SHRI YASHWANT SINHA (contd.): And he said, this must be corrected; okay, fine, it must be corrected. Then, what does he do? He reduces both to 7.5 per cent. How does that correct the inverted duty structure is something which I have not been able to understand. If he had left the finished products at 10 per cent, and reduced the raw material components to 7.5 per cent, I would have said that it falls into a pattern of changing or correcting the inverted duty structure. But if you reduce both to 7.5 per cent, you are again falling prey to what you said, "undesirable" practice of this whole thing.

Sir, I would also like to make the point that there are two other raw materials, which are used in refractory production. One is what is called c-magnesia, and the other is fused magnesite. C-magnesia and fused magnesite are at 12.5 per cent and they will now have a CVD of over 5 per cent. So, what is going to happen is that you will have the finished products at 7.5 per cent or CVD, and you will have these two very important raw materials for refractories at 12.5 per cent plus CVD. So, this is something which, Sir, calls for correction.

But, Sir, the point which I was making in my Budget Speech was a point on which the Finance Minister has touched upon again today in this House when he was introducing the Finance Bill. Sir, he has said in para 137 of his Budget Speech, I reiterate: "It is our intention to converge all rates at the Cenvat rate which is now at 16 per cent." I remember, Sir, that in one of my own Budgets I had talked about three rates. I had talked about demerit rates, I had talked about a mean rate, and I had talked about a merit rate. I thought, this could form a good structure of Central Excise to have a demerit rate, to have a mean rate and to have a merit rate. I will have absolutely no quarrel with any Finance Minister who says, "I am functioning within this framework of three rates." Where is my quarrel? Subsequently, I had said, "We should settle for one mean rate." So, we will not have a merit rate, we will not have a demerit rate. We will just have one mean rate. I fixed that mean rate, Sir, at 16 per cent. That is where it stays until this Budget.

Now, the Finance Minister is making a commitment in his Budget Speech. I am reiterating that, Sir: "It is our intention to converge all rates to the mean rate of 16 per cent." It is fine. Then, what does he do? He brings the duty on small cars and soft drinks from 24 per cent to 16 per cent. I will have no quarrel with that either. Whether he should have given it to the automobile industry, as a whole, including cars also so that that one item which remains at 24 per cent would also have been covered by 16 per cent is a matter of judgment and, therefore, I am not quarrelling with that judgement of the Government on that issue. But, then, he has also talked about exemptions not being given both on direct and indirect tax side. I had, Sir, started a system in which I had said, "As far as Central Excise was concerned, all those items which were in the exempt category would be gradually brought within the tax net. And what was my principle? The principle was that if the manufacturer had a profit motive, the Government cannot be faulted if the Government had a tax motive. So, put them on an escalator, raise it to 4 per cent in the first year, 8 per cent in the next year, 12 per cent in the third year and then bring them to 16 per cent, which is the mean rate in four years' time. It will give the industry time to adjust and at some point of time, you can say, it becomes Modvatable so that the burden of taxation gets reduced. (Contd. by kls/2o)


SHRI YASHWANT SINHA (CONTD): Now, I find from his Central Excise proposals that they are fitting in no philosophy at all because, one, he is reiterating his commitment to 16 per cent mean rate, Central rate of 16 per cent; then, he is bringing some items which have been exempt so far within the tax net. But, in the same breath, Sir, he is giving exemption, complete exemption, to a number of items. He is raising some items from 8 per cent to 16 per cent. He is giving concession on some items from 16 to 8 per cent. Now, this is something the logic of which I have not been able to understand. He told us just now that food processing industry is an industry that I want to promote, then settle for three rates, say, I will have a demerit rate, I will have a mean rate and I will have a merit rate and bring all those items under the merit rate of wherever you want to fix it - 8 per cent, okay, fine. Do it at 8 per cent; bring the entire food industry at 8 per cent and then say I want to encourage processed food industry in this country. But I am saying that this playing around with the structure of Central Excise where a lot of cleaning up had taken place is something, which has disappointed me utterly. The Finance Minister of a country, Sir, is not Mohammed Bin Tughlak. We cannot say, I like you, therefore, there will be no tax. He cannot say, I do not like you, therefore, there will be tax on you. This is the pattern, which has emerged from his Central Excise Proposals.

SHRI V. NARAYANASAMY: The NDA had done like that only. ...((Interruptions)...

SHRI YASHWANT SINHA: The NDA regime -- you will take many years to understand what we have done, Mr. Naryanasamy. ...((Interruptions)...

