REGISTERED NO. D. (D.N.) 127

The Gazette of IndiaEXTRAORDINARY

PART I—Section 1

PUBLISHED BY AUTHORITY

No. 35] NEW DELHI TUESDAY, FEBRUARY 28,1989/PHALGUNA 9, 1910

Separate Paging is given to this Part in order that it may be filed as aseparate compilation

557 GT/89 (1)

2 THE GAZETTE OF INDIA : EXTRAORDINARY [PVET I Six. ]]

3

4 THE GAZETTE OF INDIA : EXTRAORDINARY LPART I-Sit , ]]

5

6 THE GAZETTE OF JNDIA : EXTRAORDINARY [PARI f-Stc. 1]

7

8 THE GAZETTE OF INDIA: EXTRAORDINARY [Pvnr I-SEC. I]

9

557 GI/89— 7

10 THl- GAZETTE OF INDIA : EXTRAORDINARY |PMVI 1 -Srx. 11

11

12 THE GAZETTE OF INDIA : EXTRAORDINARY JPART I -Sn . 1J

13

14 THE GAZETTE OF TNDIA : EXTRAORDINARY [PARI 1-SKI. I]

15

tfi THR GAZTiTTI: OF INDIA: EX l'R.AORl)[N VRY l ^ i t r 1-Sn. 1]

17

557 GI/X9- 3

18 THH GAZETTE OF INDIA : EXI RAORDINARY [PART I-Srr: 1|

19

20 rl HH GAZETTE OF INDIA : EXTRAORDINARY [PAHI I-Six. 1J

MINISTRY Of- FJNANCt

(Department of hconoraic Aflfuiis)

BUDGET DIVISION

NOTIFICATION

New Delhi, the 28th Kebuiary, 1989

M/Hnance (DhA) U.O. No. 15(.95)-B(D)/88.—The follow-ing is published for general infoimation ol the Public:—

Budget 1989-90

Speech of

Shri S. B. Chavan

Minister of Finance

28th February, 1989

PART A

Sir,

I rise to piesent Hie Budget for the year ly 89-90, (heBudget is an instrument for achieving the basic objectives ofplanned development which, broadly, aie growth, moderni-sation, self-reliance and social justice. In each of these aieas,we have made substantial progiess. There are clear signsof an acceleration in the growth rate of our economy duringthe eighties. The pace of modernisation, particularly inindustry and infrastructme has increased gieatly because ofthe policies pursued by us for the past few years. The move-ment towards self-reliance has been maintained by the sus-tained growth in exports. And most important of all, ourcommitment to the goals of social justice has been demons-trated in the major initiatives that we have taken in anii-poverty and employment programmes and in the fulfilment ofessential needs. These long-term objectives piovide the frame-work within which the Bud.qet for 1989-90 bias been foimu-lated.

2. The Annual Budget has to pursue these long-term objec-tives within the context of the short-term economic situation.The Economic Survey for the year 1988-89, which was laidon the Table of the House n few days ago, deals with theeconomic situation in some detail. I v,ill only highlight afew key points.

21

mtomi the House that the latent estimates of economic per-toiinante in tne drought year 01 19s i-i>8 indicate that, des-pite the drought, GOF grew by 3.6 rer cent, 'ihis commen-aatoe periormance in a year oi drougnt has been lollowedby vigorous growth in trie current year and we expect tneijrtJP to grow by 9 per cent or more in real terms. Boththe rale on giowm of GDP m tne drought year and the paceof recovery in the post-drought year, are significantly higherthan tnose in earlier periods of drought. I m ay add that theaverage growth rate of GDP in the first tour years of thePlan will exceed the Plan target of 5 per cent.

4. The performance in the agricultural sector in these posttwo years gives grounds for hope. Last year, despite thesevere drought and floods, foodgrains production was 138million tonnes, only marginally lower tnan in the previousyear, showing that our policies to contain the impact of thedrought were successful. This year, foodgrains pi eduction isexpected to exceed the target of 166 million tonnes. Oilseeds,cotton and sugar production are expected to reach recordlevels. The sector continues to demonstrate a high potentialfor growth.

5. The growth in output in a period of strees, the carefulmanagement of the food economy by the Government, andthe special measures, taken to boost agricultural production andprovide relief to those affected by drought have ensured thatinflation, as measured by the Wholesale Price Index, waslimited to 10.6 per cent in 1987-88. The rate of inflationin the current year has been under 5 per cent up to the endof January, 1989. Government is concerned about the pres-sure on prices, but it is a matter of some satisfaction thatthis piessure has been generally lower than in previousdroughts. Government remains fully vigilant on this crucialfront and are determined to ensure effective containment ofinflation. ' , _,

6. The second encouraging feature of economic perform-ance in recent years, is the sustained growth of industrialsector and improved performance in the field of infrastructure.For 4 years in succession, manufacturing output has grownby over 8 per cent per year which is a clear vindication ofthe industrial policy of the Government. There is a spirit ofoptimism in industry which is reflected in the generally goodcorporate performance and buoyant conditions in the capitalmarket. Electricity generation has increased steadily fend theplant load factor of thermal plants has gone up fiorr. ."0.1per cent in 1984-85 to 56.5 per cent in 1987-88. Targets forcapacity creation in the power sectoi set for the SeventhPlan are expected to be achieved. In the Railways the quantityof freight carried has increased in the first three years ofthe Seventh Plan by an amount as large as the total increaseover the previous 10 years. More important, there has beena steady improvement in productivity over these years. \(particularly we1 come feature is the improvement in the per-formance of the basic materials industries. In the first ninemonths of this year, production of saleable steel by theintegrated steel plants rose bv 10.1 per cent, of cement by12 per cent, nitrogenous fertilisers by 26.2 per cent and phos-phatic fertilisers by 64.5 per cent when compared with thecorresponding period last year.

7. The performance of Central Public Sector Hnterpriseshas shown improvement. In the first six months of this yearthe provisional results of 179 operating enterprises show thattheir net profit rose to Rs. 694.19 crores from Rs. 59.79crores in the corresponding period of 1987-88.

8. We are committed to a policy of supporting the growthof our public sector. However, we recognise that somechanges are required to ensure a higher level of performance,particularly with regard to resource generation, -yv;^ a viewto granting greater autonomy to public sector entemrisesconsistent with their accountability, the Government has beensigning Memoranda of UnderstandipT with *f>n->e of the PublicSector Undertakinos. The MOU indicates the responsibilityof the enterprise in fulfiilinc certain physical, financial r»ndsocial objectives including resource Generation, and of theGovernment, in turn, for supporting the enterprise in fulfillingvarious objectives and targets set for the enterprise. Eleven

Public Sector Undertakings signed MO Us with the Govern-ment for the year 1988-8i>. iSe*en more Public Sector Under-takings will sign MOUs for the year 1989-90. ihe Govern-ment has constituted a High Level Committee under theChaiimanship of Cabiaet Secrsiary tu evaluate the peiform-ance of MOU signing companies and theii administrativeMinistries m lulfillmg their obligations under the MOU.

9. I have refened to the resilience of tne economy andthe improved growth i;eifinmati;e in industiy and infrastruc-ture because these are the strengths that will allow us topursue even more vigorously our b.tiie objectives of raisingthe living standards of the poor and strengthening the eco-nomic independence of our country. But 1 would be failingin my duty if I do not also draw the attention of the Houseto ceitain problem areas.

10. One aiea that needs moJC attention is the stimulationof savings and the containment ol the budget deficit. Wehave always pr.ded ourselves on being u nation with a highsavings rate, and our culture has always emphasised thevirtues of simple living and frugality. Budgetary policy mustreinforce these viitues of thtiit both through positive incen-tives to stimulate savings and through measures to restrainluxury consumption. I will udicate later in the speech thespecific measures that we propose to take towards this end.

11. Equally important, and ;u some sense more significant,is the prudent management of public expenditure Sometimes,it is assumed that Government expenditure, as commonlyunderstood, is all on the wages and salaries of Governmentservants and on goods and semces purchased by the Govern-ment Departments to fulfil their functions. This is far frombeing the case. In actual fact, the direct consumption expen-dituie of the Central Government on defence and Govern-ment Administration is less than one quarter of the totalexpenditure. A little under one tenth of the Budget is forthe direct capital expenditure of the Central Government.As much as two-thirds of the B.'.dget expenditure ieally takethe form of financial transfers to other spending entities byway of interest, subsides, grants, loans, etc. In fact, a signi-ficant part of what is shown as expenditure in the Budgetis only the financial intermediation of funds shown as acapital receipt on the one side and as expenditure in theform of loans or equity investment on the other.

12. I am drawing attention to the structure of the expen-diture side of the Central Budget in order to emphasise thatthe exercise of due prudence is not merely a matter ofeconomy instructions regarding staff or travel or purchases.That is certainly important. But it is as important, in facteven more important, to consider other items of expenditurelike subsidies, grants and loans, many of wlvich are embeddedin specific schemes and programmes. We must ask ourselveswhether we are getting value for money from these subsi-dies, schemes and programmes. In many cases the desiredre-ult could be ;ichieved at leaser cost by better targetingconsolidation of multiple programmes, greater decentralisa-tion linked to mobilisation of local resources We will ensurethat such an evaluation forms the basis for the. schemes/programmes that will form part of the Eighth Plan.

