SPEECH OF SHRI C SUBRAMANIAM
MINISTER OF FINANCE
INTRODUCING THE BUDGET FOR THE YEAR 1975-76
Dated : February 28, 1975
1.1 It is my privilege this year to present the budget to this august House.
1.2 Its formulation has been no easy task; but my burden has been lightened
to some extent by my distinguished predecessor in office who had applied many
correctives earlier in the year; these severe measures had a distinct impact
on an admittedly difficult economic situation that our nation has of late been
faced with.
1.3 It is unnecessary for me on this occasion to recount in detail the variety
of factors, both external and internal, which have interfered with the orderly
implementation of our development plans and strategies in recent times. The
virulence with which inflation has been spreading and its devastating impact
across national boundries, continue to impose on developing countries such as
India burdens and hardships which we have been ill-equipped to withstand. The
impact on the living standards of our people and on the pattern of real incomes
within the country has been serious enough. What is even worse is the persistent
rise in prices which has eroded the capacity to save and thus imposed a painful
constraint on the flow of investible resources so urgently needed to sustain
our plans for a better future. The ‘Economic Survey’ sets out in
some detail the anatomy of this complex problem and the characteristic features
of the current situation.
1.4 It is against this backdrop that I would like the Honourable Members to
assess and to judge my budget proposals.
1.5 What, one might ask, has been the underlying approach - the basic philosophy
- in framing these proposals? Is it merely an ostrich-like exercise to balance
receipts and expenditure for the exchequer? Or does the budget seek more positively
and purposively, to subserve larger national objectives?
1.6 The answer is, of course, clear and unequivocal. We do look upon the budget
as an important tool for reaching our cherished socio-economic goals. Development,
the security of our country and growth along with social justice continue to
govern our priorities; these objectives determine our decisions on how much
to spend; on what programmes to spend, and in what manner the resources are
to be raised. The pattern of our outlays, as well as the relative weight of
particular instruments in the raising of resources might vary - indeed, may
well need to be deliberately fashioned afresh - from time to time, in response
to changing circumstances and requirements. But about the over riding concern
and commitment to deliver the masses from grinding poverty there can, of course,
never be any doubt or vacillation. I shall spell out a little later in my speech,
the concrete steps contained in this budget to take the nation forward in this
direction.
1.7 The immediate concern of our fiscal and monetary policies has been naturally
to bring inflationary pressures firmly under cheek. A series of steps had to
he taken - some of them unpalatable and unpopular - to restrain and discipline
the demand pressures operating on the limited availabilities of food and fuel,
of clothing and housing, of transport and power in an economy besieged by rising
prices. In the shortrun, there was no equally effective alternative open to
the planners and policy-makers to balance demand and supply of these essential
goods and services for containing inflation. These present a great challenge
to our nation and call for courage and fortitude.
1.8 However, only incurable pessimism will, I think, bar us from acknowledging
with some satisfaction, the fact that already there are visible signs of a downward
trend in prices. The ‘Economic Survey’ provides some details of
price trends for important commodities. They give room for some satisfaction,
but ordinary prudence demands that we continue to be conscious of the fact that
the fever of inflation has not been entirely cured; it has as yet only shown
signs of some abatement.
1.9 But then, let us also remind ourselves that the problems of poverty in our
country cannot be solved by merely holding the price line. We can meet them
only through growth. A rapidly growing economy is the best insurance against
perpetuation of poverty; indeed, it is the only solution. We have, therefore,
to devise ways and means of stimulating production from the available capacity,
and of adding to that capacity in sectors considered vital for improving income
and consumption levels of the poor. This requires a multi - pronged drive to
augment our capital and improve our technology and management. The budget proposals,
which I shall set forth presently, embody certain specific steps to provide
the stimulus to the economy on these lines, as part of a longer-term strategy
for stabilising and on that basis imparting greater viability and vitality to
our economy.
II
2.1 Our ability to meet the minimum basic needs of our people depends crucially
on the trend in agricultural production. It is in this light that I regard the
claims of agricultural growth as the first charge on our developmental resources.
Modern agriculture is interlinked with industry. Fertilisers, pesticides, agricultural
implements and equipment, besides supply of power, determine agricultural productivity,
as much as seeds and water. The sectors of our industry which supply these vital
inputs to our agriculture, therefore, merit the highest priority.
