REGISTERED NO. D. (D.N)-72
The Gazette of India
EXTRAORDINARY
PART I—Section 1
PUBLISHED BY AUTHORITY
No. 34] NEW DELHI, TUESDAY, MARCH I, 1983/PHALGUNA 10, 1914
Separate Paging is given to this Part in order that it may be filed as a separate
compilation
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(1)
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18 THE GAZETTE OF INDIA ; EXTRAORDINARY [PART 1—SEC. 1] 19 20 THE GAZETTE OF INDIA : EXTRAORDINARY IPART 1—SEC. 1JMINISTRY OF FINANCE
(Department of Economic Affairs)
(.Budget Devisioii)
BUDCiET 1983-84
Speech of Minister of F; nance
On 28th February, 1983
New Delhi, the 1st March, 1983
(Part A)
No. F. 15{l)-lHD)/83.—(1) 1 riae to present tlic Budget for the year 1983-84.
2. The Economic Survey tor 1982-83, placed befoic the House a few days ago, has given a detailed account of the trends in Indian economy during the current year. I shall, therefore, be brief in reviewing the economic situation,
3. A drought year is always a difficult one for the economy. The decline in agricultural production that the di ought entails has an ellect which goes beyond the rural sector. '1 lie drop in the purchasing power of our faimers exerts a dcflationuiy influence on industry. The drought also affects power genera- tion and has an adverse impact on tne external paymeuls. It reduces the resource base and at the same time it calls for an increase in relief expenditure. The performance of the Indian economy in the year that is ending has to bo viewed against this background. That we have conic through it without too much damage to our productive structure and achieved remarkable success in containing price inflation is a tribute to the resilience of our economy. It alsp demon- strates the effectiveness of our policies of continued demand restraint and judicious supply management.
4. Although the growth in gioss domestic pioduct this year will bo lower than it has been In the two previous years, we will achieve an average growth rate of nearly 5 per cent over tho three years, which is close to the target we set ^or ourselves in the Plan. At the same time, we hme been able to maintain the tempo of investment. In other words, Nerious as has, been the impact of drought, I believe we have not allowed it to affect the puce of development.
5. Let me now recapitulate the main highlights of the economic situation in 1982-S3. On a point-to-point basis, the increase in the wholesale prices i'l the last week of January was 3 per cent compared with the unmial rate of inflation of 5.7 per cent at the same time last year. The annual rate of increase in the consumer price index, as of December 1982, was also significantly lower 8 per cent as against 12.7 per cent in December, 1981. The lower late of inflation this yeat is particularly noteworthy considering that wholesale prices had increased on an average by 2.4 per cent per month in June and July 1982 because of speculative pressures geneiated by the delay in the monsoon. However, as u result of an appropriate mix of demand and supply management policies, the situation was speedily brought under control.
6. Monetary policy continued to bo deployed flexibly. The emphasis was on the need for restraint while at the same time it sought to meet productive requirements for credit. On the supply side, action was taken to build up stocks and improve availability of foodgiains through timely imports. Procurement efforts were stepped up so that the impact of a fall in tho kharif output on stocks of foodgrains could be minimised. Higher releases of sugar and edible oils were also arranged. These and other supply management policies contri- buted significantly to the dampening of inflationary picssuies after August 1982.
7. As I have so often emphasised in this House in le&pect of the piiee situation, there can Bo no loom for complacency. The supply and demand situation in respect of sensitive commodities remains in delicTte balance. While we haie successfully weathered the immediate impact of the dioiight, we must remember that its effects are likely to be spreod ovci a longer period than one season or one year. The inter- national situation continues to be full of uncertainty ;:nd should there be a resurgence of inflation abroad, putticulaily in respect of commodities lhat we import, it could easily disturb our domestic price situation. We must also remain vigilant against anti-social elements, hoardcis and black marketeers.
8. The kharif foodgrains production will be lower than last year because of adverse wca'her conditions. Tho indications, however, are that the iebi production may be somewhat better than last year. The output of cotton is likely to he close to the level of last year, while some decrease is ex- pected in sugarcane and iute production. The target of 2.35 million hectares for increase in the irrigation potential in 1982-83 is likely to be icbieved. While the agricultural sector continues to be influenced by the \agarics of the weather, over the long run, we have been able tc. increase output significantly and to reduce the disruptive "fleets of a drought on the economy. This has demonstrated the basic soundness of our agricultural strategy of extending (he irrigated aieas, encouraging the use of fertilisers "nd high yielding varieties,! widening the credit network, and ensuring fair and icmunc- rative producer prices for tho major crops.
9. Industial production increased by 8.6 per cent in 1981-82. In the current year, the increase is likely to be about 4.5 pej cent. For the period, April to December 1982. impressive increases wcie wcoided in inspect of critical industries, M UI as crude petroleum, which Increased by 30.6 per cent, cement
21(10.2 i>er cent), fertilisers (9,6 per cent), and power Generation (7.2 per cent). It is particuiaily hcmlening thai thermal generation has shown substantial improvement and the plant load fgcloi of thermal plants has also improved fiom 45.9 per cent during April—December 1981 to 47.6 per cent this >car. Sugar production is expected to be close to the leeord level uf last yoar. The oveiall rate of giowth in lndustii.il production was, howevci, adv-isely affected by a shaip diop in output of cotton cloth and yain. Certain other seetois of industry also showed lciaiivcly low lates of growth because of slack demand or factois such as power constraints piuii- culaily in areas dependent on hydio-electricily.
10. Over the last ihiity years, significant pi ogress has betn made in expanding mid uivchifyini? our indusliial sliucuro. *The investment climate is highly favourable and capital Issues during the yeal have leached a lecoid level. However, in order to accelciatc nnd sustain a higher giowth late of pio- duction, it is essential ,that (he corjorate sector should puj greater aticntion to impioving its ov\n rate of savings In better utilisation of capaci'v and economy in conspicuous and wasteful expenditure, li tlie increasing requhements of hinds for investment aic to lie adequately nut, the coipotato sector must learn to look to",aids a l.ugor voKimc of intcinal generation of Iesonri.es. Bni,owing um only supHi-mcnt and not substitute corpoialc savings.
11. It is also essential to improve the productivity of p.jst investments and reduce costs. Capital costs in the economy have inci eased, and due to delay in the implementation i,i projects, there is a decline in tho returns that the community can legitimately expect from in investment,, In inspect of the public sector, the Government has initiated steps to monitor closely project implementation nnd operational effi- ciency. As Hon'ble Membeis are aware Iheic lias been a marked improvement in the working of many public sectui enterprises though some units continue to face piohlcms. Net profits of public sector units in the firs I nine months of this year increased to about Rs. 360 crores compaied with Rs. 134 crores during (he same neiiod last yew.
12. The piocCss of building up the financial infruRtrueluie continues apace. The bunking system has been eMcndmg its coverage to the lural arcus, moie rural banks have been opened and the National Bank for Agricultiue and Ruial Development has commenced operations, All this would help to extend further the benefits of the institutional ciedit to tho rural sector. Considerable progress1 has also been achieved in extending insuuuice to ruial aicas.
13. In tho past few ysais, our balance of payments situation has been a matter of concern. In my budget \neech last year, 1 had taken the opportunity to indicate the Government's strategy for restoring the viability in our balance of payments in the medium term. Briefly, the main elements of the stuitegy are to accelerate the pace of import substitution in ciitical sectors such as oil and fertiliscis, to increase e\poits, and tu improve the facilities available for remittances and investments by non-residents of Indian origin. The House would be hapny to know that we have achieved considerable siicces-, in implementing this stiategy.
Used to provide further protection to indigenous- industries, wherever appropiiatc.
15. Exports, which increased by 16 per ten I in 1981-S2, have shown a fuithcr giowth at 18 per cent in the first seven months of 1982-83. 'Ihis is good peiJormance consi- deirag the uncongenial external cnviionmciil maiked by lisine pioteclionism, demand recension and neai stagnation in wor'd liaUc. The trude deficit is likely to be lovvei in 19is2-M3 The lute of decline in our receives, excluding International Monetuiy Fund transactions, has also come down and has uveiagcd Rs. 91 cioies per month in this financial year up 10 end of January 19K? eompaied with Rs. 175 crores per month dming 1981-82.
