brush and detergents, for increase in duties taking care, at the same time, to see that the goods produced by the small units in the decentralised sector are not adversely affected by this increase. Excise duties will go up on house- hold and laundry soap from 5.25 per cent to 20 per cent, on low priced toilet soap from 10.5 per cent to 15 per cent, on high priced toilet soap from 15.75 per cent to 20 per cent, on detergents from 13,13 per cent to 20 per cent and on tooth paste from 10.5 per cent to 25 per cent. It is also proposed to impose a 25 per cent duty op tooth brushes Let me state e'early that my obiective In incrcnslrig the rates on thes" commodities is partly to ensure th?.t the small-scale manufac- turers, wrih the advantage of duty exemption, are able to in- crease their share of the market for these products.

117. Among food items, I have avoided imposing nnv further burden on articles of mass consumption such as pro- cessed edible oils or vana^nti. I have, in fact, reduced th? dutv on vanaspati by exempting it from special excise duty. However, I have considered items like prepared or preserved food, instant coffee, biacult.y processed cheese, cocoa powder, chewing gum and chocolate as fit for further increases, bearing in mind the sections of the society that consume such items. Thus, excise duties arc increased on instant coffee from 21 per cent to 25 per cent, on prepared or preserved food, biscuits and processed cheese from 10,5 per cent to 15 per cent, and ou cocoa powder, chewing gum and chocolates from 10,5 per cent to 20 per cent, In aerated waters, it Is proposed to increase the duty rate on plain soda from 15.75 per cent to 20 per cent. In respect of other aerated waters I proposo to have two rates—one of 60 per cent for those containing caffeine and the other of 30 per cent for those not containing caffeine. It is, also proposed to withdraw the present conce^ sional rate fipplicabc to clearances of the first 50 lakh bottles in a financial year. However, the existins exemptions in respect of aerated waters in favour of small manufacturers will continue,

118. In restructuring the duty rates on consumer products, I have reduced the incidence on a number of items by exempt- ing them trom special excise duty. 1 would like to make par- ticular mention of Ihe duty reduction from 42 per cent to 30 per cent on fluorescent lighting tubes, which are widely used for street lighting and which help in reducing the con- sumption of electricity It is a'so proposed lo extend the scope of the present excise exemption for low priced footwear valued upto Rs. 5 per pair to footwear valued upto Rs. 10 per pair.

119. I have also rationalised the rates applicable to per- sonalised modes of transport, Mopcds, which are used by comparatively less affluent people und consume less fuel. will bear a lower duty of'10 per cent as against the existing duty of about 13.1 per cent. Scooters, motor cycles and three-wheelers will bear 20 per cent as against the existing level of 13.13 per cent, while cars will pay duty at 25 per cent as against the existing rate of 18.38 per cent. The con- cessional rate applicable to cars used as taxis and auto- rickshaws will be increased from 10 per cent to 15 per cent. The rate on commercial vehicles will also go up marginally from 13.1 per cent to 15 per cent as part of the schemo or rationalisation.

120. In manufactured inputs, I have mainly confined myself to streamlining the existing rates having regard to their usage and their relative importance. The details of these changes are contained in the Budget papers,

121. Another tax reform suggested by the Indirect Taxa- tion Enquiry Committee is to extend proforma credit facilities in respect of the duly paid on inputs used in the manufacture of finished products. Presently, such facilities are available in a limited area. Wide extension of these facilities as recom- mended by the Committee would have major revenue impli- cations apart from throwing additional administrative burden in working these procedures. However, Industry has been urging that this measure be given a trial I propose to extend, as an experimental measure, the provision of proforma credit to some of the products of the engineering industry, where the incidence of duty on Inputs is perceptible. While doing so, I have also proposed upward rate adjustments in respect of some of the final products. The details of these changes are available in the Budget papers.

122. The net revenue effect of the proposals £or restruc- turing the Central excise tariff, along with a few minor changes in some of the items affected, Is a gain of about Rs. 100 crores in a full year.