2.2 The continued sluggishness of Indian agriculture since 1971-72 has contributed
significantly to the distortions which have emerged in our economy in the last
two or three years. The causes for this sluggishness have been carefully analysed;
we have identified a series of measures directed towards imparting a new momentum
to this vital sector. The prospects for the forthcoming rabi crop are encouraging.
This should not, however, make us complacent in our drive for higher productivity
from the land and labour employed in agriculture. A sustained increase in productivity
will call for action on many fronts.
2.3 The first priority is, of course, the supply of good quality seeds of the
high-yielding varieties. A major National Seeds Project for large-scale production
of quality seeds has been launched. This project will cover production, processing,
marketing and quality control of seeds. Regional and State-level Seed Corporations,
with a time-bound programme of self-sufficiency in meeting in full the demand
for high quality seeds, are being established. Agricultural Universities will
be involved in the work to ensure quality. The research and teaching staff as
well as the students are to be involved in solving the practical problems of
seed production and supply. Arrangements are also being made for an effective
seed certification programme, and for the build up of national and local buffer-stocks
to meet emergency needs. The financial and other requirements of this programme
will be fully met.
2.4 Secondly, fertiliser production programmes are being pushed through, notwithstanding
the escalation in project costs of the new units. The public, the cooperative,
as well as the private sectors have been given a role in bringing to fruition
additional fertiliser capacity during the Fifth Plan period so that dependence
on imports - which is costly and unreliable at best - could be mitigated if
not done away with altogether.
2.5 Thirdly, programmes designed to ensure optimum utilisation of surface and
ground water to aid agricultural production will be pushed through. Command
area programmes under major irrigation projects will be supported by sufficient
inputs of men and materials so that the new potential is taken advantage of
by farmers with the least delay and for maximum social benefit. Inter- State
river disputes, which unfortunately have been dragging on without solution for
a number of reasons in the past, are now being looked into with a special sense
of urgency. As a result, the progress in some of the cases has been quite appreciable.
Failure to settle these disputes is leading to waste of water and sacrifice
of additional agricultural production that the country so desperately needs.
2.6 Fourthly, special efforts are being made to organise Farmers’ Service
Societies to provide credit to the farmers in time, to arrange for inputs and
to help in processing and marketing of the produce. A high-powered group which
examined this problem has formulated a scheme for the formation of viable multi-purpose
societies linked to Central Cooperative Banks or commercial banks as the case
may be. The recommendations have been accepted by the Government and the Departments
concerned are working out a programme of action in order that the objective
of timely and adequate supply of credit, backed by physical inputs and covering
processing and marketing, is realised, particularly for the benefit of the small
and medium farmers.
2.7 Next only in importance to the agricultural sector is the energy sector.
The nationalisation of coal is beginning to yield results. Daring the current
year the production of coal is expected to go up by about 10 million tonnes
to a record level of 88 million tonnes. I would like to say a special word of
appreciation and thanks to the workers in the coal mines; without their enthusiastic
cooperation we could not have achieved the increase in production. Re-organisation
in the management of mines and supply of much needed equipment, spares and technical
expertise have laid the foundations for an expanding trend in coal output. Two
of the major constraints on coal production, namely, shortage of rail transport
and power, especially in the eastern sector have now been largely removed. With
the present trend, it is expected that during the next year, coal production
will go up by another 10 million tonnes, that is, to 98 million tonnes. At this
level of production, it should be possible to meet the domestic demand in full
(including partial substitution of coal for furnace oil); we might also perhaps
export some quantity for earning much-needed foreign exchange.
2.8 The immediate impact of the steep increase in the prices of crude oil, and
the petroleum products, was, no doubt, to strain the country’s balance
of payments severely. At the same time, this has given a new sense of urgency
and momentum to our efforts to increase production of indigenous crude. The
anticipated increase within as brief a period as one year, between 1974-75 and
1975-76, is from 7.5 million tonnes to 8.4 million tonnes, an increase of about
12 percent. What is more important is the progress achieved and the potential
that is opening up for a major break-through in the indigenous production within
the next 5 to 10 years. The discovery of oil deposits in the structures known
as Bombay High is already known. The Oil and Natural Gas Commission is expected
to establish the first stage of production from Bombay High in the second half
of 1976 with a yield of about one million tonnes per year. By 1980 production
from this source might well reach the level of 10 million tonnes, though one
may have to wait a little before making firm estimates. The Bengal and Kutch
off-shore basins are also being intensively surveyed and the preliminary results
so far obtained appear encouraging. The dynamism exhibited by the Oil and Natural
Gas Commission merits our appreciation.
