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REGISTERED No. D. (D)-72

The Gazette of India

EXTRAORDINARY

PART I—Section 1

PUBLISHED BY AUTHORITY

No. 46] N EW DELHI, M O N D A Y, M A R CH 2, 1981/PHALGUNA 11, 1902

Separate paging is given to this Part in order that it may be filed as a separate compilation

1399 GI/80—1

(139)

1399 GI/80—2

2. The Budget for 1981-82 has been formulated in an economic situation which continues to be difficult, but also shows great improvement over the desperate conditions pre- •vailiing a year ago. Tho "Economic Survey" presented to the House this week contains a detailed review of develop- ments in the past year. I shall, therefore, only review the highlights of the economic situation cis u background to pi-canting tbj strategy of next year's budget.

3. Hon'Wc Members will recall that when our Govern- ment took office in January 1980, we inherited an economy in extremely poor shape. It was reeling from a disastrous economic performance in 1979-80, when the Gross National Product declined by 4.5 per cent, and prices increased by over 21 per cent. Neglect and mismanagement of the infrastructure had produced a crisis situation in key sectors such as* coal, power and railways.

4. Faced with this grim situation, our overriding objective was to arrest the deterioration and set the economy once again on the path of stability and growth. This was no easy task. The severe drought of 1979-80, nnd tbe accu- mulated problems in management of the infrastructure, cast a long shadow over 1980-81.

5. Efforts to improve infrastructure performance deserved and received the highest priority in 1980-81. A mechanism for crisis management was established, with special adminis- trative arrangements to monitor and co-ordinate Government action in this area, and to set clear priorities. It took time for these efforts to bear fruit, but by the middle of the fiscal year, all the three sectors, power, coal ami railwayi showed distinct improvement.

6. Power generation suffered in the early months of 1980-81 because of very low hydro-electric generation. TKs was a direct consequence of the acute drought of 1979, which left th© reservoirs severely depleted through the lean summer months of 1980. Hydro-electric generation picked up after July wb;n most of the reservoirs were replen:shed by the monsoon. There was also a very substantial improve- ment in thermal generation. The problems of coal avail- ability which had plagued thermal power plants during 1979 were substantially overcome and rail movement of coal to thermal plants was organised on a priority basis. Strenuous efforts were also made to improve operational effic'encv bv initiating betterment and renovation programmes in the States with technical advice from Central Agencies. As a rem't, thermal electricity generation in November and December 1980 was 21 per cent higher than in the same months in 1979. For the year as a whole, electricity prr,*ir-n is likely to show an increase of about 6 per cent over 1979-80. However, in the second half of 1980 81 generation would be about 13 per cent higher than the second half of the previous year.

7. Coal production in 19RO-81 olso fhows a marked im- provement. The production of coal and 1'pnite Ind remained more or less stagnant at about 106 miUion tonnes since 1976-77. This frustrating spell of stagnation has been bro- ken and production is expected to exceed 115 million tonne* in 1980-81. Better availability of power waa one of the important factors behind this improved performance.

8. The railways have shown improvement In the movement of freight in recent months, breakinc a pattern of deteriora- tion witnessed over the past three years.

MINISTRY OF FINANCE

(DEPARTMENT OF ECONOMIC AFFAIRS)

(Budget Division)

BUDGET 1981-82

SPEECH OF

MINISTER OF FINANCE

New Delhi, 28th February, 1981

PART A

M/Finance (EAD) u.o. No. F. 15(3)-B(D)I81

Sir,

It is my privilege, once again, to present the Budget to this auauit House. 1399 GI/80-3

9. Industrial production in 1980-81 reflected the progress made in removing infrastructure constraints. I have already mentioned that hydroelectric generation was very low In the first three months of 1980-81 becauw of the donlctinn of reservoirs. The resulting shortage of power d e c r e ed in- dustrial production through much of the first half of 198O-8t. However, with the easing of infrastructure conslramts in Ihe second half of the year, industrial nroductior.i has picked up. For the year as a whole, it is likely to show a growth of about 4 pj-r cent. This compares with a decline of 1.4 per cent in 1979-80.

10. In addition to efforts at improving Infrastructure ner- formance, the Government also took wide ranging measures

designed to create conditions conducive to rapid industrial expansion. Hon'ble Members will recall that the Budget for 1980-81 contained specific fiscal incentives designed to en- courage investment activity. This was followed by the Indus- trial Policy Statement of July 1980 in which several pro- motional measures were announced. Steps were also taken in the course of the year to increase ttu flow of invest- ment finance to industry. A new policy has been enunciated to permit investment funds from oil exporting developing countries to flow into new units in selected industries in the form of portfolio investment. The guidelines for issue of debenture were revised to permit more effective use of this instrument for mobilisation of funds.

11. Although the promotional impact of these measures could not manifest itself fully in 1980-81 because of infra- structure bottlenecks, they have undoubtedly set thestage for longer term industrial expansion in the coming years.

12. The performance of agriculture in 1980-81 gives every ground for satisfaction and provides great reassurance about the basic hcpllh of this vital sector of our economy. Th; wea*her in 1980-81 was favourable in most, bnt byi no means all, parts of the country, and this created conditions conducive to Hn agricultural recovery. TIK tufal production of foodgrains in 1980-81 is likely to exceed 132 million tonnes, which is more than 23 million tonnes higher than in 1979-80. It will surpass the previous peak level achieved in 1978-79, and yet weather condition's were less favourable than (in that year. The gains in foodgrains production in 1980-81 have been accompanied byi a very substantial re- covery in sugarcane production. Production of fibre crops was also good.

13. This excellent performance testifies to the soundness of the agricultural strategy we introduced! in the late sixties. This strategy was vigorously pursued in 1980-81. A con- certed effort was made to ensure adequate production of quality seeds. The area under high yielding varieties was expanded to 48 million hectares compared with only 3.^.2 million hectares in 1979-80. Large imports of fertilsers were undertaken to supplement domestic production. Fertiliser consumption in terms of nutrients is estimated to have in- creased from 5,26 million tonnes to 5.6 million tonnes. Expansion of Irrigation received special attention and the agricultural extension machinery was strengthened to ensure a more effective transfer of technology.

14. The excellent performance of agriculture, combined with the beginning of a recovery in industry, is likely to produce an overall growth of 6.5 per c:nt in the Gro\n National Product. This is an important achievement, but T must caution against complacency, The progress made 'needs to be consolidated, and further momentum must be built up if the recovery of 1980*1 is to mature into full- fledged growth next year. This calls for a realistic assess- ment of the strengths, as well as the weaknesses, of the economy,

15. The economy continued to lit¹ subject to inflationary pressure dturing 1980-81 although there c:in be no doubt that there was ft marked improvement O"->T 1979-80. The in- crease in prices during 1980-81 apto llw end of Tanuary 1981 has been 13.5 r>er cent. It was nearly 20 per ce-nt in the same period of the previo'ii year. Inflationary pressures were particularly severe in the first half of Hie year because of the after effects of t\c J ••ought of 197.') and this was espe- cially evident In the bjniviour of sugar, gut and khandsari prices. With the Improvement in the supply situation in the second half of ihe year, there was a definite improve- ment. Prices declined from trw middle of October to the end of December. They have risen since then, partly because of the unavoidable increase in petroleum prices effected in January. However in recent weeks, the increase in prices ha" moderated.

