SHRI SHANTARAM LAXMAN NAIK (CONTD.): Then I would come to Employment Guarantee Act. Sir, in a place like Goa, in my State, this Act does not work because it has operations in other State; it is not applied also. But the question is that we also require some sort of relief under the Act. We do not require manual jobs because there the rate of manual daily wages is very high. This sometimes exceeds Rs.150 per day. But there are young boys and girls in Goa who are longing for a job of Rs.3000 per month -- it is a white collar job. Nevertheless, persons who cannot go to fields or do manual jobs and like to feed their families, they also require jobs. Therefore, this Employment Guarantee Act has to be amended to cover such people who require non-manual work and they are also equally poor. Therefore, in a smaller State like Goa and in other places, this Act should be made applicable with necessary amendment. Now, Sir, the Government of India is coming with a very ideal and revolutionary policy of rehabilitation. Now, this policy and a subsequent legislation, if it comes into force, will really revolutionise the things. When the land is acquired today, we pay only compensation and forget. But under the new policy whenever the land will be acquired for the public projects, it will be seen that the family is settled; it will be seen that somebody in the family is employed in the industrial unit or in the project, whichever will come in that land. So, all humane aspects are dealt with under the new policy. I think a Committee has been constituted to further go into the details. I would like to appeal to the Government of India to finalise this new policy and amend the Land Acquisition Act accordingly and make it an ideal policy followed by statute. Now I have one or two points more. Sir, we have several legislations dealing with finances like Income Tax Act, Customs Act, Excise Act and Wealth Tax Act. In all these Acts, the Supreme Court of India and various High Courts have given different rulings. They are laying down certain principles. If those principles are accepted to the Government of India as valid interpretations, let those principles be incorporated in the respective legislations. If we do not agree, then amend the respective Acts and disagree with those rulings. Now, Sir, the basic law remains at one place and there are various ample rulings of the Supreme Court and High Courts which are a part of a different set of law. Therefore, I would like to appeal to the Government to simplify the matter, to simplify the implementation of various tax laws. These principles which have been pronounced by the Court either we accept them or reject them and include them in the form of law. Lastly, Sir, Jaitleyji has referred to Goa in some connection. Maybe he wants to say that everything will be followed; Goa results will be coming and all these things. But I have never seen BJP as a political party believing in any Economics. They do not believe in Economics. They have got a different line of action as far as winning of election is concerned. Six months prior to any election, they create some problems of a religious type and on that basis they win. They do not believe in construction of roads, dams, schools, etc. Since elections are coming in Goa, they have started it. In many places, idols have been ... (Interruptions) .. †Ö¯Ö ‡ÛúÖò®Ö´Öß ¯Ö¸ü ×›ü¯Öë›ü Ûú¸üŸÖê Æïü ŸÖÖê †Ö¯Ö idols Ûêú ¯ÖÖÃÖ ŒµÖÖë •ÖÖŸÖê Æïü, ¾ÖÆüÖÓ ´ÖÓ×¤ü¸üÖë †Öî¸ü ´Ö×Ã•Ö¤üÖë ´Öë Ûãú”û ÝÖ›Íü²Ö›Íü Ûú¸ü®Öê ŒµÖÖë •ÖÖŸÖê Æïü?
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THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA) in the Chair.
SHRI SHANTARAM LAXMAN NAIK: Therefore, please believe in economics. Try to contribute to the nations development through special thoughts on the Economics, not go on those religious aspects. Thank you. (Ends) (Followed by 2n/SK)
SHRI PRASANTA CHATTERJEE (WEST BENGAL): Thank you, Sir. At the very outset, through you, I would like to inform the House that within one year, that is, between August 2005 and August 2006, the wealth of the Richest Indians grew by over 32,000 crores, if we compare the list of Indian Billionaires. That is one figure. I would also like to inform the House about the other figure put forth by the UNDP Report that India ranks 126th in the human development ranking of 177 countries. They put forth that the India accounts for 23 per cent of child deaths, 20 per cent of maternal deaths, 68 per cent of the leprosy cases and 30 per cent of tuberculosis cases. So, reform is there. But, in whose favour we are working? We know about the figures of suicidal deaths. The reforms have helped which section of the population? That is the point to be considered here. And, we have been called obstructionists. Yes, we have obstructed the multinationals and the billionaires. We will continue to do that. We will stand in favour of the people of this country. That is the point we like to place here. Yes, we are obstructionists. But, for the national economy, for the cause of the nation's people. We are against the sale of public property at very serious low rates; we are against the disinvestment, which has become outright loss to the public exchequer, raising serious issues of corruption. These are twin brothers, not this side or that side. Like, it has happened in the case of the Centaur Hotel. We are the students of social science. We know how the capitalism grows. The reform which means 6 crore tonnes of foodgrains rotted in godowns while people starved, yes, we are against these types of reforms. We are against privatisation, not in favour of multinationals, the billionaires and for bringing the FDI in crucial areas. Yes, we will oppose and obstruct any measure against the people of this country. Like pension sector or the insurance sector, everybody knows our stand. That is one point which I would like to put at the very initial stage.