16. Our balance oi payments adjustment has, howc\ei, been made mote difficult by an unfavouiable inlLin.itionul cnviion- ment chaiaelerised by lack, of political will in industrialised countries lor economic cooperation It is necessary that in association with the developing nnd other norj-align.-d coun- tries, we continue to woik for basic rcfoim in the inter- national financial and ti id:u;> s>slem. India also has had to bear a dispiopoitiomite ieduction in its shaie of con.essioiuil (lows. In this situation, while lecouise to a teitain amount of commercial loans is unavoidable, ue have to be e*J emely circumspect in relying upon this sou ice ;
17. Hon'ble Membcis .ue uwaie oL thi jjeopolitrcal situation in the region and tho 'ncreasing burden cast upon IK because of the thteat |o our national security. No sacufiLC is too great where the nation's v-ecaiity is concerned. At the bamc time, we cannot affoid to slacken the development effoit, however onerous the last may be, as in the ultimate analysis, the nation's security rests on its economic stiength. Despite a difficult icsource situation, 1 am happy to inform the House that we were able to achieve a substantial step up in the Plan outlay ip 1982-83. 1 hi- need for fuithcr economy and efficiency in the use of rcsoaices can hardly be over-emphasised. We must also contiuue 1o press ah^ad with additional rcsouice mobilisation in a non-inflationary May.
18. Fiscal policy has an impoitant role to play in the task of harnessing the nation's resources, In addition to appro- priate adjustments in tax, rates, the necessary administrative and legal measures, arc being taken to ensuie that all sections of tho community pay their taxes ptomptly. This Govern- ment is determined to plug avenues for tax cvnsion and avoidance, and to continue trie fight nijuinst economic offences.
19. Raising the living standards of our peopl: is possible only through a progressive increase ir savings .ind piodue- livity. The Indian people, we must guilefully acknowledge, have set standaids of saving levels remaikable for a low in- come country. Tt is, however, essential that these savings arc invested in nssets which rdd lo productive capacity and which diicclly benefit the people
22 THE GAZETTE OF FNDlA : EXTRAORDINARY [PARI I - S tc IJand superannuation funds. The impioveirient in the rate of return on these deposits would benefit wovkeis ;ind small savers,
21. I also propose 10 libculiic iho Public Provident P'unJ Scheme, which has become increasingly popiilai among self- employed and othcis. Subscribers will b: allowed in continue their accounts beyond 15 years. Tiie limit lor annual subs- cription is also being raised lo ks. 40,000.
22. In the light of the changes that have Liken plate in the monetary and economic situation in the last two y<_ais, the Government, in consultation with the Reserve Hank of Iniliy, has rcviev eJ the interest rates on adva'ic's Lv commercial banks, ft has been decided to reduce the ceiliiig late ol interest from 19.5 per Lent to 18 per cent. The Mtnctuir of interest rates is also being adjusted dovviiwuids for I hi; benefit of agriculture, small scale industry ond exports. A separate announcement in thij respect is boinyr made bv 'he Reserve Bank of India.
•tie expected in jelation lo Budget estimates of Plan expen- dittire in a few sectors. Overall, tin* budgetary support lor the Central Plan is estimated to go tip by Rs 262 ciores to Rs. 7605 crores.
27. The Central assistan.e foi State and Union luiritoiy Plans is also being stepped up by Rs. 3S0 cioies, of whiji Rs. 350 ciores is the additional advance Plan assistance to States which have bten affected by drought.
28. Non-Plan expendituic will also be higher in the cuncnt year due lo several factois. Non-Plan giants to Slates will b" higher by Rs. 214 ciores mainly due t> additional aiiisian.v of Rs. 147 croies for States affected by Hoods, syclonis and other natutal calamities. Similarly, ieffecting Ihe buoj.mcy in,, small savings collections, non-Plan loans to Stnte-i on this account will be higher by Ks. 200 cioies Non-Plm loans fir agricultural inputs have HJSJ been incroa-od by Rs JO croics. The subsidy for indigenous fcitilise;s will go up by Rs. 2uO cioi-cs, Additional loans .if Rs. 2'J'l tioies uie iciimicd for certain public sectior unjenakings to enable them to meet their cash losses and invresl ..ud jjp.iymcnt obligations lo the fjo\ernment.
29. The piovision foi Delence e'.penduuic will be highci by R.s. 250 crores. To meet the temporary imbalance in the tiadc cobeicd by Rupee Tiade Agreements, th^ pio\ision for Technical Credits has to be increased from Rs. HO crores to Rs. 12S0 crores. The mcicase in Technical Credits has been due to temporal}' and exceptional circumstance,, ::nd v ill be largely reversed durmg ihc >cai. Hon'Me Membci1- will nppieciate that in a ^ear of weak global demand, our Ions standing trading relationship with (he Socialist countries has been an important element m pioWdinj* a measure ol stability to oiu export sector.
2335. Taking into account Ihe above dnd other variations in 41. In formulating the 1983-84 plan, orr primary concern receipts and expenditure, the budgetary defxit in Ihe current has been to provide maximum support to those projects and S'ear is now es'imated at Rs. 1935 erores. Xlii 24 THE GAZETTE OF INDTA : EXTRAORDINARY [PART 1—SFC. 1]48. The outlay for the National Km il Vinplojmcnl 1'ieg- ir.mme, Integrated Runi Development Programme and othc-i schemes of the Nfinisliy of Rural Development v onid he Rs. 480 crores in 1983-84 against tho likely e\pcndiluic ot Rs 419 croics in 1982-83. The T.R.D P. will enable about three million fnmilies in the ruial DICJS to cross iho poverty line. The N.R.F.P. will cicatc about 350 million mini-days i>f work in the anal areas. Tile provisions foi thes- piogmmmes •will be matched by the State Governments.
49. Hon'We Memhcis arc- .iwaie that the Cjowrnrr'ent h;>s launched a crash programme for providing di inking wnlci facilities in all problemi villages, The Plan outlay for 1982-81 visualised an allocation of Rs. 127 5 ciores by [he Centra for the accelerated rural water supply pioginmme. Having regard to the piogress in implementation Ib? outlay has no\ been increased to Rs. 155 croies. A substantially highci otitlav of Rs. 200 eroies has been piovjded for Ihis prosifimme in 1983-84 The States on their part will he setting npait Rs. 319 crores and in all -IS 000 moie ullages are expected to be covered in 1983-84.
50. One of the important programmes benefiting chjldien is the Integrated Child Development Services With the higher target now set for the Sixth Plan, il is proposed to extend this scheme to 200 more projects, in 1983-34 over nnd nbov* ihu 620 projects so far copied. Over half the total provision of Rs. 60 crores for Department of Social Welfnre will he accounted for by this scheme.
51. An increased provision of Rs. 176 crores lias been mauj in the Central Plan for 1983-84 for the various jirojji armncs- benefiting the Scheduled Castes and Scheduled Tribes.
52. The 1-amily Welfare 1'iogrammcs will he implemented with renewed vigour in 1983-84 and will cover 17 million persons. A sum of Rs W0 ctoifs is Vie'ng provided for these programmes.
53. The Sixth Plan has placed considerable emphasis on accelerating investment in the Energy sector. The Inlal outlay for this sector covering petroleum, power and coal would be Rs. 5014 croies, accounting for more than 36 per cent o[ the total Central Plan outlay, Crude oil production is expected to reach 21 million tonnes this year, and incTcase further to around 26 million tonnes in 1983-84.
54. Inclusive of the allocitioTi for power development under Atomic Energy and Coil, the total outlay f ir the various power programmes in 1983-84 in the Centr.il Plan will he Rs. 1222 crores, repiesenling an increase of 31.5 per cent over that for 1982-83. The larget for addition to the capacity in 1983-84 in the Central Sector will be 1050 MW. double that of the current year.
55. The outlay for Coil sectoi, including lignite, will be Rs. 946 crores in 19R3-84. The target for production of coal is 142 million tonnes, 9 million tonnes more than in the current year.