16. I must cautlod however that although inflation has abated, it has not been overcome. The economy remains subject to continuing cost push pressures, includntf ospe- cfsliv the transmission of international inflation through) rising prices of oil and other essential imports. Since these cost pttsh pressures are likely to persist, conrimied vigilance is required in the coming year. It is essential to evolve n strategy for coping with cost push inflation effectively by tackling the problem at its roots, This is not only a mntlcv of demand management. It also requires au all out effort to increase efficiency and achieve higher productivity.

17. Monetary and credit policies .in 1980-81 were tailored to the requirements of the inflationary situation and com- mercial credit was strictly regulated. In addition, steps weie taken to ensure that the distribution of bank credit conforms to our economic and social priorities. The Reserve Bunk has evolved guidelines to ensure that an increasing sUirc of priority sector credit is directed to weaker sections, espc- ciallyi those identified in the 20 point programme. Accord- ing to these guidelines, 40 per cent of priority sector lending is to bo earmarked for the agricultural sector. Half of the direct lending by commercial banks to agriculture and allied activities will be directed to small and marginal farmers and agricultural labourers. Furthermore, 12.5 per cent of total credit advanced to small scale (industries will be reserved for rural artisans, village craftsmen and cottage industries.

18. The expansion of banking in the rural areas is continu- ing and the programme of establishing Regional Rural Banks has bcec accelerated. There were only 60 such banks at the end of December 1979. There will be one hundred by the end of March 1981. Another 25 Regional Rural Banks will be established in the year 1981-82. It is proposed to increase their number to 170, covering 270 districts, by the end of the Sixth Plan, A National Bank for Agricultural and Rural Development will be established as an apex ins- titution to meet the credit needs of the rural community and a bill to this effect will be introduced shortly.

19. This is an appropriate occasion to inform t/w House that we have decided to undertake a major re-organisation of the, Life Insurance Corporation m order to strengthen iis ability to meet the challenges of the future. The Corporation has an impressive record of extending insurance services to the community. In the process it has grown very consider- ably in size. It has, therefore, become desirable to restruc- ture the Corporation into more manageable units in the interest of operational efficiency and also to allow an ele- ment of healthy competition. Accordingly, we have decided to re-organise- the Corporation into five independent units with a co-ordir/ating body to provide supervision and guidance on matters of common interest. I have no doubt that these changes will improve the quality of service rendered to policyi holders. This re-organisation will impart a greater degree of dynamism into the working of these institutions. and this will help to extend life insurance into the rural areas, where only limited headway has been made so far.

20. The balance of payments situation facing the country gives cause for concern. Rising prices of imported oil hnve added enormously to the external payments burden on the economy. The import bill for crude oil and petroleum pro- ducts is likely to reach Rs. 5,600 crores In 1980-81, com- pared with only Rs. 1,677 crores two years ago. Most of the increase is duo to the increase in oil prices. Tr'j total import bill in 1980-81 is likely to be around Rs. 11,300 crures whereas exports are proiected to be only Rs. 7.100 crores, Even after allowing for the surplus on net invisibles, the country has to financp a balance of payments deficit of about Rs. 2.000 crores in 1980-81. Thii; is much larger than the amount of external assistance available, and it has led to a significant drawdown of foreign exchange reserves. It is. therefore, essential to evolve a strategy for bringing the balance of payments under control, The Government has already taken a number of steps in this direction,

21. High priority has been accorded to oil and natural gas exploration in order to reduce our dependence on im- ported supplies as much as possible. Thj Oil and Natural Gas Commission has found evidence of hydrocarbons in several structures both offshore and onshore and it is cssen- tial to pursue the exploration ami development efforts with all the resources at our command. Tr> this end, an ambi- tious programme is envi'snc^rl for the Oil and Natural Gas Commission and Oil India Ltd. Th? urgency of the situation is also such that the Government has decided to supplement our domestic capability by engaging foreign parties on com-

tract, on a production sharing basis, to hasten the pace of exploration and development of potential oil fields. It is expected that the foreign companies selected under this scheme will commence work in the second half of 1981-82.

22. The balance of payments situation also calls for strong support to exports and the Government has taken several important initiatives in this regard recently. Hon'ble Mem- bers will recall that in my Budget Spcecb last ycur I stated that the Government had taken a decision to establish an Export-Import Bank to assist in the financing of international trade. The details of this proposal have now been worked out, and it is proposed to introduce a Bill in tl," current session for setting up the Export-Import Bank as a Statutory Corporation. 1 am providing Rs, 70 croies in the Budget for this purpose.

23. There is also considerable scopt: for import substitution by increasing domestic pioduction and expanding capacity in sectors such as steel, cement, fertiliser, non-ferrous metals and oilseeds. This is being vigorously pursued,

24. The strategy of the Budget I am about to present flows from my assessment of the state of the economy, We bavc come out of the crisis situation which prevailed a year ago. The agricultural sector has recovered and is well poised for continued growth. The industrial recovery is as yet partial, but the various policy initiatives already taken have created conditions favourable for an industrial revival. With further improvement in infrastructure per- formance, the constraints on industry in the coming year should be substantially cased. The emphasis in 1981-82 must therefore shift from crisis management to growth.

25. The tasks ahead of us have been clearly indicated in the Sixth Plan, which bas now been approved! by the National Development Council. The Plan establishes a tar- get of 5.2 per cent growth per annum and calls for an ambitious public sector investment programme of Rs. 97,500 crore:.'. As in the past agricultural development, with special emphasis on the weaker sections, is the centrepiece of our development strategy. But the Sixth Plan also identifies some other areas which have become especially critical. The energy-transport system comprising such critical sectors as power, coal, oil, ports and railways, requires massive invest- ments if these sectors are not to become a constraint upon economic growth

26. The Budget must make a beginning in undertaking these large and urgent tasks. But it must do so in the full knowledge that the threat of inflation hus not been fully overcome. The fiscal deficit should there-fore be kept wirb'i.¹ tolerable limits, At the same time, taxation mur.t be used judiciously so that it docs not fan the flames of inflation as happened in 1979-80,

27. Along with fiscal discipline we must aha take M.eps to encourage the flow of private savings into the financial system. Only thus can we ensure adequate availability of non-inflationary financing to meet tl.i; rapidly expanding needs of the economy. This flow of resourcrs into the financial system iis threatened in two ways ar.U we must tackle both.

28. First of all, it is threatened by the pernicious growth of the black economy. This generates income flows which cannot easily surface in the financial system, and are therefore directed into socially harmful activity such as hoardinp, pro- fiteering, speculation and wasteful consumption. Thi3 only stokes the fires of inflation. The Government hus recently taken a major initiative to direct some of the resources or- culaUnn in the black economy into the pub'ic exchequer through the sale of Special Hemcr Bonds Furthci action on a wide front i> riTewa'v to ^heck 'h*; L'tnenitior; rf black money so that this social evil is progressively eliminated from our society.

29. A second '.mncjiment to financial savings K the exis- tence of high rates of inflation. Tn an inflationary situation it becomes eswntitl to pmvid-. adeqiuiti incentives to finan- cial savings. Since bank deposits are the most important single mechanism for financial savings, it has been decided to raise the interest rate on maturities from one and upto five years. An announcement to this effect is being made by UA; Reserve Bank. The interest rate paid on deposits auove 1 year maturity and upto 2 years will be raised from 7 per cent at present to 7.5 per cent. The rate paid on depo- sits above two years and upto three years will be raised from 7 per cent at present to &.5 per cent. The rale paid on deposits above three years matinity will be raised from 8.5 per cent at present to 10 per cer/t.