2.9 After a period of stagnation and shortage with widespread consequences to
both industry and agriculture, recent trends in the production and distribution
of electricity also show a welcome improvement. The entire electricity industry
is being restructured with accent on professionalism, efficiency, competence
and precisely defined responsibility for the staff. As a result of these measures,
there has been distinct improvement in the levels of power generation in the
eastern region. The Central Electricity Authority is being reactivised and the
State Electricity Boards are being helped to professionalise their management,
to arrange for maintenance services and to improve staff skills. These programmes
as well as recent achievements portend an easier power supply situation than
has been the case in recent years. Government are also actively examining the
possibilities of setting up at the pit heads of major coal fields in the country
a number of super thermal power stations. These Centrally owned power stations
would enable the Union Government to even out to some extent, the regional imbalances
in power availability, augment the power supply substantially, and to bring
about a more rational approach to the problem of generation and distribution
of power in terms of real needs.
2.10 I wish to submit that the important feature of this Budget is a clear-cut
identification of these twin priorities - food and energy with the supporting
facilities - and the ear-marking of adequate funds for the development of these
two sectors in the first instance before taking up the claims of other sectors.
This is the kind of inescapable and often cruel choice which planners and policy-makers
in developing countries are called upon to make, beset as they are with scarce
resources and multiple needs. I have no doubt that Hon’ble Members will
endorse the over-riding priority that is being accorded in the Budget to the
food and energy sectors of the economy, even at the risk of depriving some of
the other sectors. I should, perhaps, add that in so doing we are observing
the basic investment strategy underlying the draft Fifth Five Year Plan.
2.11 Nor would this clear-cut adherence to priorities be confined to the Central
Budget only. In the course of the discussions with the State Governments for
fixing the magnitude and pattern of the State Plans for 1975-76, it has been
ensured that the requirements of agriculture, irrigation and power are met as
a matter of first priority and only the balance of scarce resources distributed
among other sectors. I would here like to express my gratitude to the Chief
Ministers of State Governments and Union Territories for their willing support
and cooperation in agreeing to frame their plans within this broad pattern of
national priorities.
2.12 In striving to stimulate production in areas of high priority we have not
lost sight of two other equally important considerations - one relating to the
human and geographical aspects of production, and the other, to the proper distribution
of the goods produced. The needs of relatively weak producers and backward regions
will continue to receive special attention and support. The problems of production,
of diffusion of income and employment, of reduction of inequalities, and of
ensuring minimum consumption standards for all have to be looked at in their
entirety. The specific programmes under these heads should not only be mutually
consistent with each other, but should be so designed that they facilitate and
reinforce each other. The increase in agricultural output that we are aiming
at is thus not a matter of mechanically reaching a magic number. Considerations
of balance between classes of farmers and of regions, and of ensuring a pattern
of production that is in consonance with our socioeconomic objectives are equally
important.
2.13 If the fruits of economic development are to be equitably distributed,
adequate attention will have to be paid to the problems of relatively backward
regions and districts. To that end, development plans have to be drawn up on
the basis of a careful analysis of local needs, potentialities and resources.
In this connection, I would lay great emphasis on a comprehensive survey of
natural resources in all districts of India. This would enable us to work out
operationally meaningful plans and programmes to make optimum use of locally
available resources along the lines of the now wellknown Karimnagar project
in Telangana.
III
3.1 In spite of the various prophecies of doom one hears these days, I am definitely
optimistic that the pace of economic development will be considerably accelerated
in the coming years. I must, however, point out that the full realisation of
our growth potential will require sustained hard work and the utmost discipline
on the part of all sections of the community. We are currently faced with an
acute scarcity of domestic financial resources. Our balance of payments position
is also under strain. In order to deal effectively with the tasks that lie ahead,
we must do everything in our power to increase our exports, and economise in
the use of scarce imported inputs. Higher investment in the key sectors is essential,
but it must be financed in a noninflationary manner. This means we must increase
the rate of savings. As part of the strategy of discouraging excessive current
consumption, we need to evolve a more rational wage and salary structure, which
should be more equitable than the present structure, and also in conformity
with the changing demands for skills in a dynamic economy.