Sir, annual growth of employment in the organised sector between 1994 and 2004 declined by minus 0.38 per cent. Simultaneously, the rate of inflation, particularly relating to food items, has also increased sharply, by more than 6 per cent, in recent years. As a consequence, following the policy of globalisation, there has been a slackening in the growth of agriculture, curtailment of the PDS system, weakening of the Essential Commodities Act and entry of large corporate houses into the retail trade for food items with permission for futures trading. All these things are contributing to the existing inflationary situation. This is another point I would like to mention here. (Contd. by 2o-ysr)
SHRI PRASANTA CHATTERJEE (CONTD.): Sir, the efforts to mobilise additional resources in successive budgets under the UPA Government have been insignificant. But despite being able to raise the tax GDP ratio, the resource mobilisation effort of the Government has been grossly inadequate as far as meeting the pro-people commitments made in the NCMP are concerned. Apart from the NREGA, which has been partially implemented, several commitments made in the NCMP like spending 6 per cent of the GDP in education, 2-3 per cent of the GDP on health or providing social security to unorganised sector workers have not been fulfilled so far due to the inadequacy of resources. The tax proposals contained in the Finance Bill 2007 do not signify any departure from this trend.
The only proposal for additional resource mobilisation in the Finance Bill is the increase in the rate of dividend distribution tax for domestic companies from 12.5 per cent to 15 per cent and for money market mutual funds and liquid mutual funds to 25 per cent. The suggestion by the Left Parties to reintroduce the long-term capital gains tax on equities and increase the rate of Securities Transaction Tax, which can contribute significantly to revenue mobilisation besides dampening speculative excesses in the capital markets, has been ignored. Neither has been the proposal to increase the rate as well as the base of wealth tax been considered. Wealth tax collection was a meagre Rs.265 crore in 2006-07 and is budgeted at only Rs.315 crore for 2007-08.
The Statement on Revenue Foregone tabled along with the Budget Estimates revenue foregone on account of the direct and indirect tax exemptions to be Rs.2,35,191 crore and Rs.2,06,700 crore for 2006-07 and 2005-06 respectively. A meeting of the Consultative Committee attached to the Ministry of Finance was held last year in order to build political consensus to do away with the myriad tax concessions and reduce tax expenditures. Despite this, no serious attempt has been made in the Finance Bill to rationalise the myriad tax exemptions. The proposals to rationalise tax exemptions made in the Finance Bill are very limited in scope and would not reduce tax expenditures substantially.
The Finance Minister in his Budget speech has noted that the effective rate of corporate tax paid by all companies in 2006-07 was only 19.2 per cent (against a scheduled tax rate of 33 per cent), thanks to the numerous tax concessions and exemptions. However, the Finance Bill provides new tax concessions to corporates including extension of tax concessions to cross country natural gas distribution networks and navigation channels in sea, continuing with concessions to venture capital funds and providing a five-year tax holiday for hotels to be built in the National Capital Territory before the Commonwealth Games.
Tax arrears at the end of 2005-06 stood at Rs.90,255 crore, out of which Rs.19,875 crore was not under dispute. However, the target set for collection of arrears, according to the Budget Estimates provided in the Receipts Budget is around Rs.12,000 crore only, out of which Rs.9,000 crore is for collection of arrears of direct taxes. This clearly shows that there is much larger scope of collection of tax arrears, especially the amount not under dispute. (Time-bell)
Sir, we could not speak on Budget. This aspect will have to be considered.
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): You speak. I am only warning you. Please listen to me. Whether you spoke on Budget or not, is not the question. You take your time. But try to quickly finish this.
SHRI PRASANTA CHATTERJEE: The Budget Estimates for Tax Revenue in 2007-08 show a disturbing trend; while total tax revenues are expected to increase by 17.1 per cent over 2006-07, corporate tax revenue is budgeted to increase by 14.9 per cent only. (Contd. by 2P)
SHRI PRASANTA CHATTERJEE (CONTD.): While revenue from income tax other than corporate tax is expected to grow at 19.7 per cent, this implies that corporates are expected to contribute a lesser share in total taxes while the individual income tax payers are expected to contribute more. This is not in keeping with the equity principle. A larger quantum of taxes should be collected from the corporates by doing away with corporate tax concessions and excise duty exemptions.
Finally, Sir, I suggest the following changes in the tax proposals:
There is a need to provide greater tax relief to personal income tax payers. The basic exemption limit for income tax, as provided in the First Schedule of the Finance Bill, should be raised from R.1,10,000, as proposed in the Finance Bill, to Rs.1,50,000. For woman residents, the basic exemption limit should be Rs.1,75,000, and for senior citizens, Rs.2,00,000.
A provision has been made in clause 10 of the Finance Bill whereby employees--an amendment will be moved and Shri Tapan Kumar will also speak on this issue--availing housing facilities provided by their employers would have to pay higher income tax since the value of their accommodation would be added to their salary while calculating their income. Some changes have been made, but we would like to emphasise on the total roll back of this clause since it would increase the tax burden of the employees.