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SHRI YASHWANT SINHA: For instance, he has said, Excise Duty has been reduced from 16 per cent to 12 per cent on specified printing, writing and packing paper. Where has this rate of 12 per cent suddenly emerged? If he wanted to give relief, bring it down to 8 per cent, call it a merit rate. Similarly, he has imposed Excise Duty of 8 per cent with CENVAT credit on a number of items, which includes frames and mounting for spectacles, goggles and the like below Rs.500 per piece. It also includes roofing tiles, and I will come back to roofing tiles. Then he has 16 per cent Excise Duty which has been imposed, the point I was making that day. He has given concessions, announced some concessions in the other House on umbrellas and sun umbrellas and their parts. Then he says, food preparation intended for free distribution, subject to end use certification. Now, he himself in this Budget Speech has decried the practice of giving tax concession based on end-use certification and he says, it leads to malpractices, that the moment you have end use certification, it becomes complex and leads to malpractice. Now he has introduced it here. He has clarified something on soap yesterday in the other House, so, I am not raising it. But mixture of graphite and clay for manufacture of pencils and pencil leads, Now, all these items starting with A to M have been brought suddenly within 16 per cent Excise, not put on escalator, as I said, of 4 per cent, 8 per cent, 12 per cent, 16 per cent - directly under 16 per cent. Then, Sir, Excise Duty has been raised from 8 to 16 per cent on many items and what are they - mosaic tiles, glassware, layflat tubings, cigarette, filter rods. I am referring only to mosaic tiles here - from 8 per cent to 16 per cent. Take the roofing tiles which have also been slapped a duty of 8 per cent. Now, my point, the point which I was making in my Budget Speech was, the housing is a major trigger for the economy and housing had picked up tremendously because of the enragement that we had given to housing. I am sorry to say that for many years now no fresh encouragement, no fresh incentive has been given to the housing sector. (Contd by 2P)


SHRI YASHWANT SINHA (CONTD.): He imposed service tax on construction industry. Now, he is imposing tax on roofing tiles and mosaic tiles and there is other hardening of interest rates etc. which are going to cause problems for the housing sector in future. Then, he has withdrawn exemptions on goods manufactured without the aid of power and he says that it is very difficult to ascertain whether power is being used or not being used and there are a whole of items, which have been included in this. Biscuits, for instance, marble slabs and tiles. Biscuits are made by hand, not using power, in all parts of the country. What is going to happen? The inspectors will get there. They will start bothering these people. They will start harassing these people. This is what happens when you bring an item under tax despite the fact that many of these products could be covered under the small-scale exemptions. Take for instance, padlocks, locks of base metal and clasps. You know, I was recently in Aligarh, the entire town depends, you know Sir, on padlocks and locks and there is a huge industry there, which is dependent on that, giving lot of employment. Now, all that is going to be brought within the tax net because it is very difficult to come to the conclusion whether they are using power or not using power. Let me also say, I have some experience of the working of this Department, that if a worker is working with his hands and there is a fan which is rotating up there from the ceiling, he will say you are using power for this. This is the kind of harassment that the Department subjects industry to. Therefore, why complicate life for people who have led a simple life and have eked out an existence so far. Marble slabs and tiles, which are not using power, have been brought within the tax net. Information Technology, he announced in the other House, that customised packet software would be exempt. But, he has imposed service tax on call centres. This is an industry, which is growing, and I think every Government owes to this industry and to the people of this country to encourage it so that we remain world leaders as far as Information Technology and IT-enabled services are concerned. So, I don't know what his calculations are, how much money he is going to get, but again, introduction of this tax on packaged software is going to make life difficult for many people.

Finally, I come to the food processing industry, which he has divided into two parts. In one case, he has given complete exemption. Whatever was at 16 per cent will now carry nil duty and some, where 16 per cent tax will be reduced to eight per cent. Sir, I am not able to understand here the logic that has gone into the selection of the items. Sir, biscuit is also a food processing industry. Sir, the point I was making last time was that you have reduced condensed milk from sixteen to nil, ice-cream from sixteen to nil, pectic substances from sixteen to nil, yeast from sixteen to nil, processed meat, fish, poultry etc. from eight per cent to nil, pasta from sixteen per cent to nil. Now, pasta is something which creates a certain impression. I know that it is the preferred food of what can be described as the "country in-law of India". But it is not the preferred food of the people in this country. It could be the preferred food of some people who are high end consumers but reducing the duty on pasta from sixteen per cent to nil while, at the same time, on a whole lot of things like gulab jamun mix, rava dosa mix, idli mix, dosa mix, it has been reduced from 16 per cent to eight per cent. (Contd. by NBR/2Q)


SHRI YASHWANT SINHA (CONTD.): Now, Mr. Chidambaram, is as much a son of this soil as any one of us. One would have expected a more considerate treatment as far as Indian food products were concerned. I don't know what is the logic in reducing these duties from 16 per cent to only 8 per cent, while duty on pastha has been reduced from 16 per cent to nil!

Now, I come to Service Tax. Sir, he has replaced the words 'commercial concern' with the word 'person.' He is a very distinguished lawyer himself. He will be able to explain to us what this would mean. But, if I am not wrong, perhaps, the limit beyond which we charge Service Tax is Rs. 4 lakhs. So, any person, who is rendering a service which is beyond Rs. 4 lakhs in a year, will now be brought within the mischief of Service Tax on all those items on which Service Tax is levied.