3.2 In our quest for accelerated growth combined with stability I place the
highest importance on protecting the more vulnerable sections of the population
against shortages and the high prices of essential commodities. For this we
must have a wellfunctioning public distribution system. for certain basic essential
commodities. There must be greater certainty of supply, and the system must
in fact serve those whom it is meant to benefit. I, therefore, seek an expansion
of the public distribution system, and this pre- supposes efficient arrangements
for the procurement of the needed commodities. I am glad that procurement of
kharif cereals during the current year has proceeded satisfactorily. This, combined
with adequate imports, will certainly be of considerable help in the operation
of an effective public distribution system of foodgrains in the coming year.
3.3 Cloth is another commodity that must be provided. With the recent enactment
of the Sick Textile Undertakings (Nationalisation) Act, Government have acquired
103 textile mills whose management had earlier been taken over by the Government.
The acquisition of these mills provides Government with another very useful
instrument to regulate the production and distribution of cloth. Government
are now considering further steps to ensure that the production of controlled
cloth is in line with the agreed target and that this cloth reaches those sections
of the community for whom it is meant.
3.4 Since resources are scarce, the utmost emphasis has to be laid on increasing
productivity. This is a task which requires all round improvement both in public
administration and the management of enterprises. I have every hope that recent
innovations such as the system of internal financial advisers, performance budgeting,
and greater emphasis on monitoring and information, will help to tone up the
quality of public administration. I am happy to note the emphasis being laid
on promoting higher productivity in all manufacturing public sector enterprises
by applying more scientific policies in the fields of personnel administration,
management development, materials management and management information systems
and above all, through the introduction of modern productivity techniques. The
improved performance of a large number of public sector enterprises is a testimony
to growing productivity consciousness in the public sector.
3.5 I believe this House will concede that as a result of rigorous measures
adopted by the Government, we have succeeded in combating what seemed to be
a run- away inflationary situation. To achieve this, Government non-developmental
spending was curtailed, increase in wages and a part of additional dearness
allowance had to be temporarily frozen, the increase in the rate of money supply
drastically brought down, and severe action taken against hoarders and smugglers.
As a result of these efforts, for the last few months prices have been slowly
but steadily coming down. This is no mean achievement when we consider that
in most other countries around the world prices continue to rise. While continuing
this policy of rigorous control on spending, there is also need, as I have mentioned
earlier, for increased investment, both by the Central and State Governments,
and the private sector, in important priority areas. It is one of the objects
of this Budget to help achieve this. While the rate of spending in other areas
must remain low, this is also the time to prepare the ground and do the necessary
investigations to prepare for higher investment in later years. This we are
engaged in. It is our purpose to invest now in projects in important areas that
will yield quick results, and complete those, in an advanced stage of implementation.
Also important is the need to promote domestic savings and to stimulate investment.
These various objectives we seek to achieve through the present Budget.
3.6 I have just mentioned the need to stimulate investment. The capital market
has been depressed of late, particularly after the Restrictions on Distribution
of Dividends Act. The Unit Trust of India had to face a situation in which repurchases
were much higher than the sale of units. The Government, therefore, issued an
Ordinance providing for certain tax relief and other remedial measures which
have greatly improved the situation. For improving the capital market, I intend
to introduce soon an amendment to the Restriction of Dividends Act which will
provide that while dividends in excess of the various limitations laid down
in the Act may not be paid, higher dividends can be declared, the deferred dividend
being payable in two annual installments, but without interest, when the present
Act expires. These measures will improve the climate for investment, particularly
in respect of new issues.
3.7 I am also conscious of the fact that in recent years, there have been steep
escalations in capital costs which have acted as an inhibiting factor to new
investment in certain capital intensive industries which are vital for our future
growth. Government have appointed a high-level committee to go into this question.
When the report of this Committee is received, we shall quickly examine the
need for suitable fiscal concessions, and new pricing policies as a means of
stimulating fresh investment in these areas.
3.8 The experience of the last two years amply demonstrates that effective steps
to eliminate the black money economy must constitute an essential component
of our strategy to impart a measure of stability to the economy, and to divert
the available pool of national savings for high priority investments. I wish
to reaffirm that Government is firmly committed to root out the evil practices
of smuggling, hoarding, black marketing and tax evasion and have given evidence
of their determination in this regard. In this context a separate law for dealing
more severely with various economic offences seems to be a necessity.
3.9 Having thus outlined our approach, I will now give some details of the revised
estimates for 1974-75 and the budget estimates for 1975-76.