While reduction in customs duty on specific items can be understood, provided there is sufficient economic justification, an across the board cut in the peak rate of customs duty on most non-agricultural products from 12.5 per cent to 10 per cent, as has been proposed in the Finance Bill, is deeply problematic. The justification provided for this all-round customs duty cut in items of "one more step towards comparable East Asian rates" is unacceptable. The customs duty rates should be set in accordance with national needs and priorities, especially, keeping in mind the interests of domestic industries. This move, besides leading to significant revenue loss for the Government, would also hurt domestic producers, needs to be reversed through suitable changes in the Second Schedule of the Finance Bill. Sir, we do not find any reason for the proposed cut in customs duty on import of pet foods from 30 per cent to 20 per cent. It is a totally unnecessary move, Sir.
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): How much time will you take?
SHRI PRASANTA CHATTERJEE: I will take only five or six minutes more, Sir.
THE VICE-CHAIRMAN: Go ahead.
SHRI PRASANTA CHATTERJEE: There is another point, Sir. The Service Tax exemption provided to clinical trials on humans, as proposed in the Finance Bill, is a retrograde step. Such trials have already become controversial because of the unethical practices adopted by pharmaceutical companies, exploiting poor people with the lure of some cash and subjecting them to unpredictable health hazards. Providing tax concessions in order to make India into a "preferred destination" for such trials would encourage unbridled exploitation of the poor and unsuspecting persons by vested interests. This needs to be rolled back.
SHRIMATI BRINDA KARAT: Sir, we are going to become guinea pigs.
SHRI PRASANTA CHATTERJEE: Clause 22 of the Finance Bill proposes that the ten years' tax holiday available for an SEZ developer can be availed by a sub-contractor who has entered into works contract with the developer. Stunningly, a recent notification form the Ministry of Commerce suggested that the tax-break would be available to sub-contractors as well. I am of the opinion that the notification of the Ministry of Commerce should be in line with the provisions of clause 22 and accordingly, the SEZ Act should be amended. It is noteworthy to mention here that the provision of Tax Holidays for ten years under section 80-1A is being grossly misused. I propose to amend the Finance Bill suitably to reduce the period of tax holidays for the time being.
The proposal for bringing renting of immovable property for business and commercial purposes into the Service Tax net is welcome. But this will bring disparity amongst small and big IT firms operating from rented premises and IT SEZs respectively. Big players in the IT sector and private developers of IT SEZs will get undue benefit at the cost of small players. I, therefore, propose to review the tax concessions provided to IT SEZs to ensure a level-playing field in the IT sector.
(Contd. by TMV/2Q)
SHRI PRASANTA CHATTERJEE (CONTD.): Sir, lastly, in the sphere of Centre-State relations, unjust burden of the Central loans on the States, particularly, in relation to small savings loans, etc., has not been solved. Further, it needs to be pointed out that despite transferring education from the State List to the Concurrent List with limited powers, nearly 90 per cent of the expenditure on education is being borne by the States. It is so in the case of West Bengal also. In such a situation, it is indeed unfair to increase the burden of the States in respect of implementation of major national programmes such as Sarva Shiksha Abhiyan. With these few words, I place our views on the Finance Bill, 2007. Thank you. (Ends)
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): Dr. K. Malaisamy. You have eleven minutes.
DR. K. MALAISAMY (TAMIL NADU): Thanks a lot, Mr. Vice-Chairman, Sir, for calling me to speak on the subject on behalf of the AIADMK. It is really a privilege to join my colleagues to speak on a most important subject. Primarily, this session is a Budget session. The Budget has got different processes, preparation of Budget, presentation of Budget, discussion on the Budget, voting on Demands for Grants, consideration of Appropriation Bill, and consideration of Finance Bill. These are the various processes. Unfortunately, during the time when the hon. Finance Minister presented the Budget, it could not be discussed by this august House. So, participation did not occur. Luckily, with the efforts made by the Chair and the Secretary-General and the cooperation of the hon. Members, now we are in the midst of the discussion.
Sir, before I come to the points, I would just dwell upon what is meant by a Budget. A Budget is a process, and an effective tool or a most important instrument available to the Government for so many purposes such as to avoid inflation, to avoid unemployment, to remove poverty, to remove inequality, etc. What I am trying to divulge here is that, as a well-informed Finance Minister, he should have known the very purpose and objective of the Budget. Now, the Budget has been prepared, it has been presented and it is being discussed. I would like to know whether the totality of the objective of the Budget has been taken into account before the preparation and presentation of the Budget. Once you set the Budget, you need an instrument, namely, an organisation. The organisation should be provided with necessary manpower and it should be put into operation. So, objective, organisation, manpower and operation, all these things are necessary. I would like to ask a basic question: Can the Budget be implemented by all these means? That is my first question. Number two, as a well-informed Finance Minister, who has presented three Budgets earlier--it is his fourth Budget--by virtue of his experience and ability, he should, along with his team, certainly analyse the various aspects of plus and minus. In other words, the Finance Minister should have gone into the various aspects of strength, weakness, opportunity and threat. In other words, I would like to know whether a short analysis has been done. The plus and minus should be taken into consideration. By virtue of the inherent strength of the country, it has got certain advantages. There is an improvement in the economy. That is one aspect. To quote the words of the hon. Finance Minister, "the Indian economy is overheated". It is an overheated economy. This is what he said. The capital market is booming. Of the 125 countries in the world, India stands at 14th in the context of global competitiveness index, behind Russia and China. It is said that in 2007 it can move faster than China. These are the information that they are able to give. (Contd. by VK/2R)
DR. K. MALAISAMY (CONTD): Industrial growth, GDP and all these things are on the right side. The second plus point is, recovery of industrial and export sector is evident. Thirdly, balance of payment is quite comfortable. The fourth point is, plenty of foreign reserve and food security. Finally, booming stock market. These are all plus points which give strength to the Indian economy.