The point I am making is, every Finance Minister decides his own philosophy of taxation. Mr. Chidambaram would like us to believe that his philosophy is moderate and stable taxes. That is the philosophy with which nobody can have any difference of opinion. In fact, in his 1997 Budget, he had fixed some income tax rates at 10 per cent, 20 per cent and 30 per cent which, during all the six years of the NDA Government, were not changed, because we also believed in the stability of rates. But, the point which I would like to make here, today, is that the things have changed. Now, we have 8 per cent growth rate over the last three years. India is going to grow economically. There is a very large middleclass in this country. A time has come to my mind to look at these rates once again and, perhaps, give more room at the middle level. Let the high end-rate i.e., the peak rate be 30 per cent. Let the lowest rate be at 10 per cent. But, this 20 per cent, which is between Rs. 150,000 and Rs. 250,000 is something which calls for reconsideration. In 2006-07, we have reached a stage, to my mind, where, I think, this bracket should have been expanded. My suggestion will be that it could be raised from Rs. 150,000 to, maybe, Rs. 500,000 -- some point where it is not too much of tax laws. So, we are giving more room to the middleclass and more spending power to the middleclass for saving from their income.

I have talked about the Budget. So, I don't want to take your time on the Budget.

But, Sir, the final point on the taxation front which I will make is that the proposals the hon. Finance Minister has put in this Budget, in many areas, seem to be at variance with the principle that he himself has enunciated, namely, moderate taxes and stability of rates. Specially, in the Central Excise, if you go on playing with rates by giving concessions here and raising taxes there, it does not give a sense of stability. The 16 per cent rate could have been brought down. I hope, in some future Budget, it will be brought down and it will be moderated to 15 per cent, moderated to 14 per cent whichever is the mean rate that he fixes. (CONTD BY USY "2R")


SHRI YASHWANT SINHA (CONTD.): But, my plea to the Finance Minister will be, please stop playing around with individual products, individual items because this is what creates confusion. If you have a philosophy, please set it out in more clear terms. Thank you, Sir. (Ends)

SHRI V. NARAYANASAMY (PONDICHERRY): Thank you, Mr. Vice-Chairman, Sir, I rise to support the Finance Bill 2006 presented by the hon. Finance Minister in this august House. I was hearing the former Finance Minister, hon. Shri Yashwant Sinhaji, who has been candid enough to admit that during the NDA regime the fiscal management was not....

SHRI YASHWANT SINHA: I never said that, Sir. Please do not misquote me. Okay? ...(Interruptions)...

SHRI V. NARAYANASAMY: I am not misquoting you. ...(Interruptions)...

SHRI YASHWANT SINHA: Okay. I will abide by the advice of the retiring Member and say you have the liberty to misquote. ...(Interruptions)...

SHRI DIPANKAR MUKHERJEE: I am still a Member. ...(Interruptions)...

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): Mr. Narayanasamy does not have the liberty to misquote.

SHRI V. NARAYANASAMY: I am not misquoting, I am just telling in a lighter vein. He was explaining one point and I agree with him that the focus should be on the middleclass community in this country. As has been mentioned by Shri Yashwant Sinha the benefit should go to the poorer sections of the society, and also the middleclass should not feel the burden of taxation. I agree with him on that.

Sir, the hon. Finance Minister focussed on the area of food processing, where concessions have been given.

The automobile industry is a booming industry in this country. We know that not only are the people of this country getting advantage out of it, but also, there is a large potential for exports. Therefore, concession has been given here.

There is the leather industry, which is a component of international competition, and concession is required here. All these areas have been covered by the hon. Finance Minister. I could find a kind of envy in the argument put forth by the former Finance Minister. Without much burden on the consumer, there is a 20 per cent increase in the gross tax return which has been managed by the present Finance Minister. He may not relish it, therefore, he has been arguing in this way. Sir, whether it is personal income tax or corporate tax, we could find that the same is being maintained and no change has been made.

Sir, I would like to touch very briefly two or three points. As far as VAT is concerned, it is the policy of the Government that VAT has to be introduced in all the States. Some of them have agreed; some States have introduced VAT. According to the Finance Minister and also according to some State Chief Ministers, VAT has been doing the magic. They are able to get very good revenue after the introduction of VAT whether it is Delhi or some other States. The Rajasthan Government has agreed to implement VAT this year. Some of the States have not implemented it and some opposition has come even from Uttar Pradesh. What is the policy of the Government? How are they going to ensure a uniform implementation of VAT in this country? Sir, in Southern States also, some States have not fallen in line. Therefore, I want the hon. Finance Minister to...

SHRI P. CHIDAMBARAM: Not only Tamil Nadu, but, Pondicherry also. ...(Interruptions)...

SHRI V. NARAYANASAMY: Therefore, I said, some Southern States. ...(Interruptions)...

SHRI P.G. NARAYANAN: We are ready to pay VAT if you... (Interruptions)...

SHRI P. CHIDAMBARAM: There cannot be a compensation formula exclusively for Tamil Nadu. Twenty-five States have accepted it and you want a separate formula. How is it possible? .. (Interruptions)...