56. The provision for the various programmes of the Depni t- ment of Steel in the Plan for 1983-84 is Rs 820 crores. The Plan outlay of the Mines Department has been incieased to Rs. 494 eroies in 1983-84 compared to Rs. 292 crores in the currer^ year's approved Plan outlay. This includes Rs, 365 crores for the Oiissa Aluminium Project.
57. The revenue earning traftc to be caried by the Railways in 1983-84 is projected at 241 million tonnes, which is an increase of more than six pet cent over the likely nerformance in 1982-83. The Plan outlay tor the Railways in 1983-84 is Rs 1342 crores.
58. '1 he tiaffic handled at the polls is expected to in JI ease to 105 million tonnes in 19R3-S4 as against 95 .riliion^onncs likely to be reached m 1982-83, Inclusive of a piovision of Rs. 90 crores for the Nhava Sheva. Project, and Rs 40 ciores for investment In Slate R }ad Tianjport Corporations, a total outlay of Rs. 558 crores has been set apart foi (he Shipping and Transport Ministiy in 1983-84.
59. An outlay of Rs. 429 ctores has been provided for the vaiious projects of the Ministiy of Chemicals and Ferti- lizers, This includes Rs. 260 crores for the Thai Vaishet Ferti- lizer Project. Foi the Hazira Fertilizer Project a piovhion of Rs. 145 cioies has been made.
60. The total provision for the projects of the Ministry of Industry in 1983-84 is Rs. 549 ciores compaied with Rs. 480 crores in the current year. Of this, the piovision for small industries, including KVTC and coir, is about Rs. 173 crores
61. A provision of Rs. 72 crojes has been made for the various Plan programmes of the Department of Science and Technology and the Council of Scientific and Industiial Re- scaich in 1983-84. The Government has rcccntlj set up a separate Department of Non-Conventional Fnergy Sourcts. The programmes to be undertaken by this Department in 1983-84 would include, infer alia, establishment of 75,000 family size bio-gas units, and 100 communi'y bio-gas urn s Inclusive of the provision of Rs. 18 crores for (he bio-gas programme, an outlay of Rs. 30 crores hris been set apart for this Department in the Plan foi 1983-84
62. Mr, Speaker, Sur, it has been my effort to contain the growth in the non-Plan expendituie. However increases in certain important sectors ha\e been inevitable. Taking into account the requirements of the country's defence, a piovi- tion of Rs. 5971 crores has been made for Defence against Rs. 5350 crores in the Revised estimates for the cinrent year. Due to increase in borrowings which are mainly used for development purposes and also higher borrowing costs, the provision for interest is placed at Rs, 4700 ciores against Rs, 3950 crores in the Revised estimate foi the current yeai. The provision for food subsidy at Rs. 800 crores will be higbei by Rs. 90 crores compared with the Revised estimates for the current year. The provision for subsidy on idipenons fertilisers is estimated to go up from Rs. 550 crores in the current year to Rs. 700 crorcs next year. \ provision of Rs. 550 crores ha"s been rrnde for cash compensatory suppoit and market development assistance for exports.
63. The provision for Technical Credits under Rupee-Trade Agreements is Rs. 600 crores next year as against Rs. 1281 crores in 1he current year, A lump sum of Rs. 300 cjores h being provided in 1983-84 for payment of additional instal- ments of dearnesg allowance, pension and other leliefs to Central Government employees.
64. The House would recall that lust year, I had announced certain enhanced benefits for low paid pensioners. I propose to providr eome additional relief to this c "teo;ory of pensioners. From 1st April, 1983, the minimum amount of pension, including dearnes1) relief, will be raised to Rs, 160 per month and the minimum amount of family pension including clearness relief to Ri 150 per month.
2565. The total non-Plan expenditure in 1983-84 is estimated at*Rs. 21,984 cvores against Rs. 20.511 crores in Revised estimate 1982-83.
46. At this point, I would like to lefer to a matter concern- ing Government employees. The employees had suggested some time ago that the Government may appoint a Puy Body for revising pay scales. The Third ray Commission was appointed in April 1970 and made its report in 1973 Since then, over the years conditions have changed in several vespc;ts. The employment under the Central Govern- ment has giown steadily larger. Changes have also taken place in the relativities in Ihe emoluments of the employees of departments inter se, and also vis-a-vis clher employees For instance, several State Governments have, through P.iv Committees or Pay Commissions, substantially revised Ihc pw scales and other benefit's of their employee?. I feel it would be appropiiate now to appoint the Fourth Central Pav Com- mission. Before th? terms of reference of the Pay Commiv sion are set1 led, the representatives of the employees would be consulted The membership of the Coiimi'sion together with the te^ms of reference will be announced as soon .i possible.
67. So far ag receip's in 1983-84 are concerned, the grw tax revenues at the existing rates of taxation aie estimated at Rs. 19.964 crores compared with Rs. 17.910 crores in the Revised estimates. The States' share of taxes in 1983-8 \ is estimated at Rs. 50S8 crores compared wirh Rs. 4M9 crores in the curicnt year. The net tax revenue of the Centra will thus be Rs. 14,876 croics against Rs, 13,271 crores i i the cunent year.
68. The receipts from maiket loans are placed at Rs. 4000 crores compared with Rs. 3800 crores in thi current year. The recoveries of Technical Credits next year will be lower as the payments will also be less. Small savings collections are expee'ed to yield Rs. 1700 crores next year against Rs. 1550 crorcs tin's year. External assistance net of lo'^ repayments, is estimated at Rs. 1940 crores ajtainst Rs. 1724 crores In the current year,
69. Taking into account these and other variations in receipts, the total receipts for 1983-84 are estimated at Rs. 32,586 crores. These receipt include the effect of the changes in fare and freight rates of the Railwnjs and in the Posts and Telegraphs tariffs as well as the continuance of the Compulsory Deposit Scheme for Tncon^-tnx payers beyond 31st March, 1983, to which 1 SIMII refer later. The total expenditure is placed lit Rs. 34,836 crorcs. The oveiall budgetary gap at existing rates of taxation will thus be Rs. 2250 crorcs.
(Part B)
70. Mr. Speaker, Sir, it is aiamst the background of this review of budgetary out-turn that T place my budget propo- sals before Hon'ble Members. The Budget is more than an exercise in raising revenue or finencini* outlays. In a planned economy, it represents a potent instrument for achieving national objectives and smraiiinp 1he pace of development through appropriate financial and fiscal policies. I would, therefore, like to share with Hon'ble Members the ph;loso- phy of my budget. It aims at strengthening the produ ti\e forces in (he economy, keeping a tight rein on inflation, en- coarfl,{;na savings both in the individual and corpoi-fe sectors
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and promoting essential investment. The encouragement of savings has its corollary in discouraging consumption. Cons- picuous consumption whether at individual or the corporate level has no place in a society such as ours. 1 have also talen this opportunity to review the effects of certain incen- tives and concessions in the tax law, and to modify them where appropriate. As we are placed now, ths Budget must reflect the imperatives of attaining as speedily as possible •a v;ab!e eMern.il payment situation and, therefore, seek to rromote exnorls and affect economies in imports through a judicious uie of the fiscal instrument.
71. Within this overall framework, it has been my ob- jective to keep the budgetary deficit for the ne.vt year rcla- tive'y low. While it has been necessary to raise additional resources, I have tried to Jo so in a non-infUtiuriHry way inul without subjettip'' the low and middle income groups to additional burdens.
72. I shall first deal with my proposals in the urea of non-corporate in omc taxes. My aim is to provide some relief at the lower end of the slabs and speciflly to Ihc salaries tax-paver. At the same time, it hos been my endea- vour to rromote savings at the expense of consumption. With this end in view I am providing for a more liberal application of the exemptions pertaining to savinfs.
73. Coming to my specific proposals let me begin with the unpleasant bit, I propose an increase in the s ireharge in 1he income-tax on non-corporate taxpayers from ihc present level of 10 per cent to 12,5 per cent. The revenue yield from this measure would be Rs. 47 crores in a full vear and Fs. 37.6 crores in 19S3-84. This will nccrne wholly to the Centre. Considering the increased burden cast on (ho Centre on account of additional expenditure on national security and special assistance to the States, Hon'ble Members will agree that this measure is justified.