13. 'The-balance of payments is another area of concern,A certain amount of pressure on external payments is un-avoidable in a situation where we have urgent needs forinvestment and modernisation which inevitably require expan-sion of imports. It is for this reason that Government haveattached high priority to expanding exports to pay for theimports the economy needs. Our policies in this regard havebeen successful and in the past two years oisr exports haveincreased quite rapidly over 25 per cent >'n 1987-88 and 24to 25 per cent in the first nine months of the current financialyear. But at the same time, the import bill has nlso increasedpharply, especially so in the first ha'f of this year. This surgein fhp import bill is partly due to the fo.xiiTuns find edibleoil imports necessitated bv last year's drought r.rnl partly tothf- «!iarp increase in the international prices of metals, che-micals rind edible oils. Apart from this, our debt repaymentliabilities "ere relatively high. The limi'ed nvnflnhilitv -ofcnncessfonoi finance has compelled us *o incre-i^s the sh?reof oimmercsl Iwrrowmcs, but we have tried to 1<eep thesewithin t'nHs tkat pr*; rmn;rve>"»K'e W^ c'i not envisage a*1}difficulty in servicing our external debt.

22 THii GAZkllTE OF JNDIA : EXTRAORDINARY [PAKI 1-SM,. II

14. The Indian economy has a g'eai deal of undeilyingsticnjjth. The sustained giowth of indu&uul hector and theinvestments made in modernisation and upgiadation willshow results in terms ol' higher exptuls. Ihis in fact is tfcereal answer to the balance of payments piolilcm. I ha\ecvciy hope that the momentum of export growth will besustained and enhanced. 1 ncccLSsaiy, » ; must be preparedto restrain domestic consumption to some extent in certainareas in oulcr to release supplies for export.

15. We have tesjsted the temptation to cope willi theshort-term difficulties in our balance of pay meats hy ad hocimport egulation thiough detailed impOil licensing. Such apiocess would he selt-defoating ns it will disrupt the economy,inhibit exports and weaken our attempts at modernisationThe composition of our imports has changed greatly duringthe eighties. In 19K0-81, 65 per cent of our jmpuitN consistedof a few bulk commodities like foodgiains, edible oils, fer-tilizers, pctioloum and metals where diiect import regulationthrough foreign exchange allocations is lcliitively easy. In1987-88, these bulk commodities accounted for only 33 pertent of our impoils. l!ie other imports cover a vast iMngeof raw materials capital goods, chemicals r.nd industrial com-ponents. Direct regulation of these through foreign exchangeallocations is difficult and could well lead to delays and in-efficiency. Hence, the non-bulk import bill has to bo managedthrough more effective use of indirect instruments,

16. Lutei in this speech f will put before you some mea-sures to discourage low priority imports which jo towardsthe consumption of upper income groups. Kit culture basedconsumerism is not thj obiee'.ive oL our indti.tiuil ind HoJs;policy and must be discouraged,

17. Industiidl policy has an important role to play instimulating pi eduction which can substitute efficiently forimports. Towaids this end the Government will ensure thatdomestic production of items which are imported in substan-tial quantity is maximised and will rc-j\amine and removeany restrictions which stand in the way.

18. I-d me now turn to the special thrust areas in ihivBudget.

Anti-Poverty Piogrammes :

]y. Successive budgets have sought to tackle the busicpioblems of poverty and unemployment directly, a piocesswhich has been greatly accelerated since 1980-81. In thatyear, actual expenditure on rural development, social servicesand food and cloth subsidies amounted to Rs. 1,971 crores inthe Central Budget. The greater part of the expcndituie inthese areas is for diiectly targeted programmer to improveemployment and the earning capacity of the poor and ofvuln:table groups like scheduled castes and tribes, and weakersections, provide them with basic services like education,health-cure- and water supply, and subsidise some items ofessential consumption. In 1988-89 the Budget Estimates pio-vided Rs. 8,652 crores for the same activities.

20. 1 have not included in this total the expenditure onagricullute and the fertilizer subsidy which has increased fioman actual expenditure of Rs. 1,1791 croies in 1980-81 to aBudget provision of RH. 4,343 crores in 1988-89.

21. Under the Integrated Ruml Development Piqgramme(IRDP) over 15 million families below the poverty line rm\ebeen assisted lo take up income geneialing activities. Thetotal investment under this Programme since the beginningof the Sixth Plan has been over Us. Ten ihouhnnd crores,including the term credit provided by the financial institutions

2?. T am hippy to infoim the H'jn'blc Members lint undeithe twin piogrammes of employment generation for the raftlpoor, \'u , National Rural Employment Progtamme fNREP)and Rural Landless Employment Guarantee Programme(RL.EGP). 67 croie mandays of employment were pener>lcddm ing 1987-KB as against the target of 50 crore inandavs.

23 The present sdaleRy oE direct attack on rural povertythrough the fAi^tin" maior programmes of self-employmentami wife employment will be continued and mnds more costeffective.

24. Employment is the most urgent need of our people.Much of the employment growth will come from growth inagi iculture and in labour-intensive agro-piocessing industriesand services. However, a direct attack on the pioblem ofunemployment is ci!,ential. We, therefore, propose to givea special tin ust to all programmes of employment geneiation.It it proposed to merge NRFP/RLEU1' into a single pio-gramme, and to decentralise its implementation. This mergedprogtamme will operulc thioughout the country and will befunded 75 per cent by the Centre.

25. Poveity and unemployment are intense in certain dis-advanlagod regions and existing employment programmes fallshort of needs. Hence, in addition to the reorganised nationalpiogramme it is proposed to launch a new intensive ruralemployment programme which will provide additional fundsto selected 120 districts which aie backward find suffer fromacute unemployment.

26. In this year when we are celebrating the biith cen-tenary of Pandit Tawaharlal Nehru, the architect of modernIndia, there is perhaps no better way of remembering himthan to intensify our efforts to remote poverty and unemp-loyment. This programme is a further major step In thatdirection. It will be named after Panditii to reflect thedeepest aspiration of our people.

27. This new programme will allow fuller employmentopportunities to at least one memher of each family livingbelow 1he poverty line. The funds for this scheme will be inaddition to the provision available to the distiict under theNREP and RLEGP Programme's These funds will be me'pedand locally useful schemes will be taken up to maximizeemployment opportunities and the creation of productiveassets. We hope that the enhancement of the provision foremployment through this new scheme will ensure substantialimprovement in living standards of Ihe poor nnd an increasein the productive and socially useful assets in these areas.The details of the programme will be nnnounced Inter. Theprovision for this new programme will bf Rs. 500 crores in1989-90. Including this, the provision for employment pro-grammes will be Rs. 1711 crores in K89-90 I propose tocover the cost of the new nrogromme basically by mobilisingndditional resources from those who already have substantialincomes and the benefit of gainful employment. T will revertto this later in my speech.

2R. We welcome further efforts in this direction by StateGovernments. Recently, the Constitution has been nmendedto raise the upper limit for the profession tax to Rs. 2.50ft.We urpe State Governments to use tnis enabling nrovis"onto mobilise additional resomces for exnandinp employment.

29. Additional employment will heJn poor households Inrnise their standard of living. But in addition n more dirtcteffoit at improving the condition of women and children isnecessary. T therefore propose a new programme for the freedstiibulion of saris to deslilute women. As for children theongoing Integrated Child Development Services Programmewill be greatly expended to cover 500 moie blocks in additionto over 1700 already covered. This programme is aimed atraising the health, mittition and educational status of poorchildren.

30. The total oulloy for rural development, social cervicesand on food and cloth subsidies will be Ri. 9374 crores inthis Budget.

31. The implementation of anLi-poverty and social sciv'uresproprummes takes place laigcly Ihroiiuh State Plans. Mnnvof these programmes are externally assisted. At present 70 percent of assistance received under externally 'ilded projectsis made available to State Governments ai additional Centralassistance. Tt is proposed to modify these arrangements toenhance the additional central assistance made available lothe ^intcs to 100 per cent for a-sistancc received under e-\-fermlly aided nroiects in thr social services sector, and fofproRurnmPs which have n diiect bearmp; on fovci_l\ allevia-tion This deciiion will make avjilabio suhstantMiv morerp=oiii'p" to the States thin under the piT^enf nrranreracntr,find will faciiihte additions] iiiM;<,tinfnl'- bv th''"i i|i thr-evital sectors. Sectors which are expected to benefit from this

23

decision are Agriculture, Rural Development, Irrigation, En-vironment, Health, Family Welfare, Nitrotion, WomentaDevelopment, Education, Housing, Water Supply and UrbanDevelopment.

Agriculture

32. Agriculture is the mainstay of our population and apriority sector in our Plans. Today the incidence of taxeson agricultural outputs and inputs is minimal and in factsubstantial subsidies are provided both in the Central andState Budgets.

33. As I mentioned earlier, Plan and ncn-Plan expenditureon agriculture and the fertilizer subsidy has gone up sharplysince 1980-81. This year also provision is being stepped upand w ill reach a level of Rs. 5173 crores.