30. The interest rate paid by banks on deposits above 5 years is unchanged, but a new National Savings Certificate will be issued with a matuiity of 6 years which will carry an interest rate of 12 per cent. This will provide the neces- ,. .iy incentive for encouraging longer term savings.

31. In addition to these measures, I propose to raise th" interest rate ceiling on debentures from 12 per cent at present to 13.5 per cent. This is in line with the other in- terest rate changes proposed, and it will encourage large industrial units to raise their requirements of investment finance through tri;ir own efforts, it is essential that these units, which have the capacity to mobilise resources through the financial markets, should make greater efforts in this direction and thus reduce the burden, on the term lending institutions.

32. At present, public companies arc permitted to accept deposits from the public upto 25 per cent of the aggregate of their paid up share capital and free reserves. They are also allowed to accept deposits upto 10 per cent of paid up capital and free reserves either from their shareholders or from others when guaranteed by a. Director of the com- pany, These limits do not apply to inter-company deposit* These provisions governing company deposits will be con- tinued. However, it is propoiedi to impose a ccilini; of 15 per cent on the interest rate which can be paid on these deposits. The requisite orders giving effect to these decisions are being issued,

33. As a further step in facilitating investment in industry we have decided to relax the requirement under the Stock Exchange guidelines that promoters can only hold a maxi- mum of 40 per cent of the equity of a new company). This provision conflicted in some cases with the requirement of the financial institutions that promoters put up a minimum percentage of tile total cost of the project. This potential contradiction between two different requirements had given rise to considerable difficulties in the implementation of new projects. In order to overcome- there problems, promoters will be allowed to hold higher equityi than the 40 p^r cent limit during ttw initial stages of a project. However, equity holdings above 40 per cent will have to be divested within three years from the date of commercial production by an offer of sale to the general public. Tljis rationalisation should speed up the implementation of new projects in industry.

34. I am confident that these widc-rai/ging measures vvill help to encourage the flow of savings into the financial sys- tem and increase the availability of funds for industrial investment, They create highly favourable conditions for growth in the coming year.

35. Having outlined the broad approach I have adopted in formulating the Budget and some associated policy ini- tiatives, I will now turn to the Revised estimates for 1980-81 and the Budget estimates for 1981-82.

Revised Estimates for 1980-81

37 In addilion, the Central Government has to provide assistance of Rs. 90 crores to the States to help in flood relief work. Special loan assistance of Rs. 76 crores is being provided/ to certain North Eastern States including Assam to meet the gap in their resources caused by their exceptional difficulties,

38. A larger provision for subsidies is being made than originally envisaged. The provision for net outgo on. im- ported lertilisers is being increased by Rs. 104 crores- The provision for food subsidy, subsidy on controlled cloth and provision for cash compensatory support and market deve- lopment for exports are also being increased by Rs. 110 crores.

39. TL

ci eased by Rs. 200 crores.

40. The financial position of certain public sector under- takings did not show th© recovery anticipated at the Budget stage. Additional non-Plan assistance of Rs. 104 crores to these undertakings has therefore become necessary.

41. Turning to the Central Plan expenditure, I am happy to inlorm the House that expenditure in crucial sectors like power, coal and petroleum lias been satisfactory. The House will also be happy to note that the level of disburse- ments of the Agricultural Refinance and Development Cor- poration has far exceeded the initial Budget estimates, and I am, therefore, providing an additional sum of Rs. 126 crorcs to the coiporation. An additional provision of Rs. 50 crores is being made for Industrial Development Bank of India to enable it to meet its risicg commitments. In certain sectors like steel and civil aviation, there has been a short- fall in internal resources generation and budgetary suppoi c for their Plans has to be significantly! stepped up. There may bo some shortfalls in the Plan expenditure in some sectors. However, even after taking these into account, ihe budgetary support for 1hc Central Plan in 1980-81 will be Rs. 297 crores higher in the Revised estimates,

42. The tola) expendituiii of the Central Government iw

now estimated at Rs. 22,808 crores compared with Rs. 21,467 crores in the Budget.

43. Turning to receipts, I am happy to inform tho House that despite the concessions in income-tax allowed in (he Budget for 1980-81, tax revenues have not suffered. My jtidfiiiine'it that lower rate of taxation will promote better voluntary compliance seems to have been vindicated. The receipts from Corporation tax would bo higher by Rs, 35 crorci compared with the Budget estimate of Rs, 1515 crores. Receipts from Union Excise duties are also estimated to be higher by Rs. 99 cvore, compared with (he Budget estimate of Rs. 6265 crores. The receipts from Customs duties are likely to exceed the Budget estimate of Rs. 2989 ciores by as much as Rs. 361 crores in the current year due to larger imports and higher international prices. After deducting the States' share of various taxes, tho net tax revenue of the Centre is now estimated to he Rs. 419 crores more than (he Budget estimate of Rs. 8922 crores.

44. Capital receipts too, show an improvement of Rs 245 crorcs over the Budget estimate of Rs. 7,694 crores. This is because of higher market borrowing of Rs. 104 crorcs and estimated ro-eipts of Ks. 200 crores from the s-ilo of Special Bearer Bonds, offset by some shortfalls ehewhere.

45. Total reecints are now estimated at Rs. 20-833 crores compared with the Budget estimates Of Rs. 20,022 crorcs. The current year is now expected to close with a deficit of about Rs. 1,975 crores. The House wiJl appreciate that •>lmost the entire irlcre?ss in the budgetary deficit is accoun- i*H for by larger budgetary support for State and Central Plans

Budffct Estimates for 1981-82

46. The Budget for 1981-82 reflects the objectives, priori- ties and projtiammes of the Sixth Plan, Plan outlays of the Centre. States and Union Territories in 1981-82 are esrirmtrd. nf Ri_ 17.479 crores,• compared with Rs. 14,593 crores in Budget estimates 19RO-81. This represents an in- crease of nearly 20 per cent. The Plan outlay of ihe Cei.tre for 1981-HZ IS Doing stepped up very cousiaeraDiy 10 n.s. S,nly oiores ftom Rs. 7,340 crores in Budget estimates 1980- M, an increase of 17.4 per cent. This will be financed by budgetary support of Rs. 6,30V crorcs. and internal and cxUa budgetary resources of Public Sector Undertakings of Rs, 23,10 crores. The total of the approved Plan outlays of States and Union Territories will be Rs. 8,860 crores as Eflainst Rs. 7,253 croies in Budget estimates 1980-81, that is. an increase of 22 per cent. A provision of Rs. 3,462 ciores has been made for Central assistance for the Plans of the Slates and Union Territories

47. Agriculture has a preponderant role in our economy imd its development sets the pace for the economy as a whole. The Annual Plan outlay for agriculture in the Central and State Plans has been stepped up to Rs. 1,047 crores from Ks. 925 crores in Budget estimates 1980-81. Expansion of the area under irrigation is the most important single factor enabling a shift to high productivity scientific farming. Accordingly it is pioposed to add 2.5 million hectares under irrigation in 1981-82. The outlay for major and medium irrigation in the Annual Plan of the Centre and States for 1981-82 is being raised substantially to Rs. 1408 crores from Rs, 1213 croies in Budget 1980-81. The outlay on minor inig.ition will be Rs. 301 crores compared with Rs. 266 cvores in 1980-81.