74. Now for the good news. As a measure of relief to the salaried taxpayer I am proposing that the ceiling of standard deduction be increased from the present Rs. 5,000 to Rs. 6,00O. The revenue loss as a result of th's proposal i° expected to be Rs. 19 crores in a full year and Rs. 15.2 crores in 1983-84.
75. In recent years we have increased the exem ition limits in Tespect of income-tax. It has, however, been pointed out to me, with some justification, that the tax rate in the initial slab is somewhat high. I accordingly propose to split the initial slab, and for the first slab between Rs. 15,001 and Rs. 20,000 the tax rate will be 25 per cent instead of 30 per cent. The present rate of 30 per cent will, however, continue to. apply to the slab Rs. 20,001 to Rs. ?5,000. For the next slab between Rs. 25,001 and Rs. 30,000 the rate will be raised by 1 percentage point to 35 per cent. Even after the increase in rate of surcharge, individuals and certain • a*egories of Hindu undivided families, etc. in the lower income slabs will pay less tax than at present. ' he revenue effect of these proposals would be a loss of Rs. 35 crores in a frll year and Rs. 28 crorcs in 1983-81
76. As a measure to stimulate savings, I pfoposs to remove the ceiling of 30 per Gent of gross total inconw in respect of savings in specified forms like life insurance, provident funds, etc., while retaining the absolute monetary ceilings. Further, I intend widening the available media for savings by including National Savings Certificates, VI und VII Issues. This would be particularly helpful to those past middle age
26 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I—SEC. 1]and towards the end of their working lives who might find it • difficult to take advantage of life insurance and other con- tractual forms of savings. The revenue loss from this mea- sure is expected to be Rs. 15 crores in a full year and Rs. 12 crores next year.
77. Income derived from specified long-term investments is exempt at present up to Rs. 4,000 with an additional exemp- tion cf Rs. 2,000 for interest on securities and bank deposits for a period exceeding one year. As a measure of simpli- fication, I propose to merge these separate exemption limits and raise it frorn Rs. 6,000 to Rs. 7,000. The existing sepa- rate ex^mpt'on of Rs. 3,000 in respect of Income from units of tro Unit Trust of India will continue unchanged. As a result of these proposals, the aggregate of specified investment income which is exempt from tax would go up from Rs. 9,000 to Rs. 10,000. This should help to stimulate savings further.
T8. Tlon'b'? Members would appreciate that in sum the eff-ct of the above proposals would be such as not to increase the tax liability of assessees in the lower brackets of the tax scale notwithstanding the increase in the surcharge. As for the rest, as I intend the surcharge primarily to affect con- sumption rather than savings I have sought to combine the surcharge with measures designed to increase personal savings in specified financial assets,
79. I propose to extend the operation of the Compulsory Deposit Scheme (Tncome-tax Payers) Act, 1974, by a period of two years. At present, persons over 70 years of age are exempted from the requirement of making deposits. I pro- pose to lower this limit from 70 to 65 years. Those who attain the age of 65 years on 1st April, 1983, would bo entitled to withdraw, at their option, the balance of iho deposits to their credit, on or after 1st June, 1983.
80. At present no tax on capital gains is charged in cases where the net consideration received on transfer of a capital asiet Is invested in 7-year National Rural Development Eonds. It has been pointed out to me that (his maturity period is rather long. In order to provide investment choices and with a view to ensuring that resources flow into desired directions, I propose to extend the exemption to cover in- vestment of the net consideration in a new Central Govern- ment Bond of 3 years' maturity, a special series of units of the Unit Trust of India and debentures of the Housing and Urban. Development Corporation with maturity periods ad- justed appropriately for the interest they cany.
81. As I indicated earlier, I have decided to liberalise further the tax incentives in respect of non-resident Indians •nvesting in Tndia. I propose to levy a flat rate of tax of 20 per cent plus surcharge on incomes derived by such persons from their specified investments in India made through foreign exchange remittances. These investments will include shares and debentures of Indian companies, units of the Unit Trust of India and Government securities. Long-term capital gains arising on transfer of such assets will also attract tax at the prooosed flat rate. Such Incomes will also not be taken Into account in computing their other Indian incomes. They would not have to go through the procedures involved in sub- mission of tax returns, provided they have no other income \n India and tax at the proposed flat rate has been deducted from their Income, These non-residents will also have the option of paying tax at the normal rates applicable to resi- dent taxpayers. Such investments will also be exempt from v,?allh-tax. Gifts of such assets made by Indian citizens and persons of Indian origin settled abroad to their relatives tin India will also be exempt from gift-tax.
82. I shall now deal with my proposals in respect of j"he corporation tax. Earlier in my speech I had referred to the need to accelerate investment through higher internal gene- ration by companies and curbing conspicuous consumption. I believe that both the Government and the companies can contribute towards this objective.
83. It has been pointed out to me by several committees and representative organisations of industry that given the rising costs of replacement and modernisation, the internal funds available with the corporate sector are inadequate. I find substance in this argument. Accordingly, I propose to increase tha general rate of depreciation in respoct of plant and machinery from 10 per cent to 15 per cent I am also raising !he monetary limit for H)0 per cent write-off from the present level of Rs. 750 fo Rs. 5,000 in .csnect of small items of plant and machinery. The other related benefits which new in restment in plant and machinery now enfoy will con- tinue. The revenue loss on account of liberalisation of pro- visions relating to depreciation would ..be Rs. 140 crores in a full year and Rs. 112 crores in 1983-84.
84. Hon'ble Members would recall that last year I had proposed to allow depreciation at 30 per cent of the cost of devices and systems for energy savings and for minimising environmental pollution and for conservation of natural re- sources. I propose to go farther end allow 100 per cent de- preciation on devices and systems for energy saving. In regard to devices and systems for minimising' environmental pollu- tion and for conservation of natural resources, I propose to raise the investment allowance from 25 per cent to 35 per cent,
85. To encourage industries to shift from urban ureas and as a measure of decongostlng our overcrowded cities and reducing pollution, the capital gain arising from transfer of buildings or lands used for the purposes of business is exempt from tax if it H used for acquiring lands or con- structing buildings for the purposes of business at the new nlace. I propose to extend this exemption from, tax to capital gain arising from transfer of machinery nnd plant also.
86. I have occasion earlier to refer to the lowering of the interest rate structure. As my contribution to the relief being provided by banks and with a view to encouraging production and investment, I propose to reduce the rate of tax charged under the Interest-tax Act to half of the pre- vailing rate. In respect of the chargeable interest arising after 31st March, 1983, the rate of interest-tav will be reduced from seven per cent to three and a half por cent. About half of the loss of Rs. 130 crores on account of this measure will be recouped by the additional tax revenue as a conse- quence of tho lower deductible cost of borrowing to business and industry.
87. My other important objective in respect of the cor- porate tax structure is to provide incentive for higher pro- duction and exports. I am, therefore, continjing the two schemes announced lost year and making them more liberal.
88. As regards tho scheme for excess production, I will come to the details later while discussing my proposals in respect of, indirect ta*es.
27•89. In respect of exports the s.heme announced by mo last your provided some tax relief to exporters whose ex- port turnover for any year exceeded that of the immediately pr*:eding year by more than 10 per cent. The total relief available under last year's scheme was also subject to a maximum of 10 per cent of tax payable. I now propose to simplify and liberalise the scheme and remove both the minimum qualifying amount and limit of relief. Exporters will be entitled to deduct 5 per cent of their incremental turnover in computing their taxable income. Thus, under the new scheme all increments in export turnover will be entitled to relief. Exports of all goods will qualify for this concession excepting a few specified items. As the new provision will take effect from the assessment year 1983-84, the provision made latt year is proposed to be deleted.