34. Ciedit is a major input for agricultural production. Inorder to increase the flow of credit to agriculture, the targetfor direct finance to agriculture by Public Sector banks, whichwas raised last year from 16 per cent to 17 per cent of theirtotal outstanding advances is being further raised to 18 percent to be achieved by the end of 1989-90. With this changethe total credit to be made available to agriculture by com-mercial banks, Regional Rural Banks and Cooperative Bankswill inciease by over Rs. 4,000 crores in 1989-90. Hon'bleMembers are aware that the rate of interest on crop loansupto Rs. 15,000 was reduced last year and the reduction variedbetween 1-1/2 per cent and 2-1/2 per cent. With a viewto extending the scope of relief, the Reserve Bunk of Indiais today issuing instructions reducing the rate of interestcharged on crop loans between Rs. 15,000 and Rs. 25,000 to12 per cent from the existing maximum rate of 14 per cent.

35. One area of concern is the pace of implementation ofirrigation projects in the States. In addition, the gap betweenthe potential created and utilisation of irrigation, leaves muchto be desired. The decision to provide higher additionality forexternal assistance for agriculture and irrigation which I, havereferred to earlier will add to the funds available for thesepurposes in St^te Plans. My hope is that this will help inensuring better utilisation of aid funds and quicker completionof projects.

36. The rapid growth in incomes in our rural economy willrequire not merely higher production but also diversificationof crops, better post-harvest technology, processing of agri-cultural products into higher value products, etc.

37. The new Ministry of Food Processing Industries, thefirst of its kind in the developing countries, was established inJuly, 1988 to provide for a dynamic relationshiD between thefarnie1- and industry so that there is better utilisation ofagricultural products, greater addition of value to rural pro-duce, generation of massive employment in rural, areas,enhancement of the net level of rural incomes and inductionof modern technology in the processing of food. Anotherobjective of the Ministry is to promote utilisation of the largescale wastages which take place in the pre and post harvesthandling of ruits and vegetables, thereby improving theeconomic utilisation of food nrduced as well as enhancinsthe nutritiorpi intmts available to the people. Later in mvspeech T will indicate some fiscal incentives to provide agreater stimulus to these industries.

Housing

38. The Government attaches \ery high priority to housingTt is an activity that meets a very essential need and thatis capable of generating a verv substantial vo'ume of employ-ment. Tn pursuance of this, the Government ha« formulate!n co^nrpfien^ive National Housing Pol;cy. Tn the field nfhousing finance several new initiatives were taken in lQ8P-89.The Peserv" BenV of India hps ISbemired the terrrs rtiiconditions of hou^ine; lnan«. The "Life Tn^'rance Cornorat'Vtihnc launched f> new scheme known ns Rima Niwas Yoianawhich -will enable nolicy holders to receive financial assistancefor riircha^e or constmetion of flats.

39. The National Homing Bank has been established andhas now become operational. Promotion of a healthy housingfinance system and providing adequate finance to the housingsector ?:c the principal functions of the Bank. In formulatingits financing polices, the Bank will adopt the motto of thesmall man first. It has accoidingly announced its re-finance•^heme in lespect of loans given for low income housing ofupto 40 square metres. Similaily, in land development andhoming projects financed by it. the Bank will ensure thatnot less than 75 per cent of the plots to be thus developed orho i ,e-> to be built, >\ ill be for tho- e seeking built-up accommo-daiion upto 40 square metres.

40. The prospect of owning a house is a major incentivefor savins. We have, theiefoie, decided to establish a newscheme called the Home Loan Account Scheme which willbe launched by the National Housing Bank in cooperationwith scheduled banks. To facilitate participation by allsegments of the community especially in rural areas, theminimum contribution to the saving scheme is fixed at Rs. 30per month or Rs. 360 per annnn. The savings will earninterest at 10 per cent per annum. Any individual not own-ing a hoyse anywhere will be eligible to join the scheme.After saving for a minimum period of five years, a memberwill be eligible for a loan equal in amount to a multiple of tfieaccumulated savings including interest. Specific efforts willbe made to link up the Home loan Account Scheme with theregistration for land or house allotment by public agencies.1 w:ll propose certain tax corces-ions for these savings.

Industrial Development

41. l e t me new turn to the industrial sector. I have re-fe.ied to the good 1'erformance of the industry and infra-structure sector. We believe that the changes with regard toindustrial licencing, price and distribution controls and tradepolicy that we have made over the past few years have paidlich dividends. The underlying theme of these policy changes>'s to promote both giowth and efficiency by stimulatingdomestic competition, technology acquisition and modernisa-tion. Our industrial structure is now very complex. Manysegments have reached a certain degree of maturity. In thiss. tuation it is po'siblc for us to relax many of our detailedregulations and vet remain in control over the direction ofdevelopment through a judicious use of fiscal and credit poli-cies. In furtherance of this approach, the Government hasdea'dod to decontrol the pi icing and distribution of cementard a'liminium with immediate effect.

42. Since the partial decontrol of cement from 28thFebruary, 1982, the cement industry has witnessed an im-piessive growth. The production of cement which was 21.01million tonnes in 19S1-S2 is slated to increase to 43.5 mil-lion tonnes in 1988-89 and 49 million tonnes in 1989-90.Over this period, the levy obligation has been progressivelydecreased and a fair price for the levy cement has beengiven. These policies have led to the stoppage of importss;nce 1985. In fact, the country is now in a position to exportcement. Our long tern strategy is to increase the productionto 65 million tonnes by the end of the Eighth Plan and 87million tonnes by the end of the Ninth Plan. At present, thelevy obligation works out to less than 20 per cent of the totaloutput of the industry. It has now been decided that allprice and distribution contiok on the cement industry be re-moved with effect from Ut March, 1989. To ensure the avail-abiliiy of cement at reas-onable prices in the remote and hillyregions of rh<" country, a suitable subsidy scheme is beingworked out.

43. With the progressive commissioning of the NationalAluminium Company (NALCO), India has made great stridesin the production of aluminium metal. After achievinga record production of 278.000 tonnes in 1987-88, productionin 1988-89 is estimated to go up by 30 per cent to about360.000 tonnes. During 1989-90 aluminium production isl'kelv to increase by another 20 per cent to reach a level of435.000 tonnes. NAI CO ;s all} exporting alumina and somer'uminium and will earn aVout Rs. 200 crores in foreign ex-change during 1988-89. India has thus emerged not only self-suffc'ent in aluminium metal but will generate exportablesurplus jn the years ahead, in view of this the Governmenthas decided to decontrol the price and distribution of alu-minium with effect from 1st March, 1989.

24 n i . i GAZETTE OF INDIA : EXTRAORDINARY [PART J -SK: . I]

44 The dispersal of industry to backward areas remainsa major plank of our industrial policy. The principal barrierto industrial development in b?ckwaid areas is the lack ofinfrastructure. Recently, the Government has announced anew appioach to t'ii i in the form of the Growth CentreScheme. Fn the first phase (>1 growth centres will be taken upand (.rovid-'l with iirk.istit ;ti»e facilities of a high order. Ihave piovided Rs. 20 ctores as the Cential contribution forthis scheme in 1989-90 Plan and. depending on the pace ofimplementation, this will be enhanced, if neceslary.

45 Let me now lurn to ihe operation of capital markets. Asubstantial volume of peisonal savings now flows throughthe financial instruments Vf'cd in this market. In fact, thebreadth and depth of our financial (tructure is an as^et thatwe must use to mobilise savings and channel it into produc-tive directions. Our rural households are showing growinginterest in investing in bonds, debenture t and shares. How-ever, the proviiion" legan'inp ta\ deduction at source is adisincentive We have aliepdy raised the limit below whichthere will be no tax deduction at source to Rs. 2,500 fordividends I r iopob to do the same for interest paymentson bonds and debentures.

46. The flow of savngs into the Capital Maiket is directed\eiv much to f.\ed interest bonds and debentures. However,industrial development also reqi're I risk capital in the formof equity. In order to stimulate the flow of personal savingsinto equity, the Government intends to introduce an Equity- -Linked Savings Scheme. The Scheme will operate throughUT1 and recognised Mutual Funds and investments will beeligible for tax deductions on the basis of net annual addi-tions to such savings. Details of the Scheme will be announc-ed -fhortly.

47. The dynamism shown by the industrial sector is to acertain exteni the result of our effort to stimulate competition.However, as the industrial enviieminent becomes more com-petitive, we will need effective measures for coping with theproblems of -ndustrial sickness Some arrangements are inpfc'Ce under the Sick In histrial Cotinanies (Special Provisions)Act, 1985. However, it i | nece^arv that we take steps beforethis stage of sickness is reached to encourage and stimulatepotentially sick units to rehabilitate themselves. In order todo this, the Government intends to work out an excise reliefscheme for weak units to provide them with a proportion oftheir exese payments ass part of a diversification, modernisa-tion or rehabilitation package approved by designated Finan-cial Institutions.

Other Areas

48. Let me now turn to couple of other aieat where )propose some changes.

49 The Government has been examining the utility of theGold Control Act to ""ee whether it has served its purpose ornot and whether it requnes any modification. In the light ofthis examination the Government propo Iss to modify theGold Control Act with a view to keeping a measure of controlover pjimary gold only. This is expected to benefit hundredsof thousands of goldsmiths and artisans who will be able tofreely conduct their age-old traditional profession and providebetter service to the customers in terms of quality, purityand price Further this will lead to a boost in the export ofgold jewellery wh'ch has been stagnant. The details will beworked out and necessary legislation w'll be introduced soon.