48. Parallel vvilh the effort at boosting total agricultural produi:lion, the Annual Plan lays great stress on special pro- grrtmincs lo benefit the weaker sections of rural society such as landless labour, small and marginal farmers, rural artisans and scheduled enstes and scheduled tribes, One of the im- pJitiinL programmes which this Government has launched for this purpose is the National Rural Employment Programme. We are providing Rs, 180 crores in the Central Plan for this progiomme and this will be matched by an equal amount Horn the States.

49. Another important initiative aimed at helping iho weaker sections is (he Integrated Rural Development Pro- giammc. This programme absorbs the curlier complemen- tary, and sometimes overlapping, programmes aimed at parti- cular sections of the population. We have provided Rs. 198 crores for this programme as well as for special programmes such as Desert Development and Drought Prone Area Pio- lrtnrnmes. With an equivalent contribution from the States, it is expected that the Integrated Rural Development Pro- gramme will help 3 million families to go above the poverty line in 1981-82,

50. Central assistance for the Special Component Plans for Scheduled Castes was introduced in the very first Budget of the present Government. We have provided Rs, 110 crores for the next year. In addition, Rs, 13 crores will be invested in the Scheduled Castes Development Corporatiens of Slates. Along with an equal contribution from the Stales, I his nil) enable there Corporations to raise substantial funds from ihe financing institutions, The tribal sub-plan, wh;ch is tho veht'ie for the development of tribal areas will receive an augmented provision of Rs, 85 crorcs during 1981-82, i-omnared with R<. 70 crores in 1980-81. A provision of Rs. 92 crorcs has been made for Ihe Special Hill Develop- ment Programme compared with R<\ 61 crores in 1980-81.

51. In pursuance of the Government's policy to accelerate tho provision of safe drinking water in problem villages, an niuount of Rs, 110 crores has been allocated in 1981-82. Together with the provisions made in Ihe State Plans, this would enable about 36,000 additional villages to be covered during the next year.

52. Ihe Annual Plan acwords high priority to the all important [ask of expanding capacities in sectors such as o'l, coal and power. It is proposed to provide Rs. 580 cr,n?< for coal and lignite projects in 1981-82. This re- resents an increase of 31 per cent over the provision of Rs. 443 crores in 1980-81.

53. Large increases have also been made in the outlay for power in the Central Plan. Wo have provided Es 721 crorcs in 1981-82 compared to Rs. 520 rrorcs in (he last Piidgot. This refects the expanding role of the Centre in the power sector. We propose lo take up the Dulhastj Project m Jammu and Kashmir and the Koel Karo nrojeel in Bihar in the Central sector in the romJng year. The total outlay for the power sector in the State and Central Plans taken together is Rs. 3326 crores compared to Rs. 2745 crores pro-

vided in the Plan for 1980-81. Additional generating capa- city of 3000 MW is expected to be commissioned during 1981-82. The Rural electrification programme provides for electrification of 22000 villages and energisation of 4.25 lakh pump-sets in the coming year.

54. In keeping with the high prioiity accorded to cxplora

tion and development of oil and natural gas resources, the Plan outlay for the petroleum sector has been increased to Us. 1011 crorea in 1981-82 compared with Rs. 780 crores in the current year. An outlay of Rs. 67 crores is proposed in the petro-chemical sector.

55. An outlay of Rs. 796 crores is being provided for steel in 1981-82. A significant development in this area is the recent commissioning of the Demonstration Plant for Sponge Iron Production at Kothagudcm. This project is of special significance to India since the techno'ogy for pro- duction of sponge iron by using non-coking coal will enable us to overcome the constraints imposed by the limited reser- ves of cokinK coal in our country.

56. The Annual Plan for 1981-82 envisages a significantly higher outlay of Rs. 22J crores for minerals development against Rs. 130 uorcs in 1980-81, This includes a provi- sion of Rs. 90 crores for the Oiissa Aluminium Project which will be implemented by the new National Aluminium Com- pany registered, with headquaiteis at Bhubancswar in Ori-sa, 'i he bulk of the project cost is expected to be financed by external credit and commercial borrowings.

57. In tune with our concern lor improving transport facili- ties, we have enhanced the outlay in the Central Plan for the transport sector to Rs. 1535 Liorcs from Rs. 1351 crores in 1980-81. Hon'ble Membcis arc already aware that a subs- tantial incicasc has been made in the Plan outlay of ihe Railways from Rs, 760 crores in 1980-81 to Rs, 980 crores. A pi ovhion of Rs. 108 crores has been made for the develop- meni of poits which includes construction of additional bcrlh; at Kundla, Tuticorin and Visakhapatnam.

58. In tune with our diivc to improve and moderrise communication facilities, it is proposed to extend 2 lakhs direct telephone connections during 1981-82. An outlay of Rs. 518 crores for Posts and Telegraphs including communi- cation = has been provided in the Plan,

59. An outlay of Rs. 390 crores is being provided for chemicals and feitilisers which includes substantial provision for the ^as-based fertiliser projects at Thai Vaishet, Hazira and Numrup. Proposals for new nitrogenous and phosphatic fertiliser plants arc also being finalised.

fit"). Village and small industries have an immense potential

for providing employment while sustaining the traditional arts and skills of the village artisans and craftsmen. An outiay of Rs. 162 crores has been earmarked for these sectors edding to the outlays of Rs. 153 ciores in the Plans of the Statci and Union Tcritorries.

61. Finally I come to the all important question of popula- tion growth. All our efforts at eradicating poverty will be frustrated if we cannot reduce the rale of population growth. We have taken up revitalisation of the Family Wclfaie Pro- gramme in earnest, A provision of Rs. 155 crores is being made for this programme in 1981-82.

62. The Government is deeply concerned about the lack of adequate communication facilities in the North-East. We have therefore, decided to take up six National Highways with a total length of 1700 Kms. at a total cost of Rs. 70 crores. It 1IL>S also been decided to establish a moie direct connection from Nowgong to Dimapur on National Highway No. 36 at a cost of Rs. 16 crores. Certain missing links on the road running along the Indo-Banglade^h Border in Mtrfialaya will be completed at a cost erf Rs. 26 crores. Railway facilities in this area are also being augmented. Hon'ble Members arc aware thst the Third Level Air Service has already started functioning in the North-Eastern Region.

63 Non-Plan expenditure has betm subjected to careful scrutiny to keep it to the minimum. Defence expenditure is estimated at Rs. 4200 ciorcs ns against Rs. 3800 erorcs in the current year, j Hrn s,uie the House will agree wi'h me that in these ilifficnll times the reasonable requirements of defence should be fully met,

64. A provision of Rs. 3124 crores is being made for interest payments as against Rs. 2665 ciores in the current year, the increase being mainly on account of internal debt. Due to the nurease in prices ol naphtha and other inputs, the cost of production of indigenous fertilisers has also gone up, The cost oi imported tertiliscis has also increased. Accordingly, the Budget tor 1981-82 provides lor a higher subsidy on fertilisers of Rs. 679 crores as against Rs. 466 crores in the current year.

65. Provision for non-Plan loans to public sector under- takings has been reduced from Rs. 454 ciores in the current year to Rs, 318 crores in view of the anticipated improve- ment in their performance and financial position in the next year. A lump sum provision of Rs. 200 crores is also being made in next year's Budget to cover the incidence of addi- tional expenditure on dcarness allowance to Central Govern- ment employees. In future, dearncss relief to pensioners will be paid at the rate of 2.5 per cent of pension for each 8 point rise in the consumer price index instead of at the trite of 5 per cent for each 16 point rise as at present. The procedure for payment of dcamess relief lo pensioners is also being streamlined. These changes will ,mitigatc the hardships faced by pensioners.