90. Hon'ble Members must be aware of the phenomenon of companies which arc flourishing, but are paying no tax at all, or only a nominal tax. This k largly duo to these companies availing of the tax incentives and concessions available under the piovisions of the Income-tax Act. It has been a matter of concern (o me that under our tax system seve- ral highly profitable companies arc able to reduce their lax libility to zero even though they continue to pay high dividends. It seems reasonable that profitable and pros- perous companies should contribute at least a small portion of their profits to the notional exchequer at a time when other and less better off sections of society are bearing a burden. I therefore propose to provide that fiscal incen- tives and concessions shall not absorb more than 70 per cent of the profits. This would secure that companies pey a minimum tax, on at least 30 per cent of their profits.
91. The differential rates of tax in the case of domestic companies depending upon the total Income of the com- pany are proposed to be removed.
92. As a measure of simplification, I propose to levy income-tax at a flat rate of 25 per cent on the gross amount of interest received by foreign companies on loans advanced by them in foreign currency.
93. The income-tax payable by companies at present bears a surcharge of 2.5 per cent of such income-tax. I propose to raise the rate of surcharge to 5 pc cent. How- ever, in lieu of the additional surcharge payable by them, companies will be offered the option to make deposits with the Industrial Development Bank of India under a scheme to be notified by the Government. 1 "m not taking credit for any revenue gain from this measure in the expectation that the additional surcharge would, in fact be deposited by the companies with Industrial Development ank of India. The amount so deposited should help to provide funds for modernisation and thus flow back to the corporate sector.
94. Our corporate tax structure is riddled with a large number of different kinds of deductions. While each de- duction may seem to have a merit, the aggregate effect is to complicate tax administration, provide opportunities for misuse and reduce the growth of revenues. As a step to- wards rationalisation of this structure, I have reviewed the various deductions.
95. The Income-tax Act at present provides for weighted deduction of expenses incurred by a company or a co- operative society which uses products of agriculture, animal husbandry, dairy or poultry farming as raw material. The expenses in respect of which weighted deduction is allowed do not relate directly to the assessee's business. I propose to provide that such companies or co-operative societies would henceforth the entitled only to the deduction of expenses and not to the weighted deduction.
96. The Income-tax Act provides deductions for expendi- ture or contributions made by assessees for approved pro- grammes of rural development. On going progiairunes ap- proved by the prescribed authority will continue to enjoy tlie benefits of the deduction upto the terminal date in respect of time bound programmes and February 29, 1984 in other cases. However, with a view to preventing possi- bility of misuse, it is proposed not to allow any further deductions on this score. It is not th; intention of the Government to deprive genuine rural development pro- grammes of corporate support. The Government would shortly establish a fund called the Prime Minister's Fund for Rural Development, contributions to which would enjoy exemption under the Income-tax Act.
97. The special deduction allowed hitheuo m respect of profits and gains from business of livestock breeding or poultry or dairy farming and from business of growing mushrooms, is proposed to be withdrawn. I see little justi- fication for continuing this fiscal concession to these busi- nesses, in view of the room for abuse. However, in order to entourage and strengthen primary co-operatives lor oJ- seeds, furits and vegetables, I propose to provide full exemption from tax for such co-operatives as in the case of dairy co-operatives.
98. Ihc tujt concession in relation to horiiunial UJUS- fcr oi technology was introduced in lyW. Iho oojecuve waa lo discourage repetitive import oi miujjjn itthnuio^i. 1 nnd mat Uic concession has lent itseit to De used tiA LUA avoidance. 1, Uiereiore, propose to wiUidi.i.v luia coai.es- wun cltcUive irom assessment year 19S4-Bi.
i>9. lion blc Members must be aware of laviah and wasLtiui CAvcnduure by trauc and industry, paruicmttiy uii travelling, advertisement and the like. With a view u> inculcating a climate of austerity and provid.ng a disincen- tive to unproductive, avoidable and ostentatious spending by tiadc and industry I propose to provide that 20 per te.ii oi SUCH expenditure will be disallowed in computing the taxable profits. The Income-tax Act provides for the disallowance of entertainment expenses beyond a ceiling and tor total dis- allowance of expenses on maintenance of guest houses. I propose to define the terms "entertainment expenditure" and "guest house" to remove doubts about the correct im- port of these expressions. The revenue from these measures in a full year will be Rs. 50 crores and in 1983-84 R". 40 crorcs. The effect of these measures, combined with the increase in depreciation allowance, will be to provide a marked preferential tax treatment of investment as again unproductive expenditure,
100, Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, for long period of time. For the purpose of their income-tax assessments, they nonetheless claim the liability as deduction even as they take resort to legal action, thus depriving the Government of its dues while enjoying the benefit of no-payment. To curb such practices I propose to provide that irrespective
28 THE GAZETTE OF INDIA: EXTRAORDINARY [PART I—SEC. 1]of the method of accounting followed by the taxpayer, a statutory liability will be allowed as a deduction in com- puting the taxable profits only in the year and to the extent it is actually paid. This would result in a revenue gain of Rs. 100 crorcs in a full year and Rs. 80 crores in 1983-84.
101. It has come to my notice that some persons have been trying to avoid personal wealth-fax liablity by forming • closely-held companies • to which they transfer many items of their \ eallh, particularly jewellery, bullion ;ind real estate. As companies are not chargeable to wealth-tax, and the v.'liie of the shares of such companies does not also reflect the real worth of the assets of the company, those who hold such unproductive aesets in closely-held companies are able to successfully reduce their wealth-la\ liability to a substantial extent. With a view to circum- venting tax avoidance by such peisons, I propoie to levive the levy of wealth-tax in a limited way in the case of closely-held companies. Accordingly, I am proposing the levy of wenlth-tax in the case of closely-held companies at the rate of 2 per cent on the net wealth represented by the value of specified assests, such as, jewellery, gold, bullion, buildings and lands owned by such companies. Buildings used by the company as factory, godown, ware- house, hottt or office for the purposes of its business or as residential accommodation for its low-paid employees will be excluded from net wealth.
102. The sum of my proposals in respect of the cor- porate sector the Han'ble members would appreciate, is to ensure that every profitable company peys some tax in the year in which profits accure, that loopholes are plug- ged and tte number of deductions is reduced, that more funds arc available for modernisation and re-investment, that costs are reduced through lower interest charges and reduction Li conspicuous expenses, and that higher pio- duction, particularly for exports, receives due encourage- ment.
103. Many charitable and religious trusts and institution* no doubt do laudable work. Unfortunately, it is also true that many are used as a medium for tax avoidance, accu- mulation oi wealth and means of partronage and I cannot remain a disin'erested spectator. It is time some steps were taken to set matters right.
The Taxation Laws (Amendment) Act, 1975 had laid dpwn an investment pattern for trust funds, and (rusts which failed to comply with this investment pattern from amounting years comironcing after 31st March, 1978 were liable to forfeit tax exemption. However, having rejjard to the practical difficulties involved and to ensure a more orderly ch.inge-ovcr, this date was extended in 1977 by three years. As (he whole gamut of the provisions relat'ns to charitable and religious trusts was under consideration by the Economic Administration Reforms Commission, the date for th > new pattern of investment was again extended last year by a further period of one year.
I have since considered the matter carefully. I seu no justification for permitting investment of trust funds in business concerns, including sh&res of companies in the private sec+or- I accordingly propose to provide that all trust funds should be invested in specified modes, such as. Government securities, units of the Unit Trust of India, u:pof;its with scheduled banks, approved financial corpora- tion;., etc. Investment in immovable properties will, how- ever, continue to be allowed. I am giving notice to all charitable and religious trusts to divest their share holdings and other investment in business concerns by 30th Novem- ber, 1983. However, trusts will be allowed to keep shares in companies, which formed part of the original corpus as on June 1, 1973 and bonus shares received up to that elate, Some trusts carry on business on commercial lines and derive income therefrom. There is no reason why such business income should not be brought to tax, I, therefore, propose that business income of all charitable and religious trusts including those which have hilherto been exempted by notification will be brought to tax with effect from cssess- ment year 1984-85. Trusts having business income will also be required to conform to the new investment pattern if they wish to seek tax exemption in respect of their other, income.