Now I come to the grey area about which we are more concerned. India is burdened with very huge population of more than 110 crores. Out of which, 40 crores are workers and 37 crores are unorganised workers. Nearly, 70 to 75 per cent of the total population belongs to the farming sector. More than 38 per cent of the people are Below Poverty Line. This is what the statistics say. That is one grey area which should be taken into greater cognisance. Then inflation is on the increase. Thirdly, unemployment is galloping. It is going up and up. Fourthly, price rise is unprecedented. This is the darker side of the Indian economy. It is a grey area which needs extra care and caution while preparing the budget. In view of this background, let me analyse what the budget is going to say; what the tax proposals are going to say and what the Appropriation Bill is going to say. As I said earlier, it is the fourth budget of the Finance Minister. He has to present one more budget. By the time he presents the next budget, the elections will be round the corner. In other words, what I am trying to say is, this fourth budget is a very crucial budget. He wanted to present a very popular budget. He wanted to make tall promises and tall claims. The result is, he wants to give a political solution to the economic problems which will never happen. By reading the budget and the Bill, I can say that it looks so good theoretically, but I find it very difficult to put in practice. The percept is okay, but I would like to know whether it is okay in practice. That is a big question mark. He has given a lot of hopes and aspirations. I would like to know whether these are implementable or not. It looks only a big noise. He has set a number of goals. Whether he can afford to score on these goals, it is again a big question mark. He has made a lot of promises. In this connection, I am reminded of a journalist saying that a clever politician is one who is capable of throwing umpteen promises left and right. But after seeing that the promises could not be implemented just like what was done in Tamil Nadu about colour T.V. and two acre land for landless, etc. etc. ....
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): How much time do you want? (Interruptions). How much time do you want?
THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): Sir, he has just started his speech.
DR. K. MALAISAMY: Sir, you are very considerate to me. I cannot have guts to disagree with you. Sir, I have just started. The reason for claiming more time is, a number of my colleagues have not chosen to speak at all. You are having very limited number of speakers.
SHRI P. CHIDAMBARAM: Sir, I support him. Let him speak.
DR. K. MALAISAMY: The Minister is very considerate to me. The clever politician is one who can throw umpteen promises. If the promises could not be implemented, he must be able to explain why the promises could not be implemented. With his word power and vocabulary, the hon. Minister is highly capable of explaining and making things real, even those things which are not really true. He is capable of doing this with his word power and vocabulary. (Contd. by 2S)
DR. K. MALAISAMY (contd.): Now, let me come to the real issues. On a general analysis of the Budget and the Finance Bill, -- this is the core point -- what I am able to find out is that he has said about economic reforms; he has said about reduction of fiscal deficit; he has said about reduction of non-Plan expenditure. But he is only able to say that these are the things which he is conceiving and contemplating. He has not mentioned the means through which he can achieve all that. This is my basic point. For example, he has said that the Non-Plan Expenditure is likely to increase to 40 per cent. According to me, as a student of management, I have been taught that any one single problem will have more than one solution. Now the question is whether he is able to throw a solution towards economic reforms or for reducing the non-plan expenditure or for whatever he is aiming for. He has to prove in clear terms that these are the packages that he is giving, and he should assure the people that these kinds of things would be achieved. But we do not see that. Coming to public sector,...
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): Now you conclude.
DR. K. MALAISAMY: I have just started.
THE VICE-CHAIRMAN: Please, you have to co-operate. Mr. Malaisamy, please bear with me for a second. Prasantaji also said that he had not completed.
DR. K. MALAISAMY: Sir, it is 3.30 p.m. now. Can you afford to give me fifteen minutes more?
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): The total time allotted to your party is eleven minutes...
DR. K. MALAISAMY: I have a number of good points and even the Minister would appreciate...
THE VICE-CHAIRMAN: The Minister would appreciate it, but the House will not appreciate it. The problem is, it is the time of the House; it is not the Minister's time. If you want to tell him anything personally, you can go to him separately and tell him which, I am sure, he will appreciate.
THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): He can lose his Membership if he comes to me.
THE VICE-CHAIRMAN: Mr. Malaisamy, you had eleven minutes. You have take two minutes more.
DR. K. MALAISAMY: I have five or six points on critical areas, and three or four important suggestions that I wish to make.
THE VICE-CHAIRMAN: Make your suggestions quickly. Everybody wants that it should be finished. We have only four hours for this discussion.
DR. K. MALAISAMY: When I am not allowed to be in form, my points will not be effective. That is the problem.