66. Hon'ble Members are aware that India will have the piivilcgc of holding the next Asian Games in 1982 in the capital. The expenditure necessary next year for the games is being provided in the budgets of the Ministries concerned. Mo>t or. the expenditure will be on improvement and creation of permanent assets like roads, stadia, and other sport-, facilities,

67. The total non-Plan expenditure for 1981-82 is esti- mated at Rs. 15100 crores compared wiih Rs. 13 736 crores in the current year.

68. As regard^ re:cipts for 1981-82, the gross tax revenues til the existing rates of taxation are estimated at Rs. 14472 ooies compared with Rs. 13133 crorcs in the current year, showing an increase of Rs, 1339 crorcs over the R-.vised estimates, The State-,' share of taxes in 1981-82 is esti- mated at Rs, 4206 crores conipaicd with Rs. 3792 crores in the current year Consequently the Centre's net tax lcvcntie will be Rs, 10266 crores i.s against Us. 9341 crore-, in th; emrcnl year.

69. The receipts hom market lo.ins arc estimated at Rs. 2800 crorcs compared with Rs, 2604 ciores in the curret.t year. Small savings arc estimated to yield Rs. 1250 crores next year compared with Rs, 1100 crorcs in the current year. External assistance, irct of loan repayments is estimated at Us. 1379 croi.es as computed w-jlh Rs. 1258 crores in the current year. A credit of Rs. COO ciorc, has also been taken lor receipt from sale of Special Bearer Bonds in ths next financial year.

70. Taking into accr nt the effect of the changes in the fare and freight rate=i of railways, change in the P&.T tarilT to which I will refer a little later and the continuance; of the Compulsory Deposit Scheme for Income-tux Payers be- yond 31-3-1981, the total receipts fji 1931-82 are estimated at Rs. 23061 crores, The total expenditure for next y:ar h estimated at Rs. 2-1871 crous. The ovcrr.ll budgetary gap ft the existing rate? of taxation will thus be Rs. 1810 crores.

PART B

71. Income-tax and other direct taxes are important in- struments for raising resources and reducing disparities. We propose to achieve these objectives by plugging of kgnl loopholes and effective administration rather than by en- hancement of rates which often leads to tax evasion end generation of black money. My proposals are also designed to further our Party's avowed policy of affording relief to the middle classes in these difficult times.

72. Hon'ble Members will recall lhat last Vcnr the exemp- tion limit for income-tax on personal incomes was raised to Rs. 12,000. But the nil slab rate was retained at Rs. 8,000. The House will be glad to know that I propose to raise the exemption limit for income-tax in the case of non-corporate taxpayers other than registered firms and Hindu undivided families with one or more members having separate income exceeding the exemption limit, from Rs. 12,000 to Rs. 15,000. With a view to providing significant relief to middle income

groups, I further propose to raise the nil rate slab from Rs, 8.000 to Rs. 15.000 and also restructure the rate schedule up to Rs. 30,000. The rate of income-tax on the slab of Rs. 15.001 to Rs. 25,000 will be 30 per cent, and on the slab of Rs. 25,001 to Rs. 30,000, 34 per cent. The rates of income-lax on higher dabs will remain unchanged. As a result of these changes, about 14 lakhs of taxoayers will go nut of the income-tax net. I venture to claim thut never have so many people been freed from the burden of income taxation at one stroke. Apart from this, another 11.5 lakhs of taxpayers in the income brackets of Ra. 15,001 to Rs. 30,000 will also get varying degrees of relief. Trie re- duction in the tax liability at income level of Rs. 15,000 will be Rs. 990; at Rs. 20,000, Rs. 495 and at Rs. 25,000, Rs. 220. There will be no change in the tax liability in the ca"e of taxpayer! having income exceeding Rs. 30,000. Thus I have provided in one year income-tax exemption and/or reduction to over 25 lakhs of income-tux assessees out of about 40 lakhs of assessces in the country.

73. At present, salaried taxpayers are entitled to a standard deduction in an amount equal to 20 per cent, of the salary up to Rn. 10,000 and 10 per cent, of the balance •subject to an overall ceiling limit of Rs. 3,500. These limits were fixed in 1974. In view of the subsequent rise .in prices and as a means of relief to salaried taxpayers, I propose to enhance the rate of standard deduction to 20 per cent., sub- ject to a higher ceiling of Rs. 5,000. Hon'ble Members will bo happy to know that this benefit will be applicable to pensioners also. At present, employees in receipt of conveyance allowance are entitled to a standard deduction of Rs, 1,000 only. It is now proposed that they should be given the beneiit of full standard deduction.

74. In view of the urgent need to raise the level of savings in the economy, I propose to continue the Compulsory De- posit Scheme for Income-tax Payers for another two years.

75. The corporate sector has a crucial role to play in the growth of the national economy. I have earlier in my speech referred to the various steps taken for improving the climate for investment in industry. I now propose to reduce by 5 per cent, the surcharge on income-tax payable by all clas- se" of companies i.e. from 7.5 per cent, to 2.5 per cent. This will add to the internal availability of funds in the corporate sector and should improve the scope for investment financing from their own resources. This step will reinforce the im- pact of the measures which I have indicated earlier for mobilising financial resources foe industrial investment.

76. As Hon'ble Members are aware, all categories of taxpayers arc required to pay advance tax on pay-as-you- earn basis. Surtax is, however, not payable by companies in advance. I propose to remove this anomaly and provide that surtax will also be payable in advance during the finan- cial year preceding the relevant assessment year.

77. The Eleventh Schedule to the Income-tax Act con-

tain* a list of industries which do not qualify for specified investment related tax concessions under the Income-tux Act For example, investment allowance or tax holiday is not admissible in respect of these industries unless they are in the small-scale sector. Industries included in this Schedule were originally considered to be of low priority. However, on reviewing the list, I do not find any justification for treat- ing many of the listed industries as of low priority. Accor- dingly, 14 groups of industries will be removed from this Schcdul" and will now become eligible for

78. Hon'ble Members will recall that the Government had tiken several measures last year to curb tho use of private discretionary trusts as a device for tax avoidance. Another tax avoidance device that has come to the notice of iho Government is the creation of oral trusts. With a view to checking this abuse, I propose to subject oral trusts to income-tax at the maximum marginal rate and to wealth-tax at the flat rate of 3 per cent, or at the appropriate rate applicable in the case of an individual, whichever course is more beneficial to the revenue. This proposal will take effect from the assessment year 1981-82.

79. Another device being u*cd fur avoiding proper tax liability is the creation of associations of persons without defining the shares of members. Thii enables the creation of a laige number of taxable entities which, under the exist- ing law, will be chargeable to income-tax separately. I now propose that such associations uf persons be charged to income-tax at the maximum marginal rate and to wealth-tax at the flat rate of 3 per cent, or at the appropriate rale applicable in the case of an individual, whichever is lusher. This proposal will also take effect from the assessment year 1981-82.

80. Earlier in my speech, I have ref cried to the prospec- tive participation of foreign companies in the field of oil exploration and production. In this connection, it is neces- sity to take scveial steps relating to tax mattcis. Hrs;ly, it is proposed to extend the Income-tax Act and the Com- panies (Profits) Surtax Act to the off-shore areas. Secondly, It is proposed to insert suitable provisions in the Income-tax Act and the Companies (Profits) Surtax Act to enable the Central Government to provide, by a notification in the Official Gazette for an exemption, reduction in rate or other modification in respect of Income-tux or surtax in favour of any class of persons engaged in the business of mineral oils and gas in association with the Central Government or any person authorised by it. Notifications under the new provisions when made will be placed on the Table of both the Houses of Parliament. It is also proposed to amend section 42 of the Income-tax Act relating to special provision for deductions in the case of business of the piospectina for or extraction or production of mineral oil3 so as to extend its scope to cover cases where the Government itself does not participate in such business but does so through any person authorised by it.