50. I have referred to the need to give a stimulous tosavings and ha1 e already reffred to two measures directedrovwds this end—the Home I oan Account Scheme and theFquity linked Savings Scheme. Seveial initiative! in the areaof small savings ha' e been t«l:en n the recent vears. I amhappy to report to the Hon«e that the Indira Vikas Pafa,introduced in 1986 and the Kisan Vikas Patra introduced in19S8 are attracting a substanti 1 volume of flyings. Thesetwo savings instruments do not carry any tax concessions. Ipropose to introduce a l e v Nat'or.al Savings Certificate Serle IVIII which will cirrv an interest rate of 12 rer cent p-ndwill be eligible for tax concession under Section 80C but notfnde" Section 80L. The cJiiMim National Savings CertifiratpsSeries VI and VIT will be discontinued. This i | part of theprote-s of lationalisation of savings incentives.

51. I am conscious of the need to orotect the savings ofworkers in the provident fund and their right to gratuity. TheEmployees Provident Fund Act has been modified to raisethe mmimum contribution to 8-1/3 per cent and this en-hanced contiibution lus taken effect from 1st August, 1988.The Payment oi G utility Act has been amended to providefor compulsory insurance of gratuity Labilities or the settingup oi a giatuity fund undei income-tax rules where thep'lUein oi investment will be as prescribed by the Govern-rrtnt from time to time. It is proposed to implement theseprovisions soon after f i aming ncces lary rules.

52. As the Hon'ble Members are aware, this Governmenthas m the recent pa«t, taken various measures to help pen-sioneu. The Government is keen to ensure that pensionsnd pensionary benefits are sanctioned and paid promptlyand procedmei for tii'bursement simplified. Towards thisend. the Government has decided to further simplify theproujJiue of pension payment to civil pensioners who drawtheir pension from banks. The proposed simplication en-vi .>ges that the two intermediary agene'es of AccountantsGeneral and District Treasuries will not be involved in tW"v.o>l which will be handled by a new Office of Chief Con-troller of Accounts (Pensions) in the Ministry of FinanceThe entiie work of pension payment and accounting thereofwill be computerised. The new system is propo ted to beintroduced during 1989-90.

51. I also propose some fiscal relief on family pensionsand a new savings scheme for retiring Government emplo-yees with certain tax conce t-iom which I will revert tolater.

54. Our fieedom fighters have made great sacrifices inour struggle fo- independence. In thr| year when we arecelebrating the birth centenary of one of the greatest leadersof th;s struggle, it is but appropriate that we raise the pensionfor freedom fightcs to Rs. 750 as a mark of the nation'sgratitude.

55. I shall now turn to the Revised Estimates for 1988-89;>nd the Budget Estimates for 1989-90.

Revised E'timates 1988-89

55 Since_ the presentation of the Budget for the currentvear, additional provisions have become necessary for cer-tain inevitable increases in expenditure. Budget jjupport forCentral Plan has to be Increased by Rs. 771 crores. Theincreases mainly relate to settlement of claims arising out otcrop insurance scheme, subsidy for setting up tf industriesin backwaid areas, strengthening of equity base of PowerjHnance Corporation, payment to Shipping Companies tomeet commitments made by the erstwhile Shipping Deve-lopment Fund Committee and passing on to financial insti-tutions rupee equivalent of ex'erna* credits extended tothem.

57. Centrol assistance for State and U.T. Plans is ex-pected to be Rs. 421 crores higher mainly due to specialassistance that has to be piovided to Punjab for financing itsPlan outlay

58. On the non-Plan side an additional provision ofRs. 300 crores is lequired for export promotion and marketdevelopment. Subsidy on indigenous fertilizer will als0 behigher by Rs. 250 crores. A marginal increase of Rs. 2D0tio-es has been made in defence expenditure. An additionalprovision of Rs. ^97 crores will be required for defence pen-s'ons on the basis of pctual dnimi arising out of revision otdefence pension rates. Grant assistance to States affected byfloods has to be increased by Rs. 100 crores. Proviiion ofcertain facilities- in Puniab necessitated bv security consi-derations has cost Rs. 71 Ciores.

59. Thc-e have been (-(her increafcs as well. All these-vouM have lesujted in a much higher order of increase inlori-Phn expenditme and in deficit financing. Governmentsave taken a number of measures to contain the increase injxpendituie and 'mprove receipts.

25

60. Ministries and Departments were instmcted to locatejvinjis lo meet to the maximum extent possible tho in-cased in expenditure including the liability for additionalistalrnents of dearness allowance and bonus sanctioned 1°iovei nment employees dunny the year rlhe economy In-m:tions issued last year were continued this year also. Atresult of these measure1), the mciea^e in non Plan c\ren-

iture has been continued

61. Gioss tax revenue it expected to yield Ri. 776 croreslore. The improvement is mainly in Union Excise duties'irstoms duties and Corporation Tax. Under non-Tax RevenueIC piofit on imported cdihle oils is expected to show aharp ieduction owing to nn increase in inteinational prices,'apital receipts aie expected to iliow significant improvement,'otfll receipts of Government are now estimated at Rs, 67843roics as against Rs. 66076 ciores in the Budget estimates,olal evpcndiluie is estimated at Ks. 75783 croics as aga'nstie budget estimate of Rs. 73560 crores. The overall deficitnr the year is now estimated at Rs, 7940 crores. Thus, inpite of the large additional burden thrown on the budgetnd the various concc lions given it has been ensured thativerall deficit docs not inciease substantially.

ludget Estimates 1989-90

62. Next year being the last year of the Seventh Five YearIan period every effott lias been made to ensure that maxi-liim resouices are made available for development, Bud-ctury support for Central Plan including special additional.rovi lion of Rs. 500 crores fot new economic programmesi placed at Rs If) 964 crores,. Internal and extra budgetaryesourccs for Cential Pl»n arc estimated at Rs. 17,482 crores.he total Central Plan outlay for 1989-90 will thus boLs, 34,446 crores against the current year's approved outlayf Rs. 28,715 croics ihowine a step up of nearly 20 perent.

63. Hon'hle Members will be happy to note that in realsrms the actual outlay in the Central Sector for the fiveears would he around 115 per cent of the original SeventhMan outlay.

64. The Central Plan for I9R9-90 places a great deal ofmphasis on agriculture, rural de\e]opmcnt and relatedreas. A new stialegy for agricultural planning has been[evelope*1 on the basis of different agro-climatic regions,"he provision for agriculture and irrigation in the Central'Kin has been stepped up to Rs. 1408 crores. T also purposellocation of Rs. 495 ciotes for the Department of Fertili-;ers,

65. The programmes of Rural Development are central tomr Plan strategy. Inclusive of the provision for the newirograinme, the provision in the Central Plan for this sectorifls been stepped up by 28.4 per cent. For nromofing runilndustrialisarion. the reorganised Khadi and Village Tndittiles"ommission has planned to expand and diversify its activities.3esides identifying 33 new industries for promotion in the:urrent year. 41 other industries will be taken up for deve-opment In the future in a pha bd manner,

66. The provision for social services in the Central Plan is>cing stepped up to Rs, 3396 crores. The main emphasis inhe social welfare programme in the Annual Plan 1*589-90vill be on development of services for early childhood care,vomen's development, prevention of disabilities and rehabill-ation of the affected persons. Tn order to meet these goals,i large expansion is envisaged" tn programmes like integratedThlid Development Service (ICDS). income-generating schemes'or poor ant) destitute women, education, training and eco-lomlc rehabilitation of disabled peisons. Adequate attentionwill be given to treating awareness regarding the right ofvomen, campaign against the atrocit'es inflicted on them andilso against the social evils like child marriage, dowry, drugibusc, etc.

67. The Seventh Plan has been characteiised by a specialhru (t towards human resources devclonment. The appronch.jtraieeies and major thrust aieiis included in the SeventhFive Year plan and the priority riiogrammes of the NationalPolicy on Fdircation 198fi, taken up in 1987-88 are being:ontinued. Fmphasis is given on universallsation of elemen-

tary educaticu, eradication of adult illiteracy, vucaiionalisationof heuondary education, improvement and consolidation ofquality ;tnd standauls of higher education and moderai Utionand lemovLil of obsolescence in technical education,

68. In Older to maintain the tempo of growth that hashci'n attained in iei:ent vears, it is necessary that we continueto inu-st in the expansion and modernisation of our infra-sliuctme sectors. Hence, the outlays in the Central iPhin forPower development have been iaised by 38.6 per cent, fWRailways bv '5.6 per cent and foi Telecommunications by56.6 per cent.

69. M.ijor public sector projects In the industrial sectorincluded in the Seventh PI.in have either been completed oraie expected to be completed in the last year of the Plan,Thee include the expansion of Bhilai Steel Plant, Stage T ofVisakhap.itnam Steel Plant, thi.- Aluminium Complex ofNA1 CO ill Orissa. the gas based fertilizer plants at Bijaipur,Aonla Namrup III, the Caprolactam project at Udyogmandal,captive power plants at Duigaplur, Barauni, Panipat andBhaiindii and the Mahaiashtia Gas Cracker Complex.

