Unsaid and buried facts speak louder than words. This is sum and substance of the Central budget for 2009-10 that the United Progressive Alliance (UPA) government unveiled on July 6.
A reading of all the budget documents against the backdrop of reforms promised and committed over the years as well as electoral promises yields a dismissal outlook for the nation.
The Finance Minister’s (FM’s) budget speech for 2009-10 is indeed a masterpiece of self-congratulations, illusions and vague promises. It is loaded with the strategies to avoid taking tough calls.
What Pranab Mukherjee did not say in his budget speech is more important.
A glance through the budget documents and its fine print shows that UPA government has once again taken the budget-illiterate aam aadmi for a ride.
He has retained the UPA’s propensity to dole out lion’s share of subsidies to the corporate sector and the rich. What is worse, he has further doomed the future of coming generations by deciding to borrow heavily and recklessly under the garb of sustaining growth. This move might yield some dividend in the short run but would backfire over the medium term.
Let start the facts with farm loans. Mukherjee said the credit flow to agriculture would be increased to Rs 3,25,000 crore in 2009-10 from 2,87,000 crore in the previous year.
He continued: “To achieve this, I propose to continue the interest subvention scheme for short-term crop loans to farmers for loans up to Rs three lakh per farmer at an interest rate of seven per cent per annum. I am also happy to announce that, for this year, the government shall pay an additional subvention (interest subsidy) of one per cent as an incentive to those farmers who repay their short-term crop loans on schedule. Thus, the interest rate for these farmers will come down to six per cent per annum. For this, I am making an additional budget provisions of Rs 411 crore over interim budget estimate.”
This claim is contrary to facts given on page 16 of Expenditure Budget Volume-1 under the table headlined “Statement of Interest Subsidies”. This shows that interest subvention for providing short-term credit to farmers has been reduced to Rs 2011 crore in 2009-10 from Rs 2600 crore in the previous year.
The table headlined “Statement on Other Subsidies” on the very next page also shows how aam aadmi has been taken for a ride by UPA.
The subsidy on imported edible oils, which is primarily meant for poor people, has been slashed to Rs 200 crore from Rs 540 crore.
The subsidy on reimbursement of losses incurred by unspecified agencies in ensuring subsidised supply of essential commodities has been reduced to nil from Rs 200.01 crore.
The subsidy payable to Cotton Corporation of India for procuring cotton has been whittled down to Rs 135 crore from Rs 157.9 crore. This is in spite of the fact that farmers in cotton-growing belt are driven to suicide due to multiple factors.
The subsidy payable to Jute Corporation of India towards market operation has been decreased to Rs 30 crore from Rs 36 crore. This is in spite of all the hype that both FM and the Railways Minister hail from West Bengal.
Keep aside for a moment the logical contention of rationalists and nationalists that a secular government should not promote one religion and discriminate against others.
Just focus on the UPA’s penchant for appeasing minorities. This penchant seems to be waning with the government not providing even one paisa more on subsidy for operation of Haj charters in 2009-10. The Haj subsidy would be thus Rs 620 crore, which is same as in the preceding year.
FM has also made kapra (clothing) costlier for aam aadmi by doubling the excise duty to eight per cent on all synthetic fibres and yarn, their chemicals from which they are made. This hike is also applicable to all textiles derived from synthetic fibres and yarn.
UPA has also sown fresh seeds of inflation in general. FM has brought under service tax net the goods transported by the railways and coastal and inland vessels. He, however, claimed: “The new levy is not likely to impact the prices of essential commodities or goods for mass consumption, as suitable exemptions would be provided.”
Before the presentation of the budget, UPA had hiked the diesel and petrol prices, a move that would certainly increase the prices of all goods and services across the country.
As for the vague promises, FM has merely stated that the government would make necessary financial allocations to the social security schemes for workers such as construction labourers, rickshaw-pullers in the unorganised sector, which accounts for 92 per cent of the employment.
By neither specifying the money nor the timeframe, UPA has merely rubbed salt in the wounds of crores of such daily wage earners.
Mukherjee has also held a vague promise to farmers by stating that “in due course, it is intended to move to a system of direct transfer of subsidy to the farmers”. His predecessor P. Chidambaram also toyed with this idea.
It is indeed pitiable that the Government is still groping for solutions in coping with fertilizer subsidies even though the Congress Government initiated radical reforms in this field way back in 1991.
Ditto for the reforms in pricing of petroleum products. Several committees have studied this issue but their major recommendations have remain unimplemented. Even some of the Cabinet decisions have remained unimplemented. FM’s proposal to set up another committee on pricing is bound attract cynical reaction from the petroleum industry, which has been kept on tenterhooks for long.
As for UPA’s real bias for the corporate sector and the rich people, turn to last 17 pages of the Receipts Budget. It says: “tax preferences may be viewed as subsidy payments to preferred tax payers.
The Government doles out tax preferences as exemptions, rebates, deferrals, etc to prospective tax payers, resulting in sacrifice of revenue, which, if collected, could have been used for wiping tears from the eyes of poor.
For every one rupee tax collected, UPA preferred to forego about Paise 70 as subsidy to tax-payers primarily companies and rich people.
The cold fact as disclosed on Page 58 is that the revenue forego in 2008-09 was a whopping Rs 4,18,095 crore, which was 68.95 per cent of the aggregate tax collections. The budget does not estimate the revenue forego for 2009-10 but is likely to be in the same range, if not higher, as FM’s tax proposals would result in net gain of only Rs 2000 crore.
The budget has indulged in double speak in tax subsidies. While extended the tenure of lapsing tax preferences and keeping intact other tax preferences, the Memorandum Explaining the Provisions in the Finance Bill riles against tax preferences.
It says: “Such benefits are inefficient, inequitable, impose higher compliance and administrative burden, result in revenue loss, increase litigation and lead to competitive demand for tax benefits. Further, these benefits also encourage diversion of profits from taxed sector to the exempt/untaxed sector.”
UPA is equally soft towards companies and rich tax payers when it comes collecting taxes.
The Receipts Budget document shows that the total tax arrears aggregated to Rs 103,808.52 crore as at the end of reporting year 2007-08. Of this, Rs 39,698.74 crore was not under dispute. In other words, it could have been collected in normal course.
The non-tax arrears amounted to Rs 46915.57 crore.
According to an analyst if the Government had collected half of the tax and non-tax arrears and if had reduced tax preferences as advised by different committees, there would have been no resort to reckless increase in government borrowings. There would also have been no need to indulge in fiscal discipline and also let the States to increase their respective fiscal deficit.
By throwing to winds the urgent need for fiscal prudence, FM has subtly shown the world that he can sidetrack the advice given by the Prime Minister Dr. Manmohan Singh.
Interacting with reporters after the swearing in of 2nd batch of ministers, Dr. Singh had said: “fiscal prudence and disinvestment of public sector units; all these issues will be tackled by the Finance Minister in the budget.”
“We will ensure economic growth momentum but at the same time fiscal prudence will be kept in mind,” he reportedly said.
At his first press conference on 27 May after taking charge as the Finance Minister, Mr. Pranab Mukherjee said: “Let me say unambiguously that we are committed to restoring growth and employment and that would not have been possible without increased spending funded by incremental borrowing. This would need to be further continued in 2009-10 – the current year. However, we are equally committed to the process of fiscal consolidation over a period of say 2 to 3 years.”
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