81. While the search for additional quantities of oil should continue with unabated vigour, there is also an urgent need to accelerate the development and use of renewable energy resources and to promote their utilisatiun. The renewable energy sources which have already been biought to the threshold of commercial use by our scientists and engineer! include solar, bfomass and wind energy. Some fiscal Incen- tives to promote use of these noii-convenlional forms of energy aro called for. I, therefore, propose to enhance the depreciation allowance on machinery or plant installed for manufacturing renewable energy devices and systems from 10 per cent, available at present to 30 per cent. Depreciation on renewal energy devices and systems used for business nr profession will also be allowed at the enhanced rate, Other measures under contemplation by the Government include loans to the relevant industries on suitab'e terms from finan- cial institutions and exemption from certain taxes and duties,

82. 1 had earlier in my speech referred to the imperative need to promote our exports in view of our difficult balance of payments situation. To encoiuajre establishment of export-oriented industries in the Free" Trade Zone, the Government proposes to allow complete tax holiday in res- nect of units set up in these Zones for an initial period of five years in lieu of other concession.¹*.

83. Tea is one of our important export-oriented industries At present, development allowance equal to 50 per cent, of the exnenditurc incurred on nlnntation of In bushes in any new area or on any Innd which has been previously aban- doned is allowed in computing the income from tea business. For thi* purpose, the expenditure qualifying for develop- ment allowance is restricted to Rs. 12.500 per hectare of land situated in hilly arens and Rs. 10,000 ner hectare In other areas. Having regard to the increase in th~ cost of planting m recent years. I nronof; frt raise these ceiii'ntr limits to Rs. 40,000 per hectare of land situated in DariecHng

district Rs. 35,000 per hectare in respect of land situated in other hilly areas and Rs. 30,000 per hectare in plains.

84. Under section 35B of the Income-tax Act, domestic companies and non-corporate taxpayers resident in India Hre entitled to a weighted deduction in the computation of the taxable profits at the rate of one and one-third times the amount of qualifying expenditure incurred by them on development of export markets. The scopa of this provi- sion was curtailed last year as it had been misused for claim- ing a weighted deduction in respect of expenditure incurred in Indja on activities which had nu direct relation wilh the basic objective of development of export markets. In order to guard against such misuse, while at the same time protec- ting all legitimate effort at export market development, the Government is framing rules which will identify a number of specific activities to be allowed under section 35B. The necessary notification in this behalf will be issued shortly.

85. Electronics is both a labour-intensive and export-orien- ted industry. I, therefore, propose to include the electronic component industry in the Ninth Schedule to the Income-tax Act and provide that dividends derived by a domestic com- pany from an Indian company engaged exclusively in the manufacture of electronic components will be completely exempt from income-tax.

86. The small-scale industrial undertakings enjoy certain tax concessions under the Income-tax Act. For this purpose, an industrial undertaking is regarded as a small-scale indus- trial undertaking if the aggregate value of the machinery and plant installed therein as on the last day of the previous year does not exceed Rs. 10 lakhs, I now propose to raise this limit to Rs. 20 lakhs in line with the new definition of a small-scale Industry.

87. Under the existing law, in computing taxable income, a deduction equal to 20 per cent, of the profits and gains derived from the business of publication of books is allow- ed. I propose to extend this concession for a period of five years with effect from assessment year 1981-82.

88. At present, approved financial corporations and public housing finance companies are entitled to a deduction in respect of the specified percentage of income carried to special reserve, subject to certain conditions. The aggregate of the amounts qualifying for such deduction is. however, subject to an overall ceiling equal to the amount of the paid- up share capital. In order to enable such corporations and companies to built im such rcservea further, I propose to double the present ceiling.

89. Under the existing law, resident individuals and Hindu undivided familes arc entitled to a deduction in respect of medical treatment of physically or mentally handicapped dependants. I propose to double the amount of this deduction to Rs. 4,800 in respect of a dependant who is hospitalised for a period of 182 days or more during the relevant account- ing year find Rs. 1,200 in other cases. The House will doubt- less welcome this concession being given in the International Year for (he Disabled Persons.

90. I propose to givc some significant concessjions under the Eslat: Duty Act. The present limit of Rs, 50,000 for estate duty was fixed in 1958. f propone to raise it to Rs. 1.5 lakhs ihe same as under the Weal.h-tax Act. I also propose to provide that one residential house or part thereof will be valued for estate duty purposes on th" same basis as for the purposes of weal'h-tnx. Since the Estate Duty Act can be nmpnded only with the concurrence of State Legislatures, a Bill for giving effect to these proposals will be introduced later,

91. I propose to make certain amendments in the income- lax Act to upgrade the qualifications for appointment as mem- bers of the Income-tax Appellate Tribunal.

92. Other amendments to Ihe direct lax laws are of minor significance. I would not like to take up the time of the House by referring to them in detail here.

93. The reduction in the rates and other concessions in iespcc; of income-tax on personal incomes would result in a loss of K", 146 crorcs in a full year and Rs. 115 crores during 1981-82. Having regard to the pattern of sharing of income-tax between Centre and States, these concessions will entail a loss of revenue of Rs. 29 crorcs to the Centre in 1981-82. The loss of revenre on account of re- duction in the rates of corporation tax and other concessions to companies will largely be balanced by the payment of surtax in advance by companies. I am, therefore, not assuming any lcs" of revenue on this score for 1981U82.

94. I now turn to my proposals on indirect taxes. My basic approach is that additional revenue should flow largely from increased production. However, there is need to mobiliiw additional resources to finance the Sixth Plan. While seek- ing to raiyj additional resources, I have nevertheless kept in mind the imperative need to avoid hardship to the middle and poorer sections of consumers and to provide a larger measure of relief to the small-scale sector of our industry.

95. Taking Customs duties first, my principal proposal relates to auxiliary duties of customs. This duty has been levied on an annual basis since the 1973 Budget. While conti- nuing this levy I also propose to raise the rates of auxiliary duties as a measure of additional resource mobilisation. In recent years We have been following a fairly liberal import policy. The difficult balance of payments outlook points to the need for conserving foreign exchange. The tariff mechanism judiciously used, can help conserve foreign ex- change and also raise some revenue. I, therefore, propose to in:reasc the rates of auxiliary duties by 5 per cent ad valo- rem on all categories of imports with a few well-merited excep- tions. This will obviate a sharp increase in the landed cost of any particular article.

96. Auxiliary duties of customs are now leviable on im- ported goods broadly on a three-tier basis. Items subject to a basic duty upto 60 per cent ad valorem, for example basic raw materials, bear an auxiliary duty of 5 per cent ad valorem; on items such as semi-processed goods and inter- mediates, where the rate of baiic duty Is 60 per cent ad valo- rem or above but less than 100 per cent, the rate of auxiliary duty is 15 per cent ad valorem; and where the. rate of basic duty is 100 per cent ad valorem or above such at on finished and consumer goods, the rate of auxiliary duty is 20 per cent ad valorem. In other cases the rate of auxiliary duty is 5 per cent ad valorem, except crude petroleum on which the rate is Rs. 9.50 per metric tonne. There are HISO some Items which are fully exempt from auxiliary dutv, Mv proposal is to increase the rate of auxiliary duty to 10 per cent ad valorem wherever the rate- of auxiliary duty is now 5 per cent to 20 per cent ad valorem wherever the rate is now 15 per cent; and to 25 per cent ad valorem wherever the rate is now 20 per cent. I do not, however, propose to increase the auxiliary duty on crude petroleum.