(Followed by PB/2S)


SHRI V. NARAYANASAMY: That I would like to know from the hon. Finance Minister. Sir, there is one area where there is a small concession that has been given to the Chartered Accountants because the hon. Finance Minister has also received a lot of representations on this. The Government had given an exemption in 1988 to the practising Chartered Accountants. Now they have been brought under the service tax net. Sir, if a lawyer appears before the Tribunal, he is not taxed because the lawyers are exempted. ...(Interruptions)...

THE VICE-CHAIRMAN (SHRI KALRAJ MISHRA): Let him speak. ...(Interruptions)...

SHRI SITARAM YECHURY: Are you indicating that there is a conflict of interests with the Finance Minister? ...(Interruptions)...

SHRI V. NARAYANASAMY: No; no; I am not saying this. ...(Interruptions)...

SHRI SITARAM YECHURY: You are charging the Finance Minister.

SHRI V. NARAYANASAMY: The Finance Minister is not practising now. ...(Interruptions)...

SHRI SITARAM YECHURY: So, he is investing in his future.

SHRI V. NARAYANASAMY: It is for you to assess. I am not going to say anything on that. Sir, there is a genuine demand from the Chartered Accountants or the Cost Accountants. There is a demand from all these people that when they appear before the Tax Tribunal, or, if an Income-Tax practitioner goes there, they should also be exempted. Sir, when a lawyer appears before the Tax Tribunal or even before the Appellate Authority, they are exempted. As far as Chartered Accountants are concerned, they have been brought under the service tax net. I want the hon. Finance Minister to reconsider this because there should be a level-playing field. All those people who are appearing before the Tribunal, whatever be the qualifications which have been prescribed, either all of them should be brought under the service tax net, or otherwise, all of them should be exempted. There should not be pick and choose policy, like some people are taxed and some people are not taxed. Therefore, I want the hon. Finance Minister to respond on this issue.

Then, Sir, my third point is that the small paper pad which everybody is using, which was exempted by the Government and which is a sort of cottage industry, is taxed now. If it is a loose sheet, which the Finance Minister is holding now, it is not taxed. If a person writes on the loose sheet, it is not being taxed. But if it is a bound one, whether it is a register, diary, file folder, writing pad, notebook, etc., it is taxed. Even the notebooks are being taxed. What is the logic behind it? This is used by millions of people, and it gives employment to a large number of those people who are working in small cottage industries. It is handmade only; machines are not being used. There should be some logic behind taxing those items which are being manufactured by hand in the various households. Now, the hon. Finance Minister would say that the exemption is up to Rs. one crore. You know the kind of harassment they are facing when you bring them under the tax net. Therefore, Sir, I want the hon. Minister to look into it. Sir, by taxing the notebooks, diaries, file folders, writing pads, etc., how much revenue you are going to mop up? It is going to be very negligible. Therefore, I want the Finance Minister to consider that.

Sir, as far as the food processing industry is concerned, a lot has to be done for it. They need a lot of concession by the Government. For the last twenty years, we have been saying that we want cold storages in all the rural areas for the benefit of the farmers. We have been saying that for processing of the agricultural produce of the farmers, we want the processing industry. But it is not taking off because they are not getting the kind of support which is required from the Finance Ministry, the Finance Department. Sir, steps like giving them some concessions here and there for the machinery, for the produce that is being manufactured or by exempting some of them, or, giving them 50 per cent concession here or there are not going to solve the problem.

(Contd. by 2t/SKC)


SHRI V. NARAYANSAMY (CONTD.): Whether it is in the Western countries or China, we find that the food processing industry has been paid the utmost attention by the Government, because there it is a value addition. By carrying out food processing in the area where production takes place, farmers can get the advantage. Also, the product can be exported if it is properly processed. Therefore, I would like the hon. Finance Minister to concentrate on that area. We would request a little more attention from him.

Sir, coming to packaged software, about which Shri Yashwant Sinha has also mentioned, I agree that Information Technology and software need to be given all the concessions by the Finance Ministry. We find from the newspapers that China is going to sell its computers for Rs. 5000. We are giving it for Rs. 10,000. China started the software industry five years after India did it. Today, they want to give computers at a cost of Rs. 5000. That being the case, where is the question of the hon. Finance Minister imposing tax on packaged software? The area to which we need to pay more attention is the software industry. It is a growing industry today, and we need to give a lot of concessions, which go directly to the consumer, the user. Nowadays, computers are being used even in villages. Therefore, Sir, kindly consider this aspect also.

Sir, though I have a lot of suggestions to make, because of time constraint, I wish to cut short my submission. By not increasing the personal income tax, as also the corporate tax, the hon. Minister has not put any burden on the consumers for which I congratulate the hon. Finance Minister.

With these few suggestions, I conclude my speech. (Ends)


SHRI V. NARAYANASAMY: Yechuryji, have you got any conflict of interest?


Thank you, Mr. Vice-Chairman, for giving me this opportunity. I mean, it is a surprise that I have risen to speak. But I could not resist myself since the hon. Finance Minister is here. And Mr. Narayanasamy is particularly provocative, as always. But before falling a prey to that provocation, I would like to talk about the larger issues.