THE VICE-CHAIRMAN: No; they will be effective. You just run through the points.
DR. K. MALAISAMY: Regarding the shareholdings of public undertakings, banks, etc., you want to go to the extent of 33 per cent. In other words, you want to reduce your shareholdings in public sector undertakings and banks, by way of disinvestments, privatisation, etc. This is a Welfare State. In a Welfare State, privatisation, disinvestments, etc. will work against social orientation. This is against the policy of a Welfare State. Will this move not run counter to that? That is what I wanted to say.
Secondly, you have given the effects of liberalisation, localisation and globalisation. I need not go into the details because the Chairman is quite anxious about the time factor. With the entry of multinationals from abroad and private partners from within the country, what is going to be the effect of retail sales? A number of programmes are not faring well. For instance, the Bharat Nirman for Rural Infrastructure Development did not take up till September. Even the Ports stayed out of action due to the deadlock between the Planning Commission and the Ministry. Thirdly, the agricultural growth last year was only 2.7 per cent, whereas you have aimed very high. Then, talking about Sarva Shiksha Abhiyan, your target was to cover 5 lakh schools, but the achievement was only 2 lakhs. Also, as against the target to reach 1.5 crore teachers, you were able to do only to the extent of 28 lakhs. What I am trying to say is that what you have targeted for is not being achieved, and that will never be achieved.
Sir, out of 100 minutes of speech on the Budget, the Finance Minister had set apart 26 minutes for the farming sector. Of course, it is a right thing to do. But, unfortunately, whatever he has promised for the farming sector will never happen at all because it is a State subject. There are certain inherent problems, namely, fragmentation and rural distress. All are rain-fed areas, but the sub-soil water table is very low. I can start talking about the injustice being done to us in the case of Cauvery, Palar, etc. But I am not going into it.
(Continued by 2T)
DR. K. MALAISAMY (CONTD.): You see, how disciplined I am. ...(Interruptions)... Sir, coming to the power sector, the shortage is eight per cent during the normal time, whereas during the peak hours, it is 13 per cent. This sector has been neglected.
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): No, no; this has nothing to do with the Budget. ...(Interruptions)... Malaisamyji, you are a very senior Member. Please stick to the Budget.
DR. K. MALAISAMY: Coming to the taxation side, I think, this is the relevant side.
THE VICE-CHAIRMAN: So, this is your last relevant point. As you said, you have made many irrelevant points. You are saying this, I am not saying this. As far as I am concerned, they were all relevant points.
DR. K. MALAISAMY: Sir, on the taxation side, whatever was done last year has been reversed, I mean, whatever concessions are being given, like giving five-year holiday to a five-star hotel and cheaper things for preparation of beauty items, etc., etc. Many items which are used by the poor people are not given concessions. In short, priority is not correct, allocation is not adequate, measures taken are not effective and there is a gap in between. Sir, lastly, I have to make some suggestions.
THE VICE-CHAIRMAN: It is the real last.
DR. K. MALAISAMY: Definitely, Sir. I request the hon. Minister to think of more and more of our domestic resources, instead of thinking of tall claims. In that case, he has rightly started to unearth the black money. But, abruptly, it has been stopped. It should continue. A lot of black money is there. It should be unearthed and brought as a resource. Sir, the PDS should be given top priority and protected. Instead of disinvesting and privatising the public sector undertakings, it should be brought back to life with efficient management. Sir, then the in-built mechanism itself is defective. I mean, the delegation of powers, simplification of rules and other procedures, etc., should be thought of. A sound tax system, with a broad-based system, with its own strategy can work hard. He has made an attempt. But the attempt is not adequate; it is not exhaustive. In case they go deeper, they can do better. (Ends)
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): Your last point had six small points on that. Now, Dr. Bimal Jalan. Dr. Jalan, you have seven minutes.
DR. BIMAL JALAN (NOMINATED): Sir, thank you very much. I know the time is very short. So, I shall be relatively brief. The first point I want to make is, I welcome this debate, irrespective of the fact that there is not much interest in it just now because the Lok Sabha has already approved the Bill. But, the fact is, Sir, and it is a very sad commentary on the working of our House, that in the last four years three Budgets have not been fully discussed. In one year, we discussed only the Finance Bill; in another year, we discussed only the General Budget and last year we did not discuss anything, but passed everything with a voice vote. So, the first point I want to make is, I welcome this discussion, and I hope in future, at least, there would be taxation with representation and there will be no taxation without representation. So, I welcome this discussion today.