70. fn the industry sector adequate outlays have been pro-vided in the Annual Plan 1989-90 for productive schemes andprojects of on-going nature which would be commissioneddining the last year of the Seventh Plan, as well as for ini-tiating the necessary preliminary action for the F.ighth Plan.

71. Central assistance for the Plans of State and Unionten ittn v Government is placed at Rs. 10,R50 crores againstthe cm rent veai's Budget level of Rs. 9.714 crores, Totalexpenditure fiom Central Budget on Plan account will beRs. 27.814 crores next year as against current year's Budgetlevel of Rs. 25,714 crores.

72. Government is aware of the extremely difficult cir-cumstances in which our brave armed forces have beencany ing out their arduous responsibilities of defending OUTcountry. The whole nation owes its grateful thanks to themfor ensuring the serurity of our border? and for bringing creditto our country when called upon to help other friendly coun-tries in their hour of need, At the same time, all of us rf-cognise that there is continuing need for implementing mca-suies for greater cost effectiveness in our expenditure ondefence. My colleagues in the Ministry of Defence havealready introduced a number of measures to improve the costeffectiveness of such expenditure Keeping (his in view Ihnvc provided for a sum of Rs, 13000 crores for Defenceduring the coming year. I assure the House that Governmentwill not falter in ensuring the highest level of defence pfe-parednesi.

73. provision for food, fertilizer and export promotionsubsidies next \car is Rs. 7,472 crores against Rs. 6,841crores in the current year's Revised Estimates. Interestchiirnei next year are estimated at Rs. 17,000 crores againstRs. 14,150 crores in the current year. Grants to States as aresult of the lecommendations of the Ninth Finance Com-mission are estimated to be Rs. 612 crores higher than inthe current year. An additional provision of Rs. 152 croieshas been made next year for cx]>enses in connnction withthe General Flections. The deficit of Department of Posts Isestimated to be Rs. 97 crores higher than in the currentyear,

74 Fvery effort has been made to contain the growth ofnon-Plan expenditure and only the barest minimum provisionshave been allowed. Total non-Plan expenditure in 1989-90 liestimated at Rs. 54 347 crores against Rs. 48,R77 crores inthe Revised Estimates for the current year.

75. Coming to Receipts, Gross Tax Revenue at the existingrate of taxation N estimated at Rs. 49,588 crores. After pay-ment of Rs 12.054 cro'es to States as their share of taxesand Rs. 50 crores to local bodies in Union territories asassignment of revenue, the net accuial to Centre is estimatedat Rs. 37 484 ciores against Rs, 32,652 crores in the currentyear. Market borrowings aie placed at Rs. 7.400 crorcsnqainct Rs. 7,250 crores in the current ypar Fxteinal assist-ance net of lepayment is placed at Rs. 3,722 crores againstRs 3.216 crores in the current year. Taking into accountthe variations in other receipts and expenditure, the overalldeficit for next year at existing rates of taxation is estimatedat Rs. 8240 crores. -

557 GI/&9—4

THR GAZETTF OF INDIA : FXTRAORDINARY \V\vcr T-Src.

PART B

Id. I now turn to my tax pioposuls for 1989-90.

77. For most people taxation is va\ntion. I will only saythai we raise resources through taxation to fiilfit n largercommon pin pose and seek to return to people a benefit whichis greater than the cost they bear.

78. My budget proposals nre guided hv the ohjeclives andeconomic perspectives T have outlined earlier. More speci-fically the proposals are oriented to Ihe following ends :

— Promoting productive employment,

•— Protecting the consumption standards of the poor,

— Discouraging non-essential luxury consumption parti-cularly when it is import intensive,

— Providing some relief to middle incom; taxpayers

— maintaining the tempo of indn .triel modernisationnnd growth,

— containing the budget deficit for 1989-90

79. Now T turn to the budget proposals retarding the directtaxes.

80 The TTon'ble Members are aware of the hiph prioritythe Government attaches to creation of productive emp-loyment. As T mentioned earlier, a number of schemes mealready being implemented to generate employment in mralareas to benefit the vulnerable sections of oi r societv. How-ever, we feel that a time ha<> come for taking initiative tomake a substantial dent on the problem of unemployment.To this end, as already staled Government proposes to in-troduce H new intensive rural employment programme, to becalled Jawaharlal Nehru Rojgar Yoiana. In order to mobiliseresources for this programme. T propose to levy a surchargeat the rate of 8 per cent on resident taxpayers with incomesabove Rs. 50,0001- from assessment year 1990-91. I am sur»flint those who are priviledged to have employment in asociety, where there are so many who are deprived, will notmind this sacrifice in the interest of creating employementfor those not so fortunate.

81. The Government has maintained stability in the directtin rates during the last four years. However, it has oftenbeen represented thnt H 259f tax at the entrv po'nt discouragesmany taxpayers ;n coming to the tnx net voluntarily. Accord-inply. it is proposed to reduce the rnte of tav of in-dividuals in the entry slab of Us. 180OO-25OO0 from thepresent rate of 25 per cent to 20 per cent.

82. This House is aware of the fact that in order tomobilise resources to meet the requirements of the droughtin 1987 and its after-effect? in 1988. surcharge on income-tax and wenlth-tox wa.s levied. T do not propose to continuethe Wealth Tax and Tncome-Tax surcharge from Ihcassessment year 1989-90 and 1990-91 respectively

83. The combined effect of the changes that T urn propos-ing with regard to the employment surcharge and theclumping in the rate structure will be such that a personwith ti taxable income of below Rs. 56,000L will pav lesstax than at present. The entitre burden of additional dierct-tax will fall on tho>.e with a taxable income above Rs.56,OflO[- per annum The revenue effect of this surcharge willbe Rsi. 500 crores. T have no doubt that the House vill wel-come this socially progressive measurt.

M. With a view to curbing conspicor-s consumption, I put-po-c Ui enhance the i.ilc of expcnditmc lux omlci the tWpen-diui-o Tax Act, 1987, a.s applicable to certain hole-In, ftom10 per cent to 20 per cent. This will yield an additionalRs. 30 crores.

85, I now come to some measures for providing relief.

86. To meet the housing needs of the citizens has tlwaysbeen an important policy objective of the Government, Inhis Budget Speech for 1987-88, the Prim* Minister envisageda high priority for the housing sector and had announcedthe decision to set up a National Housing Bank, necessarylegislation in this regard has been passed nnd the NationalHousing bunk has become operation. In order to help theNational Housing Bank mobilise resources in its nascent stageT propose to provide that the deposits made in the Homeloan Account Scheme of the Nn|ioml Housing Bank aswell as the repayment of housing loan taken from the flnnkwill qualify foj deduuetion provided under section 80C ofthe Income-tax Act. The investment will also be exempt fromwealth-tax subject to the overall ceiling of Rs. 5 lakhs. Fur-ther, the taxpayers will not get a tax concession under sec-lion 54E on capital gains if the sale proceed* arc investedin the bonds and debentures issued by the National HousingBank.

87 Poultry fiaming is emciginjj as an important activityfoi enhancing nutrition and providing employment, I, there-fore propose to provide tax exemption to the income frompoultry farming at the rate of thirty-three and one-third percent of such income. This- measure should go a long way inencouraging investment in this area.

R8. Retiring Government employees are often on the lookout for investment opportunities with a good post-tax return.With this view, it is proposed to set up a deposit schemein which a retiring employee may invest the whole or part ofhis letirement benefits for a block period of three years. Theinterest on this investment will he free from income-tax.Further, this investment will also be exempt from wealth-tux,The present ceiling of exemption of wealth upto Rs. 5 lakhsin tespect of wealth in certain specified forms will also otapply to such deposits.

89. As a measuie for providing relief to the widows andheirs of deceased employees, T propose to amend provisionsof the Income-tax Act, to provide a standard deduction atthe rate of thirty-three and one-hird per cunt., subject to amaximum of Rs. 12,000|-, for the recipient of family pensionalso. Similarly, it is proposed to extend the benefit of deduc-tion of Rs. 15,000]- already available to permanently physi-cally handicapped persons, to persons who aie mentallyretarded.

90. Hon'ble Members are aware that under the Constitu-tion Amendment Act, 1988 the ceiling of tax on professionshas been raised from Rs. 250 to Rs. 2,500 per annum withthe object of enabling the State Governments to Taise addi-tional lesources. T hope that the States will take full ad-vantage of this, I propose to provide that this tax be nllow-ed us a deduction in computing the income under 'Salaries'.

91. Following the announcements made in the budgetspeech for 1988-89, Government has formulated schemessetting up the Exchange Risk Administiation Fund and issuedguidelines for venture capital comivinies(funds which provideassistance to new entrepreneurs. In order to extend fiscal

27

buppoit lo these funds, I propose to extern! ceitain tax con-cession to them.

92. Revenue loss, if any, on account of the pioposcd iclicfmeasures is expected to be made up through hcttci compli-ance and better collection.

93. By a notification of the President issued on 7th Nov-ember, 19*8, the Income-tax Act ntands extended to theState of Sikkim fiom assessment year 1989-90. In view ofsome operational difficulties, I now piopose to extend theIncome-tax Act, 1961 to Sikkim only from the assessment>car 19Y0-91. The Wealth-tax Act and the Gilt-tax Act haveaheady been extended ftom 1990-91 assessment year by theCentral Government's notification.