Sir, the Finance Bill is usually concerned with the rates of taxation and the tax revenues that we mobilise for purposes of financing the other activities, economic activities, of the Government. Now, in this Budget, Sir -- we went through this discussion earlier -- the hon. Finance Minister and the Government is expecting an increase in gross tax revenues to the tune of 19.5 per cent, or, something in addition to Rs. 72,000 crores. Of these Rs. 72,000 and odd crores, only about Rs. 10,000 crores comes from collection of the past arrears and Rs. 6000 crores comes from additional tax mobilisation. This leaves a massive amount of Rs. 54,000 crores, which we hope, will be collected because of a general buoyancy in the economy. But, in my opinion -- and I think this is an important point which I need to repeat, even though I spoke on this the other day -- much of these extra windfall collections which have happened for the last three years consecutively, and is likely to happen this year also, are essentially related to one important fact, which is corroborated also by the fact that the Forbes List today has various Indians listed as billionaires in terms of dollars. Our Indian economic journals have done a survey where they have said that the number of Indian billionaires, in terms of Indian rupees, has grown to about 311 from a less-than-a-hundred figure within the course of one year. All this is indicative of the essential point, Sir, that there is, in the hands of a few, vast accumulated surpluses before tax that had accrued to them. It is because of this that this tax collection buoyancy has happened in the country. Now, the main question is why is this accumulation of surpluses before tax concentrated in a few hands and why this has happened. That is the real concern that is directly related with the tax proposals. The reason I would adduce is that the bulk of the people, particularly in rural India, are actually being squeezed economically, and it is this growing economic inequality, which is resulting in this growth of surpluses before tax in the hands of a few. To adduce evidence for my point, if you look at the NSS Surveys, it shows that within a decade, from 1993-04 to 2003-04, per capita expenditures of 80 per cent of the rural households have declined in real terms. (Contd. by 2U)


SHRI SITARAM YECHURY (CONTD.): During this period, on an average, the growth in per capita income of the country has been four per cent. Now, for 80 per cent of the rural population, if there is a decline and there is a four per cent across-the-board increase in per capita incomes on an average, that shows the extent to which economic inequalities have widened. Now, widening of these economic inequalities is the cause for the extra revenue buoyancy and revenue mobilisation that has happened in the last three years. And if this widening is the reason, which I believe is the reason, then, this is a very, very disturbing decision that the Government seems to have taken, which was announced by the Prime Minister, unfortunately, when the Parliament is in session, that is, opening up of capital account convertibility. The RBI has issued guidelines now.

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): This was announced in Parliament in the Budget Speech of 1997-98. A committee had been appointed then. That Committee submitted a report. Of course, the ASEAN crisis overtook that. All that the Prime Minister said in Mumbai was that he would request the RBI to examine what steps need to be taken. No decision has been announced on capital account convertibility.

SHRI SITARAM YECHURY: Thank you, Mr. Finance Minister.

SHRI V. NARAYANASAMY: Before that your Government also came.

SHRI YASHWANT SINHA: Sir, this issue has come up sideways. This is an issue on which I had given notice for breach of privilege. This is the issue on which I have given...(interruptions)...

SHRI P. CHIDAMBARAM: You cannot raise it as a privilege. ..(Interruptions)..

SHRI YASHWANT SINHA: No, I am not raising it. I am merely saying that I don't accept your argument that no announcement has been made. You have made an announcement. ..(Interruptions)..

SHRI P. CHIDAMBARAM: You have raised it as a privilege...(interruptions)...

SHRI YASHWANT SINHA: You have made an announcement outside Parliament when the Parliament is in session. Parliament has been taken for granted. ..(Interruptions)..

SHRI P. CHIDAMBARAM: He is raising it as a privilege issue through the backdoor. ..(Interruptions)..

SHRI SITARAM YECHURY: I am very happy that the hon. Finance Minister has clarified in the House that no decision has been taken, and I would urge upon the Government not to take this decision, connecting it what I was talking about with the Finance Bill and why I am urging the Government is for various reasons.

The hon. Finance Minister is absolutely right when he said that the Tarapore Committee -- which had met then, and all of us are aware of its recommendations -- had suggested capital account convertibility. But mercifully, we did not do it then because the Government of the day is itself on record, saying that because we did not do that, we insulated ourselves from the ASEAN crisis, and because of that we did not fall into the vortex of that crisis. Now, that is a point of history. I am not going into that post-mortem analysis. But we have said, Sir, that the country is not prepared for such a conversion. Why I want to urge the Government not to proceed with that is the following.

The Committee may be meeting and may be considering, let us wait for the report to come. But the proposal is that to the tune of 25,000 dollars, an individual, an Indian, can use that amount yearly for either opening foreign accounts, or using that money for any investments abroad. Now, this may look a very meagre sum. But, if you take one million Indians, which is 0.1 per cent of our population, and the people from whom we are expecting this tax buoyancy, of this whopping Rs. 55,000 crores, it is those people who have these surpluses who would then utilise the surpluses, not for the purposes of increasing our tax revenues, but for purposes of investing and opening accounts outside.