Sir, I want to make two or three general points first, and then, perhaps, come to the nitty-gritty, but not specifically what I like about the Budget and what I don't like about the Budget. Sir, the first point is that this is the sixtieth year of our Independence. The sixtieth Budget that we are, probably, presenting, apart from the Interim Budgets, and so on. It does appear to me that we have to change the whole format of the Budget. I am saying this in front of the very distinguished Finance Minister because there is a lot of hype around the annual Budget; there is a lot of expectation from the annual Budget. Some Budgets are supposed to be dream Budgets, not dream Budgets, semi-dream Budgets. But, everybody twisted them depending on whatever changes in the tax rates are going on. Now, what I want to put to this Finance Minister is, -- he is a very distinguished man, a very famous man, he does not need all the hype, -- can we change the entire approach to the Budget-making? Let us concentrate on what the annual Budget of the Finance Ministry is supposed to do, which is to tell us about expenditure, about revenue, about fiscal deficit, about the state of the economy and that is all. Why do we need a Budget which changes so many rates every year, up, down, sideways? (Contd. by 2u-kgg)
DR. BIMAL JALAN (contd.): I cannot think of any other dream country like ours, any other country on the rise, except, perhaps, some of the developing countries where we change rates by some points or the other, every year. It would be nice if the Budget was a discussion on the financial situation of the country, the financial situation of the Government, rather than a substitute for the annual plan. If I see the Finance Bill, it is so thick; many of them are just technical changes. I know, up and down, sideways and so on. In the past, I have been responsible for producing similar things, but that is not the question. But now we are in the 60th year; perhaps, the whole approach to Budget-making should change. There is not a substitute for an annual plan, which you discuss any way -- social sector, farming, industrial sector. It is not a substitute; we do not have to make changes because the country is expecting that; if we had a non-event kind of a Budget, I think, we would have much more purposeful discussion. This is my first point.
The second set of issues I want to say is what is good. This is not specific to this Budget but on what direction the Budget is progressing. The revenue buoyancy is, I think, one of the greatest achievements of this Budget of the Finance Ministry, of the way it has been done, the tax information network, etc., which has been set, the movement towards electronic filing, I think, these are all to the good. Do not minimise the importance of revenue buoyancy plus our sticking to the fiscal targets which the Finance Minister has laid down. These are extremely positive steps.
The third very major announcement, which we do not pay attention to -- because we are discussing other things, tax rates going up, tax rates going down -- is the plans, a road map he has laid down for the reform of the indirect taxes, the VAT, GST, and the tariffs. It is much better to do it that way, to move in a direction of uniform rates and one set of taxes rather than keep on changing them year to year spreading 126 pages, 200 pages of details. So, I welcome these three particular changes; the road map to indirect taxes, the revenue buoyancy and the fiscal deficit target; whether you like it or not, he had a road map last year, this year he has achieved it. It is extremely good. It increases the credibility of the Government in achieving what it says it will do.
Now, Sir, the other aspect which I want to deal with is that the direct taxes require equally radical approach to simplification and to reform of the direct tax system where I find that we have moved contrary to the announced intention of reform to non-reform. This may be that we have to wait for the tariff tax code. I do not think that the most complicated direct tax system in the world must be this country. I say this with apology to the great Finance Minister.
SHRI P. CHIDAMBARAM: The U.S. tax code is ten times more complex.
DR. BIMAL JALAN: No, Sir, I know the U.S. tax code but they do not have the number of taxes you have. This is what I am saying. Here, you have taxes which are dividend distribution, service tax, personal tax, corporation tax, MAT, cash withdrawal, FBT, capital gains, expenses, education cess, surcharge, etc. The other thing is, somebody pays and somebody does not pay. Your tax rate depends on where you come from, age, gender, source of income, if you have an income from dividends you do not pay tax, you can earn Rs.400 crores; but if I have an income from interest, I pay tax even if it is Rs.1,55,000. So, it varies from sector to sector. (Interruption) I am making a longer term point about reform in direct tax system.
This is not specific to this Ministry. We all have been a part of it. What I am saying is, over a period of time, in terms of numbers, in terms of different types of taxes, we have to minimise. In terms of what the incidence of each tax is on different classes of people, both horizontally as well as vertically, we have too many categories.
The other thing is, some are exempt and some are not exempt. You have a whole tax code, as you said the U.S. has a very complicated tax code, but in terms of the intensity of the complication by any technical standard, India has the most complex variety of tax system in direct tax. In indirect taxes we have made progress. The Finance Minister has rightly announced that India is going to have a direct tax code soon.
(Contd. by sss/2w)
DR. BIMAL JALAN (CONTD.): The reason why I am mentioning is only this: that if he could introduce direct movement towards reform it would be all for the best. So, this is the point I want to raise with him and it is a general point. This is specific to this. Can we reduce the complexity? Suppose corporate tax effectively is giving you 19 per cent, charge 25 per cent by all means, but have one uniform code of tax. Then, we have different systems. We have tax deducted at source, then you have advance tax, then you have final tax and so on and so forth. I won't go into it. Now, Sir, let me go into...(time-bell). I will not take much time.
SHRI P. CHIDAMBARAM: Let him speak.
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): Sir, if you let everybody speak I have no problem. I have to go by time. If you want me to run the House and go up to 8 O' clock, I have no problem. You will also have to sit up to 8 O' clock. I have no problem.
SHRI P. CHIDAMBARAM: Sir, I withdraw my suggestion.