104. Hon'ble Members are no doubt aware that estate duty in respect of agricultural land is a State subject and that the Central has levied estate duty on agricultural land only by virtue of resolutions passed in this regard by State enabling the Union to do so. Our experience is that the the valuation of agricullral land leads to administrative difficulties and litigation. The yield from this levy hai also not been significant over the past several years. More- over, after the abolition of wealth-tax oi agricultural land, including plantations, there is little practical justication for continuing the levy of estate duty on agricultural land. I, therefore, propose to remove the levy of estate duty on agricultural land. Since the Estate Duty Act can be amend- ed only after the necessary resolutions of State Legislatures, a Bill for giving effect to this proposal will be introduced later,
105. The revenue loss on account of the reduction in interest-tax will be Rs, 104 crores next year. Taking into account the estimated recoupment of part of this loss, my corporation tax proposals will yield Rs. 104 crores next year. My proposals in regard to income-tax will lead to net revenue accrual of Rs. 25,6 croros to the Centre next year and a loss of Rs. 28 crores to the States.
106. t turn now to my proposals in the area of indirect taxation. Mr, Speaker. Sir, the House is aware that for some years now our balance of payments has been under slrain. Despite this we have sought to maintain an import regime which provides adequate access to imported inputs such as raw material and capital goods to the priority sec- tors. At the same time, I would not like lhat our policies should be taken advantage of by exporters abroad facing difficult market conditions by selling unduly cheap in the Indian market to the detriment of Indian industry. I be- lic\e wo should use the instrument of customs duties not only to help revenue collection but to support our balance of pavments and industrial expansion. In framing my propo- sals I have also tried to minimise tax avoidance and eva- sion and taken care to see that the measures would not spur inflation.
107. Taking customs duties first, my principal proposal is to continue the auxiliary duties of customs first imposed from 1973 and since renewed annually. I propose also to raise with certain exceptions the present effective rates by 5 percentage points. The statutory rate of auxiliary duty is proposed to be kept at 50 per cent, and the maximum
29effective rate at only 35 per cent. The cushion of 15 per cent will help us take care of any need for higher duty levels which may become necessary fpr reasons such as support for indigenous, production. Newsprint und crijde petroleum would not be subject to the increase in auxiliary duty. The existing full exemption from auxiliary duties on essential items like fertilizers, keiosene, hign speed dicsel oil would be continued. The revenue gain as a result of this proposal would be Rs. 254.5 crores in a fall year.
108. My next proposal relates to chemicals. This group of commodities is in general subject to a basic rate of customs duly at 60 per cent ad valorem. With the signi- ficant fall in ihe international prices of dicmicals, I be- lieve it would be appropriate to laisc the taiiff rate to 100 per cent ad vulorem and the general effective rate to 70 per cent ad valorem. Tariff rates of 40 per cent and 100 per cent applicable to certain groups of chemicals are also being raised on the same lines. However, pharmaceutical chemuals and drugs, insecticide, pesticide and fungicide chemicals, fertilizers, tanning substances, etc. have by and large been kept out of the purview of the proposed In- crease. Ihis measure will jield Rs. 37.5 crores in a full year.
109. .1 also propose to raise the effective basic Import duty on zinc metal from 45 per cent to 55 per cent ad valorem and that on lead metal from 40 per cent to 55 per cent ad valorem. The existing partial exemption from countervailing duty on lead scrap and waste is also proposed to be withdrawn. These measures will yield ad- ditional revenue of Rj. 12.8 crores in a full yeart and would also improve the financial viability of indigenous producers.
110. For the benefit of out electronic industry, the exist- ing concessional basic import duty of 45 per cent ad valorem is proposed to be extended to four more items of raw materials and components. Besides, the concessional basic import duty of 35 per cent ad valorem in respect of capital goods is proposed to be extended to 14 more items. These steps would cost the exchequer Rs. 1.22 crores in a financial year.
111. Another concession relates to bonafide gifts received from abroad by post or air freight. The existing duty- free value limits for such gifts were freed in 196R. I pro- pose to raise the duty-free limit for bonafidc gifts of food articles and medicines imported by post or as a!r freifiht, and other items imported by posl :.> Rs. 200. This liberalisation, I am sure, would be welcomed by those who receive genuine gifts from their friends and relatives abroads. The revenue sacrifice would be Rs. 3.71 crores • in a full year.
112. I also propose to rationalise and liberalise the pro- visions relating to import duties on articles of baggage which are brought by. passengers returning to India. The present duty-free limit for baggage is Rs. 1000 fixed in 1978. I propose to raise this limit to Rs. 1250 for adults with corresponding increase for minors end other cate- gories of passengers. Keeping in mjnd the needs of Indian workers abroad who are generally engaged on contracts of one year and who then return to India, I propose a higher duty-free allowance of Rs. 5000 for them for u*cd household effects with some exceptions. Ihe rate of basic duty on the first dutiable value slab will regain 130 per cent, while on the value in excess of first dutiable slab it is being reduced from 300 per cent to 200 per cent ad valorem except for a few articles. Auxiliary duty will be in addition.The list of articles of baggage in respect of which duty-free entry will not be admissible is being shortened. 1 am sure these measures would reduce the rigours of customs clearance for incoming passengers I do not anticipate any fall in revenue because of this liberalisa- tion.
i n. A few amendments to the Customs Act, 1962 aie
also proposed to streamline the working of the derailment in the field and to enable more efficient revenue collections. The changes relato mainly to the setting up of the Inland Container Depots and provisions relating to warehousing and drawback. A fair amount of customs revenue lemains blocked because of inordinately long warehousing of goods and it is therefore proposed to reduce the warehousing time to on= year in the case of no-consumable stores and to throe months for other goods. As a measure to expedite drawback payments, it is beiritf provided that for claiming drawback it would be sufficient if Ihe goods are entered for export to a place outside India. The minimum runount for which a claim for drawback would be entertained is also being raised from Rs, 5 to Rs, 50.
114. Power is also proposed to be taken under the Cus- toms Act for the Government to fix effective rates of duty on a basis different from the one spelt out in the tariff. Thus, if the tariff rate of duty is on ad valorem basis, the Government would have the power to fix effective rates of duty on the basis of weight, volume, etc.
115. Sir, coming now to my proposals in respect of excise duties my objective has been primarily to mop up windfall gains where T believe they exist, and to limit the incidence of additional levies on individual items to relati- vely small proportions. I have also kept to the fore the important objective of promoting the small scale sector which has been a nursery for entrepreneurship in the coi.nlry and has also helped to diffjse the concentration of economic power.
116. I propose to continue the levy of special excite
duties in 1983-84 at the existing rates.
117. Cement prices, as Hon'ble Members are aware, have been ruling high in the markets. To riop up undue profits, I propose to raise the basic excise duty on cement from Rs. 135 to Rs. 2Q5 per tonne for the commonly used variety of cement. The basic excise duty on cement produ- ced in mini-cement plants will also go up from Rs. 100 to 170, thus maintaing the existing duty differential of Rs. 35 per metric tonne in favour of the mini plants. The levenue gain would be Rs. 182 crores in a full year by way of Central excise duties and Rs. 0 crores by way of counter- vailing duties on imports of cement.
118. Central Excise Tariff item 6S cover a miscellany of goods not elsewhere specified in the Tariff. 'Ihe rate of duty has been unchanged at 8 per cent ad valorem from 1979. I propose to raise the rate now to 10 per cent ad valorem. This measure is likely to yield an additional revenue of Rs. 120 crores by way of Central excise duties and Rs. 60 crores by way of countervailing duties in a full yrar. This increase would be basically on finished coods siiKe the raw materials and manufactured inputs
30 THE GAZETTE OF INDIA : EXTRAORDINARY [PART I -SEC. 1]covered by this Tariff Item will continue to be eligible for duty credit as at present. I have taken care to protect the small scale sector, as I will be mentioning later.
119. 1 have also proposed a packabe of measures relating to man-made fibres, blended yarns and fabrics. Honble Members would recall that in my Budget last year neieral duty chinges were made to encourage the production of blends with the desirable proportions of polyester. As a further measure in this area, I now propose to give u competitive edge to pol>cster-cotten blended fabric vis-a- vis polyester-viscose blended fabrics. The incidence of basic and additional duty on polyester-cotton fabrics contain ins more than 40 per cent but less than 50 per cent polyester is proposed to be reduced from 15 per cent ad valorem to 6.5 per cent ad valorem. These concessional rates would not, however, apply if polyester filament yarn is used. The overall incidence of duty on cotton yarn containing more than 40 per cent but less than 50 per cent polyester is also being reduced fiom Rs. 11.25 to Rs. 7.5 per kilogram. The revenue sacrifice entailed in these changes is Rs. 19.40 crorcs in a full year.