123. I now turn to substantive proposals to raise resources.

124. On the excise side, the most important proposals relate to a few major products of the petro'eum group. Hon'ble Members are aware that the OPEC countries have announced a phased programme of increase in the price of crude oil We are still, to a significant extent, dependent on imports of crude oil and the anticipated Increase In the out-flow of foreign exchange consequent on the increases in crude prices is substantial. After the initial drop in consumption of petro- leum products in the wake of the steep increase in crude prices in the year 1973. consumption has rccitfercd a sizable upward trend. From the point of view of evolving a viable energy policy which minimises the strain on our foreign exchange resource?, I have no doubt that it is essential to restrain the consumption of the more important petroleum products. My revenue proposals have been formulated keeping this Important objective in mind.

125. It is proposed to raise the Central excise duty on motor spirit from the existing level of Rs. 2253.88 to Rs. 2750 per kilolitre. Since the bulk of the consumption of petrol is by the upper classes in society 1 have no regrets in doing this, I also propose to raise the duty on high speed diesel oil from the existing level of Rs. 404.04 to Rs. 500 per kilolitre hccau.e of the rapid ({rowlh. in its consumption.

126. As Hon'ble Members aro aware, kerosene was being used, in the past, to adulterate high speed diesel oil when there was a price differential in favour of kerosene It has been our endeavour in the last few years to check this tendency by maintaining, as far as possible, parity between the rates of duty on these two products. Besides, we have had, in the recent past, to rely heavily on imports of kerosene. Bearing these considerations in mind, 1 propose to inciease the duty on kerosene from the existing level of Rs, 408.19 to Rs. 300 per kilolitre. I also propose to efFect a sympathetic increase in the Kite of duly of liquified patroleum gas, which is primarily used as cooking fuel in urban and semi-urban areas, from the existing level of Rs. 262.50 per metric tonne to Rs. 400 per metric tonne.

127. My proposals relating to the petroleum products are expected to yield an additional revenue of Rs, 223.25 crores under Onln.il excise and Rs. 55.7 crores under customs.

128. Next, it is proposed to increase the rate of duty on the residuary heading Item 68 of the Central Excise Tariff horn the existing level of 5 per cent to 8 p:r cent ad valorem. This will yield an additional revenue of Rs. 100 crores. As Hon'ble Members are aware, there is already a provision for giving set off of ihe duty paid on goods falling under Item 68 which arc used in the manufacture of other excisable goods. The increased levy should, therefore, not have any appreciable cascading effect,

129. As the House is aware, small scale manufacturers pro- ducing goods fa ling under Item 68, whose clearances of all excisable goods during the preceding year had not ex- ceeded Rs. 30 lakhs, presently enjoy exemption from duty pay- able on their first clearances upto a value of Rs. 30 lakhs, There have been persistent representations that in computing the eligibility of a small scnle unit for this concession, the value of goods falling under Items other than Item 68 should be excluded. There have also been demands that clearances for exports should be excluded so that the units in the small scale sector are encouraged to step up their export efforts. I accept the validity of theoe demands. Keeping these as well in the proposed increase in dutv under Item 68 is view, T propose to rationalise the existing scheme of exemption. Under the levised scheme which would be effective from 1st April, 1979, sma'l scale manufacturers whose clearances for home consumption of goods falling under Item 68 in the preceding financial year did not exceed Rs. 30 lakhs would enjoy complete exemption from the duty payable under Item 68, on their first clearances of a value upto Rs. 15 lakhs; they would pay duty at 4 per cent, which is half of the rate of dutv proposed for this item, on clearances between Rs. 15 l.iHis and Rs. 30 lakhs.

130. As the Hon'ble Members are awnre, the scheme of excise duty concession to encourage higher production in selected industries, which was announced in the year 1976, is due to expire on 31-3-1979. T do not propose to continue the scheme beyond this date. This withdrawal is expected to yield an additional revenue of Rs. 40 crores.

131. T have also taken this opportunity to review a number of existing notifications and I propose to modify or withdraw some of them. The details of this will be found in the Budget (papers.