DR. BIMAL JALAN: Sir, I will just take two to three minutes. What I want to suggest to him is, in the next round of discussions that he is going to have on simplifying the tax code, on direct taxes that have equal taxes for equal income to reduce different kinds of taxes and -- sometimes same tax you pay three times -- you have to reduce all the complexity of the tax system, make it easier to pay. If 19 per cent is the average effective rate of corporate tax, charge 25 per cent by all means, but charge it straight and equal, depending on not from where it comes from, where it does not come from. I do not have the time to go into details. But this is where I will leave the tax part. Three other points I wanted to make very briefly. One is on the SEZ. This has been discussed very broadly and so on and so forth. Everybody is right that our country needs an SEZ, but the issue here is, land acquisition is important, re-settlement is important. All those I am leaving beside because there is complete agreement on those old issues. The most important point is not the number of jobs that you create in SEZ. You can create 65 lakh or 70 lakh jobs because you have given tax concessions to SEZs. But if those goods are allowed to be sold in the domestic market, then what happens to the other jobs? So, you must not take gross employment but you must take the total employment generated in our country and if tax concessions can generate net employment, not gross, then why not give tax relief to the whole country? Not only to the 2 per cent of the country which can generate 65 lakhs of SEZs. So, you must take net and not gross and if you want to sell goods at home there must be a level playing field, you must put a capital charge on what is sold at home rather than only neutralising the indirect tax. Instead of saying 25 lakhs has appreciated or 30 lakhs has appreciated is not good enough. Secondly, Sir, I come to financial imbalances. The whole advantage of the Budget is -- I do not have the time to go into it -- it corrects partially the financial imbalances. We had seen a capital flight from banking sector with high credit deposit ratio to the stock market to the mutual funds. That has been corrected partially but, I think, we have to move in that direction, on the financial imbalances. The third point and the final point is, about the trade off between inflation and growth. It is virtually an elementary point that if you have a rate of growth of 8 per cent or 8.5 per cent over a period of three years from a trend rate of growth of 6 previously, then your capacity utilisation will increase by 40 per cent. If capacity utilisation will increase by 40 per cent, the investment cannot increase within the same period of 3 years because the existing capacity is giving you 40 per cent more out put. So you would have a certain amount of strain and which would lead to price increases on the manufactured prices. You have to correct that. I am glad that he is taking steps to correct that also. This is only a significant phenomenon. It is not a secular phenomenon. Then, a point about agricultural commodities...
SHRI P. CHIDAMBARAM: I hope your friends sitting around you agree.
DR. BIMAL JALAN: You have persuaded them, not I. I do not have a political clout. Two points are correct. One is technical; the other may be is long term. (ENDS)
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): Mr. Finance Minister, just a point on SEZ. It has come to my notice that some Export Promotion Zone has been converted into SEZ and they are taking all the benefits. There is no new employment, no new industry but only the same units, same industries. Only the area has been converted. I am just bringing it to your notice. If that is the intention, then it is a different situation. The intention probably was that new units should come; new areas should come. I will let you know separately on this.
SHRI P. CHIDAMBARAM: I have noted it.
(Followed by NBR/2X)
SHRI RAVULA CHANDRA SEKAR REDDY (ANDHRA PRADESH): Sir, I know the scope of the Finance Bill. But, please bear with me and since we were not allowed to speak on the Budget, I may be given more time. At that time, only one hon. Member from the Opposition spoke.
THE VICE-CHAIRMAN: One minute. Even Prasanta said that they were not allowed to speak on the Budget. It was not allowed because all of us did not want to speak. Or, this was your and my problem. Time allotted for Budget discussion was 12 hours. Now, for Finance Bill, the time allotted is 4 hours. I cannot extend it to 12 hours. That is my difficulty. Still, you will get extra time. You go ahead.
SHRI RAVULA CHANDRA SEKAR REDDY: Why I am mentioning it is only to request the hon. Finance Minister to pay some attention on the points raised by me through the Finance Bill. Often, I may be going off the track since I know the scope of the Finance Bill.
While thanking you for giving me an opportunity to speak on the Finance Bill, I would like to request the hon. Finance Minister to look at the on-going Central projects. In reply to a question, it has been mentioned that about 160 Central Government Projects are badly delayed costing Rs. 100 crores or more. If that is the case, there will be cost escalation and the tax-payer is again burdened. So, there should be a monitoring mechanism which should oversee the completion of projects on time. Otherwise, as per figures, earlier, 315 projects were pending. But, now, as of 1st July, 2006, 159 projects are delayed, each costing Rs. 100 crores or more.
The money collected through taxes and spent for the welfare of the people through various projects and programmes of the Central Government like DPEP, SSA, the Government of India does not have any mechanism to monitor as to how the money is being spent in the States. I will give you a classic example of my own State of Andhra Pradesh, where there is an incident and a case is registered. Sir, more than Rs. 6 crores were diverted. A person working in the Chief Minister's Office in the capacity of Additional Secretary to Chief Minister is directly involved in this.
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODAI): This is not right. You are a senior Member. We cannot mention these things.
SHRI P. CHIDAMBARAM: Don't make allegations.
SHRI RAVULA CHANDRA SEKAR REDDY: This is not an allegation. A case is registered. I am not alleging.
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): He cannot reply to you.
SHRI RAVULA CHANDRA SEKAR REDDY: Sir, if something is un-parliamentary, I will withdraw.
THE VICE-CHAIRMAN: We will check it. If it is un-parliamentary, it will not go on record.