94. I shall now proceed to deal with mv pioposals ielat-ing to indirect taxes.

9?. Jn formulating these proposal,, I have teen guidedby the imperative need tor raising additional lesouiccs, Indoing so, I have taken care to >ca that items of mass con-sumption aie not unduly iillecled and thtt the burden fallslargely on idatively a affluent sections of the population.

96. As the House is aware, problems of evasion of exciseduties through undeivaluation and lelated adminislialiveproblems ha\e led to specific rather than ad valorem dutieson a large number of commodities, Jn fact, of the total ex-cise ie\enuc, about 70 per cent is deiived fiom commodities<_•-»[ ryijip duties at specific lates. In the case of many commodi-ties which aic subject to specific rates o£ excise duly, the dutyincidence is substantially lower than what it w,«s when thespecific duties were fixed ongiirillv. Theie has lu l c a systemwhereby all specific rates arc revisi-d upwaids periodicallykeeping in view pi ice incieasc I proposed to make a beginn-

ing in this regard in this Budget by increasing the existing.specific duty rates of a substantial number of commoditiesby a modest five per cent of cuirent rates with suitable lound-iny oft I hasten to add lb.it I have taken cme to cnsuiethat items of mass consumption aie kept outside the pin viewof Ihis adjustment. The items on which there will he nochange in the i ate of excise duty include sugar, tea, cotfee,petroleum pioducts like kerosene, dicscl and motor spirit, biris,vegetable oil, vanaspaii, cotton \(irn and fabrics, jute yarnand labries, and electric bulhs and fluoiescenl tubes.Similaily the existing exemption for newspiint andspecified paper intended for use in the printing of textbooksor other books of genciM interest remains unaltered.

97. It is expected thai the upward re\ision of specific rateswill vield an additional excise revenue of Rs. 220 ctores.

HL some commodities which are chaiged to^jyicjse-chrty. at specific rales and which would call for a higher

ra!F"oT*TOtiistment than what has Aicen proposed in general.I now come to rjiy _propo'.als in rejaTtt to 4$atsjf-;(jrommodities

99, In the cast of iron and steel, the s-p cific rales of dutyhave not been changed significantly for over a decade now.As H revenue raising measure, T propose to rais« the l sitesof duly on these items, The duty on pig iron is proposed to beincreased from Rs. 80 to 200 per tonne. On steel items otherthan stainless steel, such as ingots, billets, bars, road?, etc.presently attracting duty of Rs. 3fi5 p f tonne T propose loincrease the duly to Rs, 5<10 per tonne. The duty on ceilainhot rolled flat products such as sheets, strips, etc. is propos-ed to raised from Rs. 500 to Rs. 700 pei tonne. In respect

of certain cold rolled Hat products such as sheets and strips,the duty is proposed to be nuised Iroin Rs, 715 to Rs. 900 pertonne.

100. There arc certain assessment dispults in the case otloigings and castings as the duty rates vary depending uponthe classification, As u measure of rationalisation and to pre-vent such disputes. I propose to levy uniform rate of dutyof Rs. 800 per tonne on steel forgings and Rs. 60U per tonneon steel castings.

101 In the case u[ stainless steel where the duty incidenceis rather low, I propose to raise the duty on ingots, semi-finished products and hot rolled products from the existingrates to Rs. 1000 per tonne and on certain cold rolled pro-ducts from 715 per tonne to Rs. 1500 per tonne. Stainlesssteel castings and forgings will also attract a duty of Rs.1500 per tonne.

102. Similar duty adjustments are proposed to be madeon olhcr iron and steel items. In the case of dutiable down-stream pioducts, MODVAT credit on iron and steed itemswould continue to be available,

103. These measures are expected to result in additioaalexcise revenue to the lune of Rs. 150 crores and customs re-venue of Rs. 18 crores,

104. No Finance Minister can resist the Icmplation of look-ing lo smokers of cigaratles for augmenting excise revenue. Tmust conless thai 1 like mo^t of my predecessors, rendilysubmitted to this temptation. Smokers who do not pay anyheed to the statutory warning to their health should, I feel atleast conliibute moie to the health of the national economy.I propose lo restructure to duty on cigaraltes. While gene-rally the duty rates arc being raised, the extent of incret.se-uould he more in that case of filter cigarettes of length above70mm However, non-filter cigrettes of length upto 60 mmwill cany a rate of excise duty of Re. 1 per packet of 10.These measures aic estimated to yield excise revenue to thetune of Rs, 101 crorcs.

105. Having revised the duty structure on cigaiettes, T wouldnol like users of pan ma^sala to feel aggrieved that they hovebeen let down. 1 propose to double the excise duty presentlybeing levied on pan masala not containing tobacco for thetwo existing slabs based on value from Rs. 10 and Rs. 20per kR, to Rs. 20 and Rs. 40 per kg, respectively. Simulta-neously, I propose to incie.ise the excise dutv on pan masalacontaining tobacco from 25 pei cent to 30 per tent, 1h«revenue implication of these measures is Rs. R crorcs.

106. As the House is aware, molasses is the principal rawmaterial foe the manufactuie of liquir. In keeping with itsend use, T feel, molasses can bear a higher incidence of dutythan at present. 1 accordingly propose to increase the exciseduty on molasses from Rs, 60 to Rs, 120 per tonne. 1 pro-pose to increase suitably the credit of money that is presentlyavailable when alcohol is used in the manufacture of chemi-cals. It' is estimated that th^i measure will yield additionalexcise revenue to W tun^ of Rs. 11 croreg. ,

107. I have a couple of proposals relating to tiavel tax.

108. As present. Foreign Travel Tax is being levied atthe rate of Rs, 50 per ticket for travel to neighbouring count-ries and Us. 100 p«r ticket in reslpect of trn\el to other count-ries. Thc-e rales have not undergone any clianjrr since 1979.J propose to increase the afoiesaid rates of tax to Rs\ 150 andRs, 300 respectively.

28 THE GAZETTE OF INDIA : EXTRAORDINARY [PART I-SEC. 1]

109. As the House is awaie, Government has invested su'os-tamuil sums of money in developing OLIT airports and provid-mg inrrastructmul Jacilities therein. Keeping this fact inview, [he privileged few who can afford to fly within thecountry should niA ltinul it they arc to pay a small extraamount as tax. for augmenting revenues. I intend to levya new tux called inland Air Tiavel Tax at 10% of thebasic iare, However, I propose to exempt passengers payinguir faic in ioreigu cunency. Thcie Will also be a provisiontor exempting deserving special categories of passengers fromthis tax.

J10. The pioposals iclating to tiavel tax will be giveneffect to tiom a date to be notilieU later and ale expected toyield additional levenire to the tune of Rs. 85 crores.

111. Having dealt with those who Ji>, 1 nov» lum to (hosewho drive, J et me deal with my ptoposals m icjjaxd to theautomobile sector.

112. As honourable Members arc awaie, presently thereis u concessional rate of excise duty of 25 per cent in res-pect of fuel cmoienL cuis oi engine capacity not excedinj:lOOOcc and 30 per cent in respect of such, cars of enginecapacity exceeding 1000 cc as against the rate of 35 per centlor other cars. 1 leel tuel ellicient cars have established them-selves and theie is no necessity to continue with the conces-sional laies any more. 1 accordingly propose to levy a uniiorm late of 35 per cent on all motor cais. This rate willapply to vans and jeeps also. The revenue gain from thismeasure will be Rs, 1U0 crores.

113. Cunently the excise duty un two wheeleis of enginecapacity not exceeding 100 cc is 15 per cent and thai onothers, 25 per cent 1 propose to restructure the excise dulyon two whceelers into a four tier regime. The rate of duty ontwo wheeleis uplo 50cc will iemain at the present level of15 per cent The duty on two wheelers between 50 and 100cc is being raised from 15 per cent to 20 per cent. Thereis no change in the mte of excise duty of 25 per cent on twowhecleis between 100 and 150 cc. 'I he rate of duly on twowhcelcis above 150 cc will be 30 per cent. Ihis measuro JSexpected to ycild additional revenue of about Ks. 26 cioics.

ll't. I also propose to g^c some concessions in customsduties to this sector keeping in view the need to encouiagcdomestic production and hasten the piocess ol indigenisation,

115. 1 i'uituer propose to p resen t ;i concessional duty of40 per cent on machineiy impoited for the manufactureoi iuel injection equipment, which is a vital component forthe automobile sector. The same rate would be applicable tocomponents impoited for manufacture of fuel injection equip-ment. The concessional lttte would be available only to theunits manufactuiing under an appioved phased manufacturingprogramme. (

116. The concessions in customs duty to the automotivesector will have a revenue implication of Ra. 19 crores.

117. 1 now come to the package- of measures lelating tothe electronics sector. This is one of the fast growing sec-tors in oui economy and is in a posiLion to contribute moreto the exchequer. My proposals hi regard to this sector areoriented to giving a greater stimulus to [he process of in-digenisation.

118. The Members of the House are aware that televisionhas offered considerable entertainment to our people. It would

be in the fitness of things that television viewers who dciivesuch entertainment should contribute more to the resources ofGovernment and theieby to the piogramrncs of national deve-lopment.