Sir, my concern is directly connected with the financing of the projects which the Government has promised to undertake in the social sector. They may, however, be inadequate but that is a different point. My fear is, even this tax buoyancy will not be realisable because of the capital account convertibility. As a result, there will be greater and further crunches that will be imposed on social, infrastructure development, which will be disastrous and which, I think, will be a negation of the commitment that this Government has made in the Common Minimum Programme. Therefore, this is a point which they have to keep in mind.

The other reason, Sir, which I wish to actually inform this House is that we have had a massive amount of foreign exchange reserves in the country. If we go through it, in 2002-03, the net capital inflows into the country were to the tune of US $12 billion and US $6 billion came in addition in 2003-04, in the first quarter of April-June.

(Contd. by 2W/KSK)


SHRI SITARAM YECHURY (CONTD): And, the reserve accumulation with the RBI is to the tune of 17 billion dollars during 2002-03. That is all around, roughly, about 25 billion dollars between April-December, 2003. My point is that a 0.1 per cent of the country's population, if it wishes to utilise this avenue, then this entire thing is wiped out. That will put a very serious constraint not only on the economy, but, as I have argued, it will put constraints on the governmental revenues which will adversely affect the financing of the much-needed social infrastructure projects which were outlined in the Budget.

Secondly, Sir, the argument, that is often given, is that there is huge amount of foreign exchange reserve in the country. But, the returns on the foreign exchange reserve are declining. The RBI has itself put out that what it earned, let us say, 4.1 per cent on these reserves as an interest rate between 2001-02, has decreased to 2.8 per cent between July-June in 2002-2003. So, what we are holding, even the holding costs, whether they are coming through interest generated on this amount, that is also doubtful. Yes, therefore, there is pressure. There is too much of this accumulation. And, if the supply is larger than the demand, then the rupee appreciates, and if the rupee appreciates, Indian export competitiveness decreases, and if the Indian export competitiveness decreases, our growth will not be as vibrant as it ought to be. That is the official argument. But, my point is that in order to meet that argument, what you are doing is greater damage to the economy by undertaking this proposal at this present juncture, because what we will see is a net outflow of capital from the country and in such sums that that will actually affect your domestic rates of investment, and which will affect your domestic rates of savings. Therefore, capital account convertibility is actually like opening up the sluice gates when the floods are already on in the country. And, we would urge this Government not to undertake this at the present juncture because, I think, this will be completely ruining us even in terms of the tax revenue mobilisation, calculations that the Finance Minister himself has presented in the Finance Bill. Because this buoyancy, I repeat again, of Rs.54,000 odd crores, which has to come from these surpluses, will be diverted into that area. So, I would sincerely and seriously urge this Government to reconsider it. And, let us not forget that as far as international capital is concerned, there is a very unique phrase, which is called 'feast or famine syndrome'. There is a feast when you have nice returns and there is a famine when these returns no longer exist. If that is an argument that our stock market today has crossed, it is almost nearing 11,000 -- we were told as we entered the House today -- if it is a sign of good health, we are told, that is why, it is rising, but, Sir, I want the Finance Minister also to consider this point. Through you, I want to make this point to the Government...(Interruptions). Sir, what I am saying is that this rise in your Sensex is also directly related to the fact that you do not tax profits on the Sensex. There is no dividend tax; there is no capital gains tax. You can earn thousands of crores of rupees as dividend income and not pay tax. But, the poor, the middle-class salaried people have to pay tax. Therefore, this anomaly is a cause for this increase. Finance Minister must recognise this point. So, do not fall into the false trap of saying this is because of good health of my economy, and therefore, I am in a position to enter into capital account convertibility today. That would be disastrous and we would want the Government to seriously reconsider it. So, this is the major point that I wanted to make. The other thing is -- many of my colleagues will agree -- regarding two further points that I would like to make. One is across the road reduction in customs duty that has been announced. Now, this will adversely affect you domestic producers and, therefore, it will also adversely affect the employment that these producers were giving. For example, today, you have a zero per cent duty on importing a laptop. You have a zero per cent duty on importing a colour television. Now, what will happen to all these industries that have mushroomed in our country during these years to actually create and produce those parts that will go into final assembling of these products? If you can import them at zero per cent, and you have an excise duty of 12 per cent for your domestic producers, it is a sure recipe for ultimately, totally ruining your domestic industries in these areas. Now, this must be seriously considered because these are not only related to the growth of our small domestic industries but this is also directly connected with the employment potential that these industries give. (Time-bell). Sir, I would like to make one last point.

(continued by 2x)


SHRI SITARAM YECHURY (CONTD.): Therefore, I would only urge the Finance Minister to consider this before we adopt the Finance Bill. In the sense, I know the limitations of the Rajya Sabha in adopting the Finance Bill but we would want them to seriously consider it.

SHRI P. CHIDAMBARAM: We are returning the Bill.