97. Tn line with the approach I have explained. I propose to withdraw the present full exemption from auxiliary duties of customs in respect of certain Items of capital equipment and subject them to auxiliary duty of customs at the rate of 5 per cent nd valorem. This increase would cover, among other things, imports of machinery ns 'project imports' as nlso items of machinery on which the concessional rate of 25 per cent nd valorem is applied. This measure would, anart from yielding additional revenue, afford some addi- tional protection to the indigenous machine building industry which hns, of late, had to face a significant escalation in input costs.

98. T said earlier that I would exclude some 'terns from the proposed increase in the auxiliary duties of customs Imports of essential items like edible oil will be exempted from the proposed increase. Bulk oetroleum products such ns kero*etle and hiph speed diesel oil nnd iteel imported for buffer stock operations will also not attract the Increased levy. Items on which import duty rates hav" been changed

in (he recent past with a view to maintaining parity with prices ot domestic products hjve also been kept out of Lhc purview of the increased levy. Further, keeping in view oui commitments under lhc General Agieemcnt on Tarill.¹) and Trade. 1 propose to {{ivc up the auxiliary duty in res- pect of three ilems involving a small revenue scanflc. Fur- ther details of the proposals are available in the Budget Papers,

99, These proposals are expected to yield an additional

revenue of about Rs. 250 crores.

100. My next proposal relates to levy of import duty on newsprint. At present this item is fully exempt. There is u large foreign exchange outgo on imports of newsprint. There is no reason why this commodity should not bear a moderate rate of customs duty, 1, therefore, propose to impose an effective customs duty of 15 per cent ad valorem on imported newsprint. 1 expect this measure to yield an additional revenue of about Rs. 21 orores.

101. Imports of stainless steel bars and wire rods now attract a duty of 75 per cent because they have industrial applications. But there is reason to believe that some of these imports are being diverted for rerolling into strips and sheets used in the manufacture of utensils, 1, therefore, pro- pose to raise the effective customs duty on stainless steel bars, rods and wire rods from 75 per cent to 175 per cent ad valorem. 1 have, however, taken care to sec that this in- crease does not affect imports of stainless steel wire rods which are used for the drawing of wires. This measure is expected to yield an additional revenue of Rs, 5 crores.

102. I also propose to raise the basic customs duty on plain shaft bearings from 60 per cent to 100 per cent ad valorem. This increase should help to restrict large scale imports of bearings such as thin-walled bearings, which have been affecting the indigenous industry. This proposal is expected to yield an additional revenue of Rs, 2,75 crore.'. On similar considerations it is proposed to raise the basic customs duty on computers and computer peripherals from 40 per cent to 50 per cent ad valorem. The likely revenue gain from this increase would he Rs. 1 crore.

103. T will now come to excise duties. The House will recall that in 1978 the Additional Excise Duties (Textiles and Tcxt:le Articles) Act was passed, in terms of which an addi- tional dutv excise was levied on certain textiles and textile articles at 10 per cent of the basic excise duty leviable. The revenue from this excise levy was intended to meet the expen- diture incurred by way of subsidy on controlled cloth. The production of controlled cloth is being stepped up. with em- phasis on larger production of dhotis and sarees which are of specinl significance to the poorer sections of society, particu- larly in rurnl areas. As a result, the provision for subsidy under this scheme would rise to nearly Rs. 100 crores in the coming year. The revenue at the existing rate of additional excise duty is only about Rs. 66 crores. f, therefore, propose to raise the rate of additional excise duty frqm 10 per cent to 15 per cent of the basic excise duty on all the items which are now covered by the levy. This would yield an additional amount of about Rs. 33 crores nnd help finance the increase outlay on controlled cloth.

104. As regards special exciae duties, I propose onlv to continue them at the existing rates. The exmptions in force are also beinc continued,

105. My remaining proposals under Union excise duties are mainly designed to achieve simplification and greater clarity.

of fra-me-filling, dipping splints in irulch composition, box making, box filling, labelling and banderollinfi and packaging. It such units use power fur any of the above process, they will be liable to a duty rate of K". 5.50 per gross boxes, which would be intermediate between the rate of Rs. 7.20 applicable to the i'ully mechanised sector and Rs, 4.50 now applicable to the non-mechanised middle sector, I would like to stress that this iu nut intended as a revenue measure, It is intended only to protect through the excise mechanism, the employ* ment potential of 'ho non-mechanised sector.

107. With a view to preventing the possible infiltration of Ihe middle sector into the co tage sector and in order to ensure that the benefit of the lowest rate of duty accrues 10 genuine cottage sector units, it is proposed to reimpooe a coiling on the clearances by cottage sector units at conces~ sional rales. The new ceiling, which is proposed to be fixed Vt I2f> million matches per unit per annum, is much more liberal thin the ceiling of 75 million that existed prior to the 1980 Budge;. The pnttern of production and clearance will be kept under watch and this ceiling will be reviewed if circum- stances to warrant. The changes 1 have propound are fair (d all segments of the industry and are designed to promote both employment and production in the best possible mnnner.

108. Another rationalisation measure relates to the con- cession available to manufacturers of goods falling under Tariff Item 68, who undertake work On 'job' basis. Under the present scheme, duty is being effectively collected only on the 'job charges' paid by the principal manufacturer to the job worker. In the operation of the scheme, however, swveral difficulties have been experienced particularly on the question of what is 'job work'. There have been cases where some manufacturers have taken undue advantage of the concession, I, therefore, propose to replace the present scheme by one in whkh, instead of levying duly separately on the job charges raid

109. I aho propose to rationalise the Central Excise tariff entry nnd the rate structure relating to tvres with a view to making the legislative intent clearer and minimising the scope for disputes in classification and assessment, particu- larly in regard to ofT-the-road tyres uced in bulldozers, scrap- pers nnd other earth moving equipments. While proposirjK itic necessary amendments, I have t^ken care to maintain the existing rates of duties and d'lty concisions in respect of tyres both for agricultural tractors and their trailers.

110. The other major area where rationalisation of the tariff entries has been proposed is in regard to non-ferrous metals under the respective entries in the Central Excise Tariff. There has been considerable debate and dis-puto on the question of assessment of waste and scrap of these metals. To set these at rest it is proposed to specifically cover waste and scrap of these metals under the respective tariff en'ries,

111. In addition to (he above, a few other amendments to certain tariff entries as also the insertion of a separate tariff item for polyester film have been cronosed. The details of these changes may be so?n from the Budget papers.

rate from Rs. 21.00 to Ri. 21.25 per thousand. The overall revenue from cigarettes will remain practically unchanged. There should, therefore, be no justification for manufacturers to mark up ihe prices of cigarettes. With these changes, the overall ratio between the yield from basic and special excise duties on the one hand and additional excise duties on the other ia expected to improve to 2 : 1 taking the three items sugar, tobacco and textile;.' together. This will result in a transfer of about Ks. 21.72 crorcs from revenues under Central Excise to the revenue under additional excise duty.