IV
REVISED ESTIMATES 1974-75
4.1 The original budget for the current year envisaged a deficit of Rs.126 crores.
It has not been possible to adhere to this figure because many of the assumptions
on which the original budget was framed have been affected by adverse trends
in the economy, most particularly the phenomenal price rise this year. The various
reasons for this I shall explain.
4.2 The provision in the budget for food subsidy was Rs.100 crores. In view
of the difficult food situation and the need to maintain the public distribution
system at the level of 11 million tonnes, in 1974, we had to arrange for the
import of as much as 5.5 million tonnes of food grains. The cost of imported
food grains also went up greatly. Food subsidy during the year is now expected
to amount to Rs.295 crores.
4.3 The provisions for salaries of Central Government employees included in
the budget for 1974-75 were based on the price level reached upto December 1973,
and a lump sum provision of Rs.120 crores was made to meet the cost of additional
dearness allowance. On the basis of the price increase upto April 1974, three
instalments of dearness allowance were sanctioned. Prices, however, continued
to rise till September 1974, and three further instalments of dearness allowance
fell due on the basis of the dearness allowance formula accepted by the Government.
In view of the likely unsettling effects of further dearness allowance payments
on the economy, it was considered necessary to review these arrangements. Subsequently,
in consultation with Government employees, it was decided to sanction instalments
which fell due on the basis of the average price index upto 272. It was also
agreed that arrears on this account upto December 1974, payable in cash, would
be deposited in the provident fund accounts for a short period. I must express
my gratitude to the employees for their understanding and cooperation in meeting
the present difficult situation. This has enabled us to restrict the draft on
the Budget on account of six instalments of dearness allowance to about Rs.230
crores in the current year. This is still Rs.110 crores more than the provision
of Rs.120 crores made in the Budget.
4.4 Defence expenditure for the current year will be Rs.2157 crores as against
Rs.1915 crores in the original Budget. Apart from a liability of about Rs.95
crores on account of dearness allowance, the increase is mainly due to revision
of pay scales, rise in prices of petroleum products and the higher cost of provisions
and transport.
4.5 Another reason for increase in the deficit has been the drought and floods
with which many parts of the country have been affected. As Honourable Members
are aware, Central assistance for drought and floods is being made available
now only by way of advance release of Plan assistance, or assistance under the
Drought Prone Areas Programme, Tribal Development Plans, etc. so that plan priorities
are not disturbed or distorted and that productive and durable assets are created
through this assistance. Such advance assistance will be adjusted against the
normal Plan assistance due to the States in the ensuing years. In accordance
with this policy, advance Plan assistance of Rs.55 crores has been allocated
to the States for drought and flood relief measures in the current financial
year. Apart from this, additional assistance has been made available to the
States concerned under the Brahmaputra Flood Control Works and Drought Prone
Areas Programme also. With these and certain other inescapable commitments towards
the States, including release of loans against small savings collections in
1973-74, the additional assistance to the States will amount to Rs.161 crores.
4.6 Other causes for the higher deficit relate to public sector enterprises,
fertilizer imports and additional spending on core sector projects. A few of
the enterprises did not have an adequate surplus to repay loans taken from Government.
It, therefore, became necessary to provide additional assistance of Rs.126 crores
to a number of undertakings mainly because of increases in wages and dearness
allowance and higher cost of fuel which had not been foreseen in the Budget.
4.7 The Budget for 1974-75 did not envisage any net outgo on fertilizer transactions.
The issue price from the pool was raised only from June 1974. Subsequently,
in order to meet the urgent demand for fertilizers, an additional quantity of
nearly 1 million tonnes had to be imported at considerably higher international
prices. There is usually a time lag of about four months between the payment
for purchases abroad and the cash recovery from State Governments of the cost
of fertilizers issued to them. Because of this time lag, large fertilizer imports
have been paid for by the Central Government, but their cost will not have been
recovered from the States by the end of this year. The Central Budget, therefore,
has to bear this burden. As of now, the estimate of cash outgo on account of
fertilizer transactions is about Rs.290 crores.
4.8 As the House is aware, a series of economy exercises were effected in August
1974, locating considerable savings in expenditure. However, additional allocations
of Rs.190 crores had to be made for Plan schemes in the core sectors like fertilizers,
power, coal, petroleum, steel, ports and paper to maintain their schedules,
and provide for escalation in costs. Economies anticipated in other sectors
could not be realised in full due to steep rise in costs. As a result, the net
expenditure on Central Plan will go up by Rs.74 crores