132. Tn mv search for addition:!! resources I have, nf TIPCC")- sity, to fall back upon the old faithful, cigarettes T have already referred to the withdrawal of the duty on tobacco at the unmanufactured stage which is borne by cigarettes. 1 now propose to pdfust the rate structure on cigarettes in such n way as to further secure an additional sum of Rs 60 crores from this item. Takinjr into account the revenue expected to accrue from this measure and the recasting of the rate structure .''Pn'icnble to the manufactured tnbacco products, which I hivr referred to earlier, the States' 'horc in respect of ruirtittorinl excise duty fn lien of sales tax will go up by Rs. IS.31 crores a year,

133. As Hon'ble Members are aware, the excise duty mecha- nism has been used consciously to encourage the production of matches in the non-mechanised sector. I propose to carry this process farther by stepping up the duty on matches produc- ed by the mechanised sector from the existing level of Rs. 4.83 per gross boxes of 50 matches to Rs. 9.20. I also propose to round off the existing level of duty applicable to the non-mechanised sector, other than cottage units, from the existing level of Rs. 4,52 to Rs 4.50. As regards cottage sector units. It is proposed to reduce the duty applicable to them from Rs. 3.36 to Rs. 1.60. I am sure this package of measures will result in a further accelerated growth of thu non-mechanised sector in general and cottage units in parti- cular. The additional revenue yield from this measure is expected to be of the order of Rs. 8 crores during a year.

134. Machine-made carpets produced in a few organised units constitute an item of elite consumption. I can see no justification for encouraging this line of production when we have a large number of traditional carpet weavers whosu skit's have won international renown, 1 would not like the livelihood of these weavers to be threatened by the prolifera- tion ol rn-ichinc-made carpets. I, therefore, propose to impose it duty of 30 per cent on such machine-made carpets H.indmade carpets will be totally exempt from this levy. The estimated additional yield from this proposal is Rs 1.9 crorea.

135. Consistent with, the above approach, with a view tc? encouraging labour oriented non-power processing sector of the cotton textile industry, it is proposed to withdraw the concessional rate of 8 per cent ad valorem on power-processed white powerloom cotton fabrics of finer varieties so that such fabric-' ;>.lso pay the snunc rate of 12 per cent ad valorem as is applicable to other power processed fabrics.

136. This Government is committed to the encouragement of the handloom sector. The competitive capacity of hand- loom fabrics in relation to fabrics produced by powerlooms and composite mills has to be improved further. Jt is there- fore, proposed to increase the excise duty on cotton and cellu- losic spun yarn of finer counts used by composite textile mills and powerlooms by about 10 per cent of the existing rates. Details ot these changes are available In the Budget papers. Additional revenue expected from these measures is aoout Rs. 10 crores.

137. The special duties of excise Imposed a& a part of the

1978 Budget are due to expire on 31-3-1979. It ft proposed to continue thrse levies for another year at the existing rate of 1 /20th of the effective basic excise duties However, it is proposed to exempt from this levy items in respect of which rates have been restructured as well as the new levies; the existing exemption in respect of electricity, coal and Item 68 will a¹ so be continued.

138. I shall now deal with the proposals concerning customs duties. The most important of them relates to withdrawal of the existing exemption from countervailing duties of customs applicable to imported goods, which attract classification under ilem 68 of the Central Excise Tariff. When this residuary entry was introduced in that Tariff in 1975, imported goods were exempt from the corresponding countervailing duty customs. This exemption which was initially granted when the excise duty on indigenous goods was 1 per cent ad valorem has con- tinued, even though the rate has successively been stepped up fo 5 per cent. An T have already stated, I have proposed a further increase in the Central excise duty under Item 68, from 5 per cent to 8 per cent ad valorem. Tn this context and as a measure of protection to the indigenous goods classifiable under Item 68, it is proposed to withdraw the existing exemp- tion In respect of imported goods. In withdrawing this exemp- tion, however, I ljave not proposed any change In the duty in regard to project Imports and also the Items of machinery on which the customs duty was, in the recent past, reduced to 25 per cent ad valorem on the consideration that such machi- nery is not Indigenously produced. This measure will yield an ndiHtional revenue of Rs. 96 crores by way of countervail- ing duty.

139. In the context of the sizable gap between suppry and demand of edible oils, substantial imports of these oils have taken place in the past and arc continuing. As a means of assuring remunerative prices to indigenous producers of oil seeds, rt is proposed to levy basic customs duty on palm oil, rnpeseed oil, soyabean oil, sunflower oil and palmolein oil at 12-1|2 per cent ad valorem. They will, however, be

exempt from auxiliary and countervailing duties This mea- sure is expected to yield an additional revenue of Rs. 33.5 crores.