114. 1 have also a minor proposal which is basically of interest to the State Governments. Under the Medicinal and roilct Preparations Act, 1959, excise duties are leviable on mtttactnes and toilet preparations which contain alcohol, narcotics and narcotic drugs. Certain changes have been proposed in the Act with a view to effecting a switch over to the metric system and also to eliminate avoidance of duty in certain casca The changes proposed, however have very little revenue significance.

115. I shall now turn to concessions in the area of indirect taxes. This Government is committed to the pursuit of a vigorous policy of promoting small scale industry in the interest both of employment and broader development of entrepreneurship. Accordingly, I propose to increase the duty exemption limit under the general scheme of excise duty concessions applicable to 72 excisable commodities from Rs. 5 lakhs in terms of value of clearances to Rs, 7.5 lakhs. Clearances in excess of Rs, 7.5 lakhs will continue to benefit from the existing concessional duty limited to three-fourths of the applicable rates of excise duty up to a clearance of Rs. 15 lakhs in a financial year as at present. This measure should benefit a substantial number of small manufacturers and enable them to compete more effectively with large units. I am sure that all sections of the House will welcome this enlargement of the scheme of conces- sions enjoyed by small scale industry.

116. Under the excise duty concessions available at present to small manufacturers of tome products, notably Item 68 goods and specified electronic goods, one of the criteria for eligibility is the value of investment in plant and machinery. I propose to increase the eligibility limit of such investment from the present figure of Rs. 10 lakhs to (Rs. 20 lakhs, in line with the revised definition of 'small scale units' under the new Industrial Policy. Here ngain I am confiden' that my proposal wil be welcomed by all the Hon'ble Members.

117. In the last Budget I had announced wide ranging duty concession^ with a view to encouraging the development of the electronics industry. As a further step in this direction, 1 propose to extend the scope of the import duty concessions so as to cover 59 new items of capital equipment and 23 new Items of raw materials and components used by the electro- nics industry.

118. At present, the handloom sector of the woollen industry does not enjoy any special duty concessions. This sector has a good grow'h potential. I, therefore, propose to reduce substantially the processing stage duty on woollen fabrics produced on haridlooma on the lines of the concessions which are available to co'.ton fabrics produced on handlooms.

119. 1 also propose to extend the concessional import duty of 25 per cent ad valorem to a few more important drug inter- mediates. This step should induce indigenous manufacturers to go in for production of more basic drugs.

120. Last year, I had fully exempted cotton and cotton- viscose blend hosiery from excise duty. T now propose to extend this exemption to all hosiery articles falling under Item 68 of the Central Rxcise Tariff.

121. Another duty concession relates to 'flocked' fabrics where the excise duty is being reduced from the present level of the base fabric duty plus 30 per cent ad valorem to the base fabric duty plus. 15 per cenl ad valorem On the considera- tion that the present duty burden is heavier than warranted, particularly on dock-printed fabrics. Further, DO colour

1399 01/80—4

scanners for the printing industry, the basic customs duty is being reduced from 100 per cent ad valorem to 60 per cent ad valorem.

122. In this International Year of the Disabled, it is fitting that appropriate tax relief measures should be extended to our handicapped brethren. Artificial limbs and rehabilita- tion aids for the handicapped are already exempted from Central excise duty under Item 68. I now propose to exempt fully from excise dutv Braille watches for the use of the blind.

123. I also propose to exempt from excise duty Braille paper which is necessary for printing books for use by tho blind.

124. I further propose to substantially reduce the customs duty on hearing aids and Braille watches imported for personal use by post or air.

125. The increased levy of auxiliary duties of customs to which I have earlier referred will not be applied to Roods such as orthopaedic appliances, Braille watches and parts, tricycles for the crippled, hearing aids and parts. I am sure that this House will wholeheartedly endorse these proposals.

126. The variou8 concessions and reliefs in excise and customs duties which I have announced will entail a sacrifice of revenue of Rs. 9.35 crores in a full year.

127. My taxation proposals will yield a sum of about Rs. 35.57 crores in a full year by way of excise duties and R'.v 285.00 crores by way of customs duties. The concessions I have announced add up to Rs. 7.05 crores on the excise side and Rs. 2.30 rrores on the customs side. The net yield is, therefore, Rs. 28.52 crores from excise duties and Rs. 282.70 crores from customs duties. The accrual to the Central Ex- chequer in a full year will be Rs. 300.50 crores.

128. I hope it would not have escaped the notice of Hon'ble Members that this is perhaps the first Budget In recent years in which no increase has been effected in excise duties for raising general revenues.

129. I would now like to say a few words on behalf of my Hon'ble colleague, the Minister of Communications. A substantial programme of development of telecommunication facilities is envisaged during the Sixth Five Year Plan, It is, therefore, appropriate that the Department should generate internal resources to a reasonable extent for financing Its Plan. The additional dearness allowance sanctioned to em- ployees and other Increases in the cost of operations have already eroded the existing surplus of tho Department. It has, therefore, become necessary to revise certain telecommuni- cation tariffs. At present the rate of telephone call charge in measured rate telephone system is 30 paise per call unit for calls exceeding 250 but not more than 1750 in a quarter. Tt is proposed to increase this charRe to 40 paise per call unit. The manual trunk call charges for calls of ordinary category for a unit period of 3 minutes in the distance slabs of 100 to 200 kilometres are being increased from Rs, 6 to Rs. 8 and in the distance slab of 200 to 500 kilometres form Rs. 10 to Rs. 12. These measures are estimated to yield Rs. 35,78 crores in a full vejr. The additional revenue during 1981-82 will be of the order of Rs. 20 crores and has been taken into account in estimating the receipts of Posts and Telegraphs. Tt is also proposed to increase the rates of deposits for telephone connections under 'Own Your Telephone' system. This revision will yie'd about Rs. 5 crores to the Government by way of additional deposits in 1981-82. The details of these revisions are shown in a memorandum which is bcinR circulated along with the Budget papers. The changes will be (riven effect to from a date to be notified after the Finance Bill is passed by Parlia- ment. There will be no change in either rostui or telegraph rates.

130. T had earlier stated that the resources qap estimated at existing rates of taxation is Rs, 1810 crores. The various tax measures I have presented, together with the reliefs offer- ed will yield net additional revenue of Rs. 271 crores to the Centre This leaves an uncovered deficit of Rs. 1539 crores. This deficit may appear Irrge. but taking ii total view of the economic situation I be*ieve tt Ii within the limits

131. Mr. Speaker, Sir, the economic situation remains difficult and yet full of great opportunities for development and growth, I have tried to present a Budget which gives maximum support to forces that can move us forward on the path of growth wjth stability and social justice. It sets the stage for all of us to work towards the achievement of our economic and social goals so clearly laid out in the Sixth Plan. Economic policy can only do this much. Hard work, discipline and the innate good sense of the people of this ancient land must do the rest.

132. Sir, I commend this Budget to the House.

A. C TIWARI, it. Secy.

of fiscal prudence. The Inflationary potential of the Budget must be viewed in the context of the full package of policy measures which I have outlined. This package contains many incentives for higher production and increased utilisa- tion of capacity. This should stimulate a considerable supply response during the coming year and as I have mentioned, signs of this upturn are already evident I attach great im- portance }o expanded supplies a3 the critical element in keep- ing inflationary pressures in check. The package also con- tains important incentives to savings which will undoubtedly help in this regard. Furthermore, monetary and credit policies will be so designed M to ensure that Government ici-oursc to deficit financing takes place within a balanced and measured overall expansion of credit in the system.

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