SHRI SITARAM YECHURY: Yes, we are only returning the Bill. But I would want them to consider yet another additional point, that is, to please reconsider, and, I will repeat, please reconsider for the sake of our country's revenues, for the sake of the health of the economy, some method by which you will mop up some, some of the profits that are actually accruing in your stock markets. A 54 per cent increase in one year when your economy is growing at just eight per cent, this mismatch cannot be allowed. We have given our suggestions earlier. I am aware of the constraints that the present Government and the Finance Ministry has, which is also partly a legacy that came from the other side, about Mauritius route, about the double taxation agreement. Why all this is happening, I am aware of those things, but, nevertheless, I think, this is an area that merits a much closer scrutiny so that larger revenues can be raised.

SHRI YASHWANT SINHA: That legacy had come even before we came into office. It was done when Dr. Manmohan Singh was the Finance Minister.

SHRI SITARAM YECHURY: Thanks for the clarification. Only because of this particular situation whereby we have some say and some role to play, now use that as a pretext to break from that legacy. If it is coming from the Congress, down to the NDA and back to the UPA, then Left is sincerely urging you to accept...(Interruptions)

SHRI YASHWANT SINHA: Through the United Front Government.

SHRI SITARAM YECHURY: Through the United Front Government! He was the Finance Minister there as well.

Finally, Sir, through you, we would like to urge the Government and the Finance Minster to seriously explore the possibility of a closer scrutiny of how we can tap more resources from the stock market gains. Thank you, Sir. (Ends)

SHRI C. PERUMAL (TAMIL NADU): Mr. Vice-Chairman, Sir, I rise to speak on the Finance Bill. I am straightway coming to the important issues. Sir, one important aspect is tax on cooperatives. The cooperative banks in rural areas lend mostly to farmers. The income tax imposed on the cooperative banks is a jolt to them, and, in any case, farmers will be affected. Moreover, the cooperative banks in rural areas do not have finance support and facilities which are enjoyed by banks in urban areas. I demand that taxes on cooperative banks should be withdrawn immediately.

Sir, on the one hand, the Government is trying to popularise the computers, but, on the other hand, the Government is taking steps which would affect this industry. With much fanfare, the Government announced that computers would be sold at Rs. 10,000/-. But with the increase in the excise duty, I do not know how it would be possible to sell computers at this price. Due to the increase in the prices of computers, the student community will be affected the most. Therefore, Sir, I demand that the excise duty on computers should be withdrawn completely.

(MR. DEPUTY CHAIRMAN in the Chair)

Sir, banks have started charging transaction fee on ATM services. While it was promised that there would be no burden on users, this is an indirect way of burdening the common man. Moreover, the service tax has been increased from 10 per cent to 12 per cent. The impact will be felt everywhere. If one goes to a middle-budget hotel in an urban area to have lunch, and, the amount of the bill is Rs. 100, then the service tax will be around Rs. 15, Value Added Tax will be Rs. 20 and the customer is left high and dry. Though on the face of it, it appears that the common man does not have to pay any service charge but when he goes to market to buy goods or to avail any service, he has to pay more.

Sir, as far as handloom sector is concerned, there is no specific fund for its development. The handloom sector is like a rural industry and lakhs of workers are involved in it. Sir, the treatment that is given to the powerloom sector is not given to the handloom sector.

Sir, the standard deduction which was withdrawn should be restored. Moreover, Sir, the income of senior citizens up to Rs. 3 lakhs should be exempted from tax. (Contd. by 2Y-sk)


SHRI C. PERUMAL (CONTD.): Sir, everybody expected that there would be some concession in tax proposals. With the increase in cost of living and general price rice, the income tax limit should be raised to Rs. 1,50,000 from Rs. 1,00,000. The Finance Minister, in the other House, stated that taxation in respect of senior citizens and women should not be revised every year. But, when the cost of living is so high, what is the problem in upward revision?

Another important aspect is that Income Tax Act should be simplified so that even an ordinary citizen can understand it. In fact, I urge upon the Government to review all taxation laws to make them simpler. The excise duty on all items of daily use by common man should not be hiked and a review is necessary. The excise duty on several items has been increased and it has been totally withdrawn.

Sir, the hon. Minister has increased the rate of Vanaspati in this Budget. One thing that I would like to know from the hon. Minister is this. We were importing Vanaspati from Sri Lanka and Nepal at zero per cent duty. At this stage, what happened to our production? Let me clarify, Sir.

Sir, the banks, particularly, the nationalised banks, charge a different rate of interest for various loan schemes. The banks should charge a uniform rate of interest for all types of loans so that the scheme is transparent and people are benefited. Now, 25 per cent subsidy is given for the self-employment scheme. This should be increased to 50 per cent because of high rate of unemployment situation in the country.

Then, Sir, the so-called concessions to the farmers are just an eyewash. No concrete mechanism has been set up for agricultural credit. Farmers are still committing suicides. Many of the banks, including some nationalised banks, have lagged behind in the agricultural credit sector. When a farmer approaches a bank for loan, he is made to run from pillar to post. He is harassed in such a way that he is forced to seek credit from greedy moneylenders.

There is no mention about crop diversification scheme. There is no mention about reimbursement of expenses to the State Governments in connection with free power supply to farmers. The Crop Insurance Scheme has not been extended to all crops and all seasons by taking village as a unit.