119. At piesent, black and while television sets of screensize exceeding 15 cm. and upto 36 cm ale completely exemp-ted from excise duty. While continuing the exemption forsuch sets, 1 propose to increase the excise duty on the picturetube of .such sets to Rs, 200 per tube. Black and white tclc-\ision sets of scieen size exceeding 36 cm attract excise dutyof Rs. 300 per set. I propose to mciease this rate to Rs. 500per set.

120. As regatds colour television sets, the present d*ty isRs, 1500 per set of assessable value upto Rs. 5000 andKs. 2000 per set of assessable value mole than Rs. 5000. Thisdutv stiuctuie has led to some valuation disputes. Some highvalue sets have also enteicd the market, A review of theduty structure on colour television sets is theiefore called for.I piopose to fix a duty of Rs. 2250 per set without remotecontrol, Rs. 2500 per set with remote control and Rs. 4000

per set having the facility of 'Picture in picture'.

121. I also propose to fix a uniform rate of 20 per cent onladios, two-in-oncs, cassette recorders and musical systems,as against the present rates of 15 per cent or 20 per cent.

122. I propose to increase the excise duly on computersfrom 10 per cent to J5 per cent ad valoiem. At the sametime computers me being taken out of the general schemeof exemption for the small scale sector.

123. Presently, specified raw materials and piece parts im-poitcd for the manufactuie of specified electronic compo-

nents attract customs duty at the rates of 35 per cent and50 per cent respectively. While extending concessional <.!utyto a larger number of items, I piopose to raise these ratesto 40 per cent and 60 per cent respectively.

124. Thc-c proposals relating to electionic items are esti-mated to yield additional levenuc to the tune of Rs1. 15?emies in excise and Rs. 36.5 crores in customs.

125. 1 have some concessions in customs duly to announcefor the electronics sector. In last year's Budget, a unifornlate of import duly of 100 per cent was provided to a largfnumber of equipments for telecommunication, satellite communicalion, data communication, television transmission amsound broadcasting, I piopose to extend the concession tc35 more specified equipments.

126. Optical communication cables arc essential for telecommunication. In order to encourage the manufacture osuch cables in the country. I propose to reduce the imponduty on specilicd raw materials required lor their manufaclure from the present rates varying from liO to 300%, tcthe level of 8 0 % .

127. With a view to encouraging production of high-teclitems like large scale integrated circuUs, .microprocessors an<other microelectronic Items, 22 items nf machinery have beeigiven a concessional import duty of 1 5 % . ) propose to extend the concession to five more items of machinery.

128. The concessions in customs duty to the electronicsector will have a revenue implication of Rs. 33 crorcs.

129. I have a package of measures in rogntd to trie cu!toms duty structure for capital goods.

29

UO. At the time of piescnting the 19«7 Budget, the Hon'blePi me Minister hud cmp'-iasised the impoilance of ihe capi-tal goods industry md had stated that it is central to ourdloits for achieving self reliance and to promote the growthof this sector, impoitant steps were initiated that year, fhcsuccess, brought forth by these mcasuies encourages us tocontinue flutter along those lines. My first proposal it toextend the duty concession for import of machinciy underthe technology ungradation scheme for the capital goodsindustry to four more sectors. These are cutting tools, com-mercial tool looms, textile ntachinery and paper machinery.In addition, for the machine tool sectoi, I propose to expandthe list of machin:ry items attracting concessional duty.

131. I propose to rationalise the import Unit of capitalgoods. The rate of import duty ua general projects- andmachinery is beinjj reduced from the exiting $07o t o

80% ad valorem. The talc of duty on components whichis 15% below the rate applicable to the machinery wouldt,et conespondingly reduced.

132. The next step in this regard would be rationalisingthe rate of concessional import duty on specified machinerywhich presently varies between 2 5 % to 35%. This is beingunilied and fixed at 40% ad valorem. There would, however,be no change in the case of fertilizer projects. In the caseof power projects, the increase would be by five percentagepoints.

133. The rationale for these changes lies in the desirabilityof reducing the dispersion in tariff rates as murh as possible.In pursuit of this objective, 1 am introducing an inteimediatelevel of duty of 60% ad valorem. This will apply to certainspecified items of machinery which are manufactured indige-nously Mich as captive power plants, certain types of generat-ing sets and circular looms for jute industry.

134. As a measure of facilitating tJie export thiust sectonto upgrade their technology by importing modem machinery,concessional duties have been prescribed from time to tiuv)on machinery for specified thrust sectors. I propose to ex-tend the concession to rubber and canvas footwear sectorand to expand the existing list of machinery for textile andsericulture sectors.

135. These measures relating to capital goods ale estimatedto lesult in a loss of customs revenue of about Rs. 117crorcs.

136. As I have mentioned cailier in my speech, pricingand distribution of aluminium is heinH decontrolled withimmediate effect. Tn this context, I propose to increase theexcise duty on aluminium in?ots ;nd wire-rods from theexisting level of 18% to 20% ad valorem plus Rs. 2500 pertonne. Since MODVAT credit in regard to primary alumi-nium would be available for dutiable downstream products,I propose to increase the duty on most of such products byten percentage points. It is nlso proposed to exempt alumi-nium ingots from basic and auxiliaiy duties of customs. Thebasic customs duty on aluminium wrap Is being reducedfiom 30% to 1 5 % . The net revenue ylel<) from the-emeasures will be Rs. 50 cro.es.

137. There im- certain commodities which attract a lowrate uf customs duly at present n.id these call for a review1 propose to raise the import duty on wood pulp, wastepaper, low ash co.il, n w (W-oI-ium er.fre and certain chemi-Cdln by five pcirrntnge pants over 'he eii'Mini? rales. Onbenzene, T propose to raise the basic customs duty from the

existing nil rate to 25% ad valorem. The ic\enue gain fiomihc-c pioposuls will be Rs. 39 aoies.

138. 1 pioposc to ineiease the basic elisions duly onglazed ncwspnnt from Rs. 550 pu- tonne to 30 '/c ad valoicm,I his will yield additional revenue of about R.S. 12 crores.

13(J. Watches and components then:of presently bear a lowlate of excise duty of 2% ad valoirm. This rate was fixedin older to encourage indigenous production ot watches.This measuie has been successful, I think, the time has come,when the watch industry can bear a higher duty. I proposeto increase the rate to 5% ad valoiem. Thi : will result ina revenue gain uf Rs. 5 crores.

140. I shall now deal with my package of proposals mtegaid to the agrobasod and related industries.

141. As Honourable Members aie aware, the growth offood processing and packaging industry is e^cntial for in-creasing value addition of agricultural produce and raisingincomes of farmcis. As part ot Budget proposals last ycai,excise duty on parts and accessories going into the installa-tion of cold storage plants for preserving foodstuffs was re-duced from 40% to 15%,, 1 now propose to extend theconcessional late of 15% to parti of refrigerating appliancesand machinery as well as compiessors intended to be usedin refrigerated vans meant for transport of food and dairyproducts.

142. At present, 34 specified items of food processing andpackaging machinery enjoy a concessional import duty of35%. I propose to extend the concessional rate to a fewmoie specified items of machinery such as transput lefrigera-lion unit and machinery for egjf processing. The concessio-nal rate of duty as stated earlier Is now being fixed at 40%.

143. I propose to reduce the excise duty on skimmed milkpowder and condensed milk from 15% to 10%,. Srmulta-nously the exemption from excise duty on skimmed milkpowder in one kilogram pack is being withdrawn. The ex-cise duty on certain other food preparations such as prepara-tions of fish, meat, tapioca and sago fn unit containers isbeing reduced from 15%, to 10%. Nomkeens such as buji-yas and chabena and specified icady-lo-cock mixes such asidli-mix and vada-mix are being fully exempted from exciseduty.

144. A concessional import duty of 61% has been provid-ej for certain specified items of machinery for marine foodiTtor. I propose to further reduce the rate to 40% and

enlarge the list by adding three more items of machinery forfishing, In addition, I piopose to reduce the import duly onmachinery for the manufacture of fish nets from 90% to10%.

145. One of the proposals contained in the New Policyon Seed Development announced in September, 1988 relatesto the tcduclion of import duty on machines and equipmentsused for seed production and processing and quality controlt<n which technology upgradntion is necessary. I propose toprescribe a concessional import duty of 40%, on 12 specifiedUems of such machinery tmd equipments.

146. In order to help improve the quality of poultry feed,T propose to reduce the import duty on two specified tun Innacids from the present level of 147.25% to 7 0 % .

30 TtiE GAZETTE OF INDIA : EXTRAORDINARY [PARF I-bEc. lj

147. To give relief to the jute indiibliy, I piopose to exe-mpt from excise duty jute yarn supplied to a registetcd hand-loom cooperative society or an organisation set up or ap-piovcd by tlie Government. This exemption will be availablefoi tlie purpose ol' development of handlooms loi maniifuc-tuie of fabrics other than those used for jule sacks, 1 alsopropose to extend this exemption to units set up by theKhadi and Village Industiies Commission and Boards.

148. Paper and puperboard containing not \tv, ihan 75%by weight of bagasse is totally exempted from excise duty.In order to fuither encourage the use of unconventional lawmaterials for tho manufacture of paper and th'is reduce thepiessiiie on forest based raw materials, I propose to extendfull excise duty concession to those varieties uf paper andpaper board which contain not less than 75% of pulp madefrom raw jute ur mesta. This meaouie may incidentally helpthe jute industry.