120. The effective duty on viscose staple fibre is being raised from Rs. 4 per kilogram to Rs. 5 per kilogram, further, to discourage the inciensing imports of this fjbie, I propose to raise the impoit duty on ordinary viscose staple fibre from 30 per cent to 40 per cent ad valorem and on improved varieties of viscose staple fibre also to 40 per cent ad valorem. The revenue gain will be Rs. 5.6 crores.
121. In the case of imported polyester fibre, consider- ing the gap between its landed cost and domestic prices, it is proposed to raise the effective duty on polyester staple fibre by Rs. 9 per kilogram. This would yield Rs. 9 crores In a full year.
122. Polyester filament yarn is used in comparatively higher priced fabrics and I propose to raise the effective excise duty by Rs. 7.50 per kilogram on filament yarns of textile applications. This increase would be equally incident on imported filament yarn by way of higher countervailing duty. The increase would not be applicable to polyestei filament yarn of 750 deniers and ibove which goes into industrial applications. The revenue gain in a full year would be Rs. 22.5 crores by way of excise duties and •Rs. 5.6 crores by way of countervailing duiies.
123. In step with the above increase, I also propose to raise the effective duty on nylon filament yarn of textile d_eniers by the same margin. The additional revenue yield will be Rs, 15.5 croies by way of Central excise duties and Rs. 50 lakhs by way of countervailing duties in a full year.
124. As a measure to combat tax avoidance I propose to change the basis of duty from ad valorem to ad valorem- cum-spccific rate or specific rate on a few commodities. In respect of paper, while adop ing an ad valorem-cum-specl- flc rate. I propose to fix a uniform rate for rrinling, wrflrng and most of the other varieties of paper and paper board. The effective basic duty for kiaft paper will be 10 per cent ad \alorem plus Rs. 1810 per metric tonno and for most of the other varieties of paper and paper board, 10 per cent ad valorem plus Rs. 1430 per metric tonne. The existing concessional basic rate of 5 per cent ad valorem in respect of white printing paper supplied to Direuor General, Supplies and Disposals or for educaftonal purposes would, however, continue.
52S. T have also reviewed the present concessions av^lable to small paper mills. The linking of the concession enjoyed by thii sector to the installed capacity of a plant has been posing some practical problems. I, therefore, propose to rational is o the concessions to this sector on the basis of quantum of clearance in a financial year. The extent of exemption is also being suitable modified whkh should encourage the small paper mills to Increase their produc- tion substantially. Rates of duty for paper manufactured in such paper mills using unconventional raw material will be Rs. 560, Rs. 900 or Rs. 1120 per tonne depending on whether the clearances of paper and paper boaid from su ih paper mills in the preceding financial year did not exceed 3000 tonnes, 7500 tonnes or 16500 tonnes res- pectively.
126. In regard to aerated waters it is proposed to iix. specific rates of duty to replace the existing ad valorem rates, The effective basic duty for a bottle of 200 milli- liters will be, 5 paise for soda and 30 paise for others. The concessions available to small scale manufacturers would continue.
127. The present ad valorem rate in respect of motor cars is being converted into ad valorem-cum-specific rate. The effective rates would be based on the engine capacity and would be different for petrol driven end diesel driven cars.
128. In the case tyres used in two-wheeled vehicles and tractors and tyres of specified sizes for trailers, the present basic tariff rate of 60 per cent is proposed to be i educed to 25 per cent which is the level of the present effective rates of duty.
129. The House may recall that in November last the concessional rates of duty on cigarettes were withdrawn and cigarettes were made liable to pay statutory rates, The revenue realisations had been affected inter alia °n account of disputes over the method of arriving at the assessable value. With .i view to ending the ioom for uncertainty once for all I propose to fix specific rates of duty in respect of ciga- rettes. These rates of duty would be linked to their retail sale prices printed on the cigarette packs. Keeping in view the fact that the consumption of cheaper cigrettes is large, T have also sought to have a graded levy based on retail prices. The duty now proposed will, at the lowest slab, be Rs. 35 per thousand cigrettes. I except that this measure would help the Government to realise the revenue expec- ted from this item.
130. All these anti-avoidance measures would help secure revenue of the order of Rs. 50 crores which otherwise might ha\e been avoided.
131. There have been strong representations from many quarters that the existing scheme of concession in excise duty for th© small scale sector hampers continuous growth and should be liberalised. I have reviewed the matter. Under the general scheme applicable to 70 specified groups of commodities at present, manufacturers are eligible to get full duty exemption upta first clearances of R". 7.5 Iakhi and the concessional rate of 75 per cent of the duty pay- able on clearances in excess of Rs. 7.5 lakhs but upto
31i Rs. 15 lakhs, I propose to raise the upper limit from Rs. 15 lakha to Rs. 25 lakhs. At "he same time, I propose to reduce the lunit of full exemption from Rs, 7.5 lakhs to Rs. 5 lakhs. The clearances in excess of Rs. 5 lakhs upto Rs. 25 lakhs would| however, enjoy a concessional rato oi duly of 75 per cent of the normal duty payable.
132. Two commodity groups, namely cosmetics and toi- let preparations, and the other, refrigerating and aircondi- tionlng appliances and machinery and their parts bear high rates of excise duty and will be deleted from the general scheme. An alternative exemption scheme has b;cn pro- vided for these items under which small manufacture s wth total clearances upto Rs, 2.5 lakhs would be completely exempt from payment of duty and those with tnrno\er upto Rs. 15 lakhs would pay duty at half the normal idle
" on the entire clearance.
133. As regaids the exemption available to the small scale manufacturers of poods falling under Tariff Ifrm 68, I propose to raise the eligibilty limit of Rs 30 lakhs hy way of value of clearances in the previous year to Rs. 40 laVhs. This measure would help the small srak mils to avail of the benefit of exemption while expanding their Uimovei With the increase in the rate of duty from 8 per cent to 10 per cent which I mentioned earlier, thr amount of the DCW concessions can go up to Rs. 3 lakhs against Rs. 2.4 lakhs till now.
134. For both the schemes, I propose to exclude tht clearances of exempted goods, other than those exempted under small scale exemptions, from the computation of value of clearances for the purpose of determining the eligibility as well as availment of exemption fiom duty. The net revenue effect of all these concessions for the small scale sector will be a loss of Rs. 5 crores in a full year.
135. As part of the 1982 Budget, I had announced an excise duty relief scheme for encouraging higher produc- tion In respect of certain specified commodity groups. I propose not only to continue the scheme but also enhance the relief in duty for excess clearances. Under the existing scheme.there Is, for excess clearances, a relief of 20 per cent of-duty for items falling in certain duty rate qioups and 10 per cent for thuoe falling in other such groups. I propose to provide incentive in two dabs instead of the present single slab. I also propose to increase the present incentive of 20 per cent and 10 per cent respectively to 30 per cent and 15 per cent for the fir-.t slab of excess clearances and to 40 per cent and 20 per cent for the subsequent slab. I am hopeful that industry would take advantage of this liberalisation and step up production.
136. I have also proposed a few changes which would benefit State Governments. The first Is in relation to coated fabrics, both cotton and man-made and flocked fabrics where additional excise duty (in lieu of sales ta\) of 5 per cent ad valorem is being proposed in addition to the duty on base fabrics. This measure would net an additional re- venue of Rs. 3.4 crores in a full year. The other proposal relates to sandalwood oil in respect of which all extent exemptions are being withdrawn. The net gain from this proposal is Rs. 30 lakhs in a year,
137. I now coLit :o changes which do not involve any significant revenue. I propose a few changes in the ta, iff descriptions relating to iron and steel items which would align the Central Exise Tariff, as far as these items are concerned, with the Indian Customs Tariff. The principles of classification hitherto adopted through executive instruc- tions are being incorporated in the tariff entry itself. The tariff cntiies relating to iron and steel would be spelt out on a rnoie scientific bails and the problems encountered in the matter of charging countervailing duty would also be reduced considerably. These changes would, however, be brought into effect from a subsequent date after the necessary gioundwork. Till then, the present effective rates of duty would continue.