SHRI RAVULA CHANDRA SEKAR REDDY: I am only placing the facts before you. I am not making any allegations. But, at the same time, money released by the Government of India is not spent properly and the people at the lower level are diverting and using it for their personal purposes.
SHRI P. CHIDAMBARAM: Then, you say that in your State one officer did it.
THE VICE-CHAIRMAN: But, you cannot specify it.
SHRI P. CHIDAMBARAM: How can I reply to that?
SHRI RAVULA CHANDRA SEKAR REDDY: Sir, at least, he has to take note of it and direct his officers to see and verify that. It is a fact that a case is registered and investigation is taking place and the Government of India is not stepping into it. The Government of India is not sending any person to examine the reality. If something goes wrong at the State level, next year, you are going to deduct that money and reduce the allocation. Then, we are the sufferers. In such a situation, is it not my responsibility to bring it to the notice of the Government? Likewise, there are instance of diversion of funds which are meant for SCs/STs. I request the hon. Minister to place some mechanism to oversee the implementation part. Otherwise, money sent to States is diverted for other purposes and the money meant for persons will not reach them. That is my grievance. There is social unrest and the money allocated to the backward areas development is very meagre. Sir, only Rs. 500 crores was allocated. I request the hon. Minister to see that the allocation is increased under Backward Areas Development programme.
SHRI P. CHIDAMBARAM: Backward Regions Grant Fund is Rs. 5,000 crores, not Rs. 500 crores. (FOLLOWED BY USY "2Y")
SHRI RAVULA CHANDRA SEKAR REDDY: The previous speaker was mentioning about the SEZs, I call them as 'special exploitation zones'. Due to paucity of time, I am directly coming to the point. The Government of India has announced a FAB policy. Under this policy, the Government of Andhra Pradesh has allocated 100 acres to an individual at a cost of one rupee, that is, one paisa per acre. This happened last week on 28th April, 2007. Hundred acres of land was allocated for one rupee! When there is such a hue and cry in the country about the SEZs the Governments are tempted to allocate so much of lands for the semi-India projects. And, this is out of the FAB policy of the Government of India. If such is the policy of the Government of India where hundreds of acres are allocated to individuals, what will happen to agriculture? You have exported 55 lakh metric tonnes of wheat. And, I read in newspapers that you have decided to import 15 lakh metric tonnes of pulses. On the other hand, you are converting the agricultural land into industrial and residential zones. This is a classical example, G.O. No. 94 of the Government of Andhra Pradesh. As many Members have spoken on national issues, I would be touching on Andhra Pradesh issues only.
Another programme of the Government of India is to help the industries and corporate sectors in establishing their units. What are they in turn giving to the society? They are sponsoring cricket games, fashion shows. I have no objection. But let there be a condition on them to adopt some village, at least, to improve the infrastructure, health, and education. The Bill Gates came to India all the way and gave money for AIDS Control Programme. But our corporate sector is not coming forward. And, you are going on giving incentives to them. I have no objections, give incentives to them. But let there be a condition on them that they, at least, adopt a rural area or a backward area and provide drinking water, construct roads, improve health facilities, education, etc. Why can't that be done? When you can impose Education Cess on individuals, why can't you ask corporate sector to do this.
Sir, the health sector is most neglected. They may say that 'health' is a State Subject. But, the Government of India is providing money to the National Rural Health Mission. The situation of Government hospitals is such that people are afraid that if they go to Government hospitals they may not come back alive. Such is the situation in the rural areas.
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): You are right.
SHRI RAVULA CHANDRA SEKAR REDDY: Sir, I give you an example. I have a photograph here, in which pigs entered a 1350-beded hospital in the Karnool district of Andhra Pradesh and carried away a newly born child. The child was eaten away by the pigs in the hospital itself. This is a 1350-beded hospital!
THE VICE-CHAIRMAN: Now, you have to finish.
SHRI RAVULA CHANDRA SEKAR REDDY: Sir, this is the state of Government hospitals! (Interruptions)
THE VICE-CHAIRMAN (SHRI SANTOSH BAGRODIA): Mr. Reddy, how much more time will you take?
SHRI RAVULA CHANDRA SEKAR REDDY: Sir, the National Rural Health Mission is a national programme. The polio re-surfaced in many parts of the country. What has happened to the National Rural Health Mission? There are problems like Chikungunya, dengue, etc.
THE VICE-CHAIRMAN: You have already taken nine minutes. You have just one more minute.
SHRI RAVULA CHANDRA SEKAR REDDY: Sir, I am concluding. Sir, my next point is with regard to the problems of the bidi workers. The Government of India has imposed a condition on the bidi manufacturers to print skull and bones on the bidi packings. They have also raised the tax from Rs. 7 to Rs. 11....(Interruptions)
SHRI P. CHIDAMBARAM: We have reduced it, yesterday.
SHRI RAVULA CHANDRA SEKAR REDDY: I did not read about that.
THE VICE-CHAIRMAN: Okay, that point is over. You come to the next point.
SHRI RAVULA CHANDRA SEKAR REDDY: Sir, if it is reduced, it is fine. But please try to withdraw the notification.... (Contd. by 2z -- VP)