149. For helping Ihe farmers to get better prices foi theiipioducc, 1 propose to increase the busic customs duly oncinnamon from Hs, 20 per kg, to 90% ad valorem plus Rs.20 per kg. and that on cloves from Rs. 60 to Rs. 95 perkg.

150. To gi\e a major thrust to marketing of piotlucts ofthe Khadi and Village Industries sector, I propose to make>in exception in regard lo availability of small scale conces-s;on where the products bear the brandname of Khadi andVillage Industries Commission and Boaids, The existingconcession for products of village industiy maiketed by orwith the assistance of the Khadi and Village industries Com-mission is being extended to furniture and ceramic products.

151. These measures relating to atroba^ed and relatedindustu'es me estimated to result in a revenue loss of Rs. 5croies of customs duty and Rs. 8 ciores of excise duty.

152. On a review of the excise duty structure for thematch industry, I feel there is need for revising the dutyrates for the different sectors of the industry. Cunently,excise duty is being levied on the mechanised, semi-mecha-nised, non-Mechanised and cottage sectors of the industry atRs. 5.85, Rs. 4.15, Rs. 3.50 and Rs. 1.60 per gross of boxesrespectively, I propose to bring down the aforementionedmles to Rs. 4,50, Rs. 3.00, Rs. 2.50 and Rs. 1.10 per giossSimultaneously, I propose to increase the ctci'c duty onpotassium chlorate, an essential raw material for the manu-facture of matches, from 15% ad valorem which works outto loughlv Rs. 2 per kilogram to Rs 5 per kilogram, Theduty rates will be converted into metric system and specifiedas applicable to 100 boxes with elFect from the 1st June,1989. These proposals involve a revenue sacrifice of Rs.11 c i ores excise duties,

153. In view of the shortage of cotton di'e lo drought,is part of the Budget proposals last year, a concessionalluty of Rs. 5.22 per kg. was prescribed on viscose staplenhte for blending with cotton, However, with th? increasedtvailahilily of cotton this year, ther: is no further necessityo continue the concession. T propose to withdraw the con-cssiona) rate and fix a uniform rate of Rs. 8.35 per kg- o n

'iscose staple fibre, The revenue jnin from this measure\ill be of the order of Rs. 14 crores.

154. I propose to exempt raw wool to bo imported by»hadi and Village Industries Commission anJ State FChadind Village Industries Boards from the whole of the duty.

155. The customs duty on raw silk is bcinj; teduced from75% to 30% ad valorem.

156. Dycstuffs are impoitant inputs for the processing uftextile.!. This commodity carries at present an excise dutyof 35%- I propose to reduce the excise duty on syntheticuiganic dyes-tuffs from 35% to 3 0 % . This proposal winchwill benefit this textile related industry involves a revenueloss of Ri. 19 crores.

157. Synthetic (>hoddy blankets of value upto Ri.. 60 persquaic mctie are being exempted from the whole of exciseduty.

158. I propose to give certain concessions in customs dulyto specified life savins drugs and drug intei mediates, Theproposals in this icgard are likely to lcsult w a revenue lossof about Rs, 7 crores,

159. In oidei to give icliet to cement units using veilicalshaft kiln, I piopose to reduce the excise duty on cementmanufactured by such units by Rs. 100 per tonne from thegencial elfcclive rale, This involves u revenue loss ofRs. 10 croies,

lftO. As a step tovuiids energy conservation, I piopose loreduce the excise duty on high picssuie sodium vapour lampsfrom 15 per cent to 10 per cent. Simultaneously, I propose toprescribe a concessional imporL duly of 50 per cent on fourspecified inputs for the manufacture ol such lamps, Theseme.isuies me estimated lo result in revenue loss of Rs. 2.5croies in excise revenue and Rs. 5 crores in customs revenue.

161. There huve been repiesentations that the film indusliyhas been adversely hit by video piracy. I accordingly proposelo restructure Ihc excise duty rates on feature films. As perthe levised proposal, Ihe first 30 prints of each feature filmwould be eligible for complete exemption from excise dulyas against the first 12 prinls at present. The nates of duty onsubsequent prinls are being reduced.

162. Some of the organisations engaged in the lehabilila-tion of physically or mentally handicapped persons undertakemanufacturing activity for pioviding employment lo suchpci sons, Presently, such organisations aie eligible for exciseduty exemption only to the extent available for specified goodsmanufactured in the small sector. I propose to fully exemptsuch goods produced by these organisations.

163. In order to promote safety in chemical industiy andenvironmental control, 1 propose to extend concessional im-poit duty of 40 per cent on 25 specified equipments such asmonitoring instruments for toxic and hazardous, chemicals orgaves special incinerating systems etc.

164. Parnxylene is an impoitant law nmtcnal used in themanufacture of DMT and PTA which in turn arc used by thepolyester industry. Keeping in view the lecent trends in theinternational price of paraxylenc, 1 propose to reduce theimport duty on paiaxylcne from 120 per cent to 'JO per cent,

165. There arc a tew rationalisation and anti-evasion meu-suies ielating to customs and excise duties.

Ifi6. Presently, petro-chemical factories are eligible for cer-tain concessions including concessional excise duty on naphthawhen they are declared as refineries, The present scheme

n1MS been reviewed and 1 propose to make available thr, con-cessions with ceitain modifications, without linking the con-cessions to the declination of a factory us a refineiy. Simul-taneously, I propose to raise the concessional rate of dutyon ruw naphtha from Rs. 30 to Rs. *S0 per kl. The order*declaring certain factories us refineries are being rescinded

167. Small scale units are allowed complete exemption fromexcise duly upto a value of Rs. 30 lakhs in case they manu-facture goods falling under more than one heading of theCcnlnal Excise Tariff. I propose to lestiucture the schemeso that the exemption uplo Rs. 30 lukhs is available only ifthe goods falling under more than one Chapter of the Cen-tral Excise Tariff are manufactured.

168. The details of the revenue implications of the mea-sures announced are given in the Fxpl.inatory Memorandumto the Finance Bill.

169. Provision is being made in the Finance Bill for con-tinuance of auxiliary duty of customs nnd special excise dutyat the existing rales.

170. Apart from Ihe above proposals, T have proposed cer-tain amendments in the Finance Bill seeking to effect changesin the excise and customs tariffs. These amendments aremerely enabling provisions and have no revenue significance.Besides, there are proposals for amendment of .some of theexisting notifications. In order to save the time of the House,T do not propose to recount them.

171. In the aggregate, the proposals in regard to changesin the customs and excise duties outlined above are likely toyield additional revenue of Rs. 863.20 crorcs from exciseduties and Rs. 117,06 crores from customs duties. The con-cessions and reliefs announced aggregate to Rs. 237,12 cro-res on the customs side and Rs. 71.02 crores on the exciseside. The net additional revenue from excise duties wouldthus be Rs. 792.18 crores. On the customs side, there Is anet revenue loss of Rs. 120.06 crores. Besides, the changesin the Foreign Travel Tax and the levy of Inland Travel Tax.would yield an additional revenue of Rs. 85 crorcs. Thus,out of the total net additional yield of Rs. 757.12 crores fromIndirect taxes, the Centre's share would be Rs. 373.13 croresand thnt of Slates Rs, 383.99 crores.

172. 'I he Medicinal and Toilet Pieparations Act is anenactment under Article 2bB of. (he Constitution in terms ofwhich duties are levied by the Union but collected and app-lopi Litcd by the Slates. There has heen no change in therales of duties leviable on medicinal and toiler pieparationsconlaining alcohol, narcotics and narcotic diug>. since 14N2.Theie have been requests from the Suite Governments thatIhe rates should he reviewed and revised suitably. While Ido not propose lo make any changes in the uj valorem rates,do not propose to make any ehanyes in the ad \alorem rates,of the existing roles. The details of the changes made in theSchedule are given in the Explanatory Memorandum to fheFinance Bill.

173. Copies of notifications giving eflfecl to the changes incustoms and excise effective from 1st March, 19R9 will belaid on the Table of the House in due course.

174. The modifications proposed by me in direct and In-direct taxes are expected to yield Rs. 903 croies to the Cen-tre. Taking this into account (he year and deficit for thenext year is estimated at Rs. 7137 crores.

175. Sir, the pioposals I have just presented mark, in theirtotality, a qualitatively new stage in our continuing quest forsocial justice. The new employment programme, which willexpand over time, is the people's own weapon in their strug-gle to usher in a society liberated from the shackles of po-verty. The budget proposals also leflect Government's strongcommitment to self-reliance. We are determined to vigorouslyimplement strategies for evpoit promotion, for modernisationof Indian industry and for efficient impart substitution. Withinthese basic policy parameters, every effort will be made tocontain imports to reasonable levels, The journey "along theliith of development is hard and long. It involves sacrifices.'The question is who will make such sacrifices for future growthand prosperity. The answer of these budget proposals isclear and categorical, Tt is the relatively affluent who willhave to share a larger burden so that the weaker and vulner-able sections of society may share in the fruits of growth.

176. I commend the Budget to (he House.

K.V R. NA1R, Addl. Secy. (Budget)

Printed by the Manager, Govt. of India Press, Ring Road, New Dellii-110064

and published by the Controller of Publications, Dejhf 110054, 1989