Mr. Deputy Chairman, Sir, children are the future of this country. In Tamil Nadu, a scheme has been introduced by our Hon. Chief Minister, Puratchi Thalavi, to provide free cycles to all students studying in plus 1 and plus 2, irrespective of their religion or caste. This scheme is unique, not only in India, but in the whole world. The Mid Day Meal Scheme is a great success in Tamil Nadu. The allocation for education sector has not been increased considerably. With great regret, I would say that education loans are not given to the students. Students are harassed and security is insisted and a long time is taken to process the loans. Only poor students approach banks for loans. If they are denied, then, what is the purpose of this scheme? There is no mention in the Budget regarding imparting free education to students of all classes. The rate of interest should be reduced and loans should be given liberally to students. I raised this matter through a Special Mention. The education loans should be given without any security and surety and only on the basis of mark-sheet and the certificate of the students.

Sir, the proverb goes 'Health is Wealth'. Under the National Rural Health Mission, Tamil Nadu has not been included at all. And, on top of this, the Health Minister is from Tamil Nadu.

Sir, I will talk about one more general subject. Dharmapuri and Krishnagiri are the two backward districts in Tamil Nadu. But, they have not been included in the National Rural Employment Guarantee Scheme. I demand that both these districts should be included under this Scheme. Both the districts depend wholly on monsoon for agricultural and drinking purposes. In the last so many years, there has not been sufficient rain. The scanty groundwater available also consists of fluoride, which is harmful to human lives and livestock. An integrated water scheme, based on the Hogenakal falls, is the need of the hour. But, there is no mention about this in this Budget. The interest rate on Employees Provident Fund has not been increased despite demand from all sections of the House and the society. (Contd. by YSR-2z)


SHRI C. PERUMAL (CONTD.): Sir, finally, one important point regarding my State. The Central Government announced, two years back, to set up a plant to make seawater potable at Chennai at a cost of Rs.1,000 crore, but no fund has been allocated so far. In fact, the scheme was launched by Tamil Nadu Government many years back. Though the Tamil Nadu Government has completed all the formalities, the environmental clearance has not been given. The Central Government has neither allocated funds nor given clearance for the State project. I request that the necessary funds and environmental clearance should be given to the State project immediately. With these words, I conclude. Thank you, Sir. (Ends)

SHRI RAMA MUNI REDDY SIRIGIREDDY (ANDHRA PRADESH): Thank you, Mr. Deputy Chairman, Sir, I rise to speak on the Finance Bill, 2006. Agriculture is the mainstay of our country. 70-75 per cent of the people depend on agriculture for their livelihood. Agriculture and its allied sectors contribute 22 per cent to the GDP. So, it is the backbone of our economy. Sixty per cent of the area sown is dependent on rainfall. We have been talking about upliftment of farmers since our First Five-Year Plan. But we have done little in this direction. If you look at the scenario, big farmers are becoming marginal and marginal farmers are becoming labourers. So, this trend has to be changed by making necessary adjustments in our policies relating to agriculture such as land utilisation, crop diversification, credit, integrated production of oilseeds, pulses, etc. Farmer is facing problems due to spurious seeds. He is still haunting to get lab-to-land techniques. We demand Minimum Guarantee Price for the farmer instead of Minimum Support Price.

Now, I come to agriculture insurance. The finance Minister said that there would not be any change in the National Agriculture Insurance Scheme for 2006-07. I suggest that it has to be a comprehensive and effective one and according to the existing needs. It should cover all the small and marginal farmers.

Irrigation is another important area for sustained agriculture production. We have to put a lot of emphasis on restoration of water bodies. We do not lack the most precious natural resource, that is, water. But due to lack of proper planning, we are not able to tap it. For this, a clear-cut road map has to be drawn by taking all the political parties into confidence. The Government of India should take measures to settle water disputes between the States. Otherwise, it may cause unrest. A beginning has been made with regard to interlinking of rivers during the N.D.A. regime. It should be speeded up. The hon. Minister said that six lakh hectares would be brought under irrigation. If more funds are allocated, then only we can achieve this goal. The National Common Minimum Programme also assured the people in this regard, but no concrete steps are contemplated.

Now, I come to organic farming. A scheme called "National Project on Organic Farming" has been taken up in October, 2004. I don't know about its progress. The hon. Finance Minister has not given any importance to this. He should pay more attention to it.

Now, I come to micro finance. The hon. Minister announced last year major changes in the micro finance. But nothing has been done so far. In the Budget Speech, he said that he would introduce a comprehensive Bill to this effect. I only request him to pass it early.

Sir, now I come to Self-Help Groups. Andhra Pradesh is having the highest number of Self-Help Groups in India. More and more SHGs should be encouraged. The goal set in 2006-07 for credit-linked SHGs looks ambitious, but, if you have the will to implement, then only we can do so. Women have to be empowered through SHGs. Private companies are exploiting women in Andhra Pradesh by charging interest at the rate of 36 per cent to 50 per cent. It was questioned yesterday also.

Sir, in the regime of WTO, our farmers don't have a level-playing field. Hence, the Government should help the farming community in a big way.

(Contd. by VKK/3A)