138. Lest this litany of measures givj the impression that the Finance Minister's proposal only relate to raising leve- nue, let me add that wheie appropriate I have tried, as T will be announcing now, some concessions in excise duties.
139. Sugar is an important item in the family budget. I propose to reduce the duty on both 'levy' and 'non-levy' sugar. The present ad valorem rates aio being leplaced by specific rates, that is 38 paise per liloguim en 'levy' sugar and 50 paise per kilogram on 'non-levy' supar. The revenue sacrifice will be of the order of Rs. 21.02 crores in a full venr. I have, however, taken special care to see that the amount due to the States from additional excise duty in lieu of sales tax on sugar is not nffected.
140. Housewives in India, as ehcwhne, have bceij com- plaining for some time about the rise in their expenses As a measure of economising on their fuel bills without affect- ing the nutritional and, hopefully, the gastronomic value of what they cook, T propose to exempt totally pressure cook- ers from excise duties. They would now fijid someone else in their kitchens letting off steam.
141. With the same intention of piomotrng fuel economy, I propose also to exempt fully from exise duty fuel efficient keiosene stoves
142. The effective basic rates of excie duty on electric bulbs upto 60 watts and fluorescent tubes aie now 10 per cent ad valorem and 30 per cent ad valorem respectively. As a measure to reduce the prices of these items, and thus help In the effort to shad more light at lesser cost, I pro- pose to exempt fully the former from excise and reduce trie basic duty on the latter from 30 per cent to 20 per cent -i1 valorem.
143. In consideration of the potential of multi-axled vehicles for fuel savings, I propose to reduce the effective basic duty on them from 15 per cent to 10 rier cent ad valorem.
144. For the benefit of farmers, who uso these fertilizers, 1 propose to fully exempt ammonium sulphate and calcium ammonium nitrate from exise duty, as also agricultural gTade pyrites used for reclamation of nlknline soils.
145. Aluminium pipes used in sprinkler equipment for irrigation, which at present bear a basic duty of 16 per cent :.J valorem, will also be fully exempted, Another proposal is for exemption from excise duty of internal combustion engines for acricultuiol spraycis, and also for powered cycles.
146. One of the factors leading to higher prices of pre- pared or preserved foods, and food producls is the cost of the nietril containers vised in their packafllnjr. I propose to exempt these items from that part of excise duly as is rela- table to the cost of such containers. This should being about a reduction in the nrice of these foods to the consu- mer.
32 THE GAZETTE OF INDIA : EXTRAORDINARY [PART I—SEC. 1]147. Skimmed milk powder sold in pocks upto 1 kilo- gram is also being fully exempted from duty as a measure to reduce its prices to consumers.
148. I also propose to fully exempt from duty s -vc al spe- cified items of hospilal furniture which should red'ice the cost of acquiring them for the hospitals.
149. These duty concessions would colt tho exchequer
Rs, 35.02 crores in a full year.
150. There arc some other proposals in respect of customs and excise duties which are relatively minor. I do not wish to take the time of the House over them.
151. The proposal I have presented will yield revenue of Rs. 409.00 crores in a full year in Cential etcise duties and Rs. 397.96 ciorei in custom duties. The concessions and re- liefs amount to Rs. 83.58 crores on the Central excise tide and Rs. 4.93 crores on the custom side. The net yield ii therefore, Rs. 125,42 crores from Central excisc duties nnd Rs. 393.03 crores from ;ustom3 duties. Ths accrual to thr Central Exchequer in a full year will be Rs. 589.71 croio and the share of the States will be Rs. 128.74 crores.
152. Where the changes are to be made by notifications effective from 1st March, 1983, copies thereof will be laid on the Table of the House in due comae.
153. In framing the Budget proposals, I have been greatlv helped by ihe observations and recommendations in repoits of Parliamentary Committees and also the reports made so far by the Economic Administration Reforms Commision. My proposals reflect these recommendations, wherever fea- sible and appropriate, but I mut add that it has not been possible for the Government to take decisions finally on all the recommendations in the reports. A number of them on important matter, such as a Tribunal for valuation of urban properties, will be processed for a Direct Taxes Amendment Bill, the preparation of which will be taken in hand.
154. This year I have not much to say on behalf of my Hon'blo colleague, tho Minister of Communications as h" has already taken care of himself. The postal services are being expanded every year to reach mere and more ceople.
Presently there are over 1,41,000 post offices, ;nd an em- \ ployce strength of about 5.8 lakhs including extra-djpart- mental staff. Wi'h a view to meeting ptirt of the increasing operating costs, it has become necessary to revise the postal tariff. While I do not propose to touch post-cards and getter- cards, the tariff in respect of parcels is proposed to be in- creased to yield Rs. 12 crotcs in a full year and Rs. 10 crorw in 1983-84. A Memorandum showing the proposed tariff is beina circulated along with tho Budget documents. The changes will take effect from a. date to be notified after the Finance Bill Is passed by Parliament.
155. I had earlier mentioned that the budfietary deficit at the existing rates of taxation would be Rs. 2250 crores. The proposed tax measures, taken together with the reliefs and concesions, are estimated to yield net additional revenue of\ Rs. 615.31 crores to the Centre and Rs. 100.74 crores to iho Srates during 1983-84. Besides, I am taking credit for Rs, 135 crores as receipts from thre new Bond to be issued in terms of the approved investment to obtain exemption from capital gains tax. After setting off the receipt of Rs. 55 crores from the existing National Rural Development Bonds already included in the Budget, the net yield on this account would be Rs. 80 ciore. The budgetary deficit would thus get reduced to Rs. 1555 crores, which Hon'blc Mem- berg would agree would not put undue strain en the economy.
156. Mr. Speaker, Sir, there are no easy answer or short- cuts to development problems faced by India. Whether we, as a nation, succeed or fail must ultima'ely depend on the quality of our economic management and the cooperation of people. It is true that wo have been able to maintain price stability despite a setback in agriculture in the current year, increase our national income by about 5 per cent per nnnum in the last three years anj show some improvement in our balance of payments despite an unfavourable international environment. These achievements, however, must not lull uj into a false sense of economic well-being. The road ahead is long arduous. Given the resilience and dedication of our people, we can face the future with hope and con- fidence.
157. Sir, I now commend tho Budget to th0 House.
A. C. TIWARI, Jt. Secy.
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- LLnt to 11 5 per cent per annum. Similail. I pio; t'-e !•) in^u-ase the rate of interest by 1 pci c^at on Spewial JVJIOMI-, OI ) niplrvyiCs Provident Fund and other non-Government piovident, grQiuity 14. The .substantial increases in domestic production of petroleum and fertilisers have enabled us to reduce om dependence on imports of these items in the cuirent jem. Imports of steel, non-ferrous metals, and several other items have also been lower. Impoit policy has sought to combine truj objective of lediicinj: ill' growth or n lpoils with the need to continue tlie libeial access 10 mv, maii'iuli Mid o;iiiii."ii goods for priority soctois. Tariff policies :ac being effcciiveU ↩
- concessions in icspect of subsciiptions by tho. non-residems to 6-Vrear National Savings Certificates, which cany iuteie.,1 at 12 per cent per s crores. The budgetary siinpoit for the power sector will gu up by Rs. 62 crores, while issistance to National Bank for ugricu!- and Rural Development hns been increased by Rs. 100 uoies. The outlays for schemes of family welfare have been enhanced by Rs. 50 ctores. Plan provisions tor rural water supply, agri- culture and co-operation have also been stepped up, while the budgetary support for ;he ?osts and Telegraphs Plan has been increased by Rs. 75 crnres owing, in this case, to a shortfall /n internal resources, As against these increases, some reducilorn Rs. 27,844 crores to Rs. 30,563 crores ↩