140. It is proposed to continue the auxiliary duties of cus-

toms for the next financial year at the existing levels.

141. Taking Union excise duties and customs duties to- gether, my proposals will lead to a net revenue gain of Rs. 606.14 crores in a full year, of which Rs. 413.15 crores will accrue to the Centre and Rsi. 192.99 crores to the States.

142. Where changes are proposed to be made by notifi- cations, effective from the 1st March, 1979, copies of such notifications will be laid on the Table of the House in duo course.

143. Members are aware that in respect of every inter- national journey paid for in Indian currency, Foreign Travel Tax is being collected from passengers. In order to simplify the administration of the tax, and to guard against the possi- bility of evasion, I propose to revise the scheme and replace the ad-valorem levy with a specific one. The new arrange- ments will be brought into force as soon as possible after legislation in this bcalf is enacted. This measure will not have any significant revenue effect.

144. I have now a few words to say On behalf of my colle- argiie, the Minister of Communications. As Hon'ble Members are aware, the unit costs of a number of our postal services c\cccd the revenue they fetch. Moreover, the modernisation of telecommunication service?; involves largz capital investment. These factors necessitate an increase hi postal and telecommu- nication tariffs. A memorandum showing the proposed tariffs is being circulated along with the Budget papers. The letter card (inland letter) and the letter will cost live paise more. The rate for the post card has been left untouched. As re-

f ards telecommunication tariffs, the ordinary telegram of words will cost Rs. 2.25 as against Rs. 2 at present and each additional word will cost 30 paise as against 25 paise at present. The rate of Press telegrams will however remain unchanged. Local call charges, beyond 1750 calls per quarter. will be 40 paise per call, as against 30 paise at present. I will not go into other details which are given in the memorandum, The tariff revisions, which will be given effect to from a date to be notified by the Government after the Finance BUI is passed, are estimated to result in additional revenue of Rs 57 96 crores per annum. The yield during 1979-80 is placed at Rs. 48.30 crores and ha* been accounted for in esti- mating die internal resources of the .Posts and Telegraphs.

145 Our tax effort will bring in about Rs. 665 crores, of which Ks. 205 crores will accrue to the States leaving Rs. 460 crores with the Centre. Taking also into account Rs. 160 crores of accretions compulsory deposits by income- tax payers, theie will be a residual deficit of Rs. 1355 crores, which 1 propose to leave uncovered. I huve assessed care- fully the inflationary potential of a defict of this size. The large food output Of the current year, the large stocks of food and other commodities the we have, the large volume of foreign exchange reserves and a continuation of the current supply management and restrictionist monetary policies give me confidence lhat we shall be able to maintain reasonable price stability in the coming year also.

146. With this I have come to the end of my labours, t have attempted in this budget to put the maximum em- phasis on agricultural and rural development and labour in- tensive industry, because it is now accepted by all that only that way can we eradicate poverty and unemployment hi the country, I have, however, not neglected large industry and infrastructure in the process. On the contrary, I have posi- tively encouraged them, But I have no sympathy with those industries which cater to the wants of the rich. We can have no room for production which caters to the rich and is thus a visible manifestation of the disparities which exist hi our socialy.

147. The elimination of the kind of poverty which exists in

our country cannot be achieved overnight. It is a long process which involves large investment through the mobilisation of surplus resources wherever they exist hi society, better or- ganisation and the development and transfer of appropriate knowhow to millions of small persons engaged in agricul- ture and allied occupations and village industries throughout the country. The ultimate objective as not merely to raise tht standard of living of the poor but to build a society of men and women with skills, resources, imagination, and above all, hope. ( like to think that this budget is a small step in that direction. Bui its sutcess really depends upon a national con- sensus about the desirability of the objective and the need fo work hard for it and a willingness on the part of the power- ful and affluent sections of society to make the necessary sacrifies. I seek the help of this House in achieving such a consensus and securing the required sacrifices.

A. C. TTWARI, Jt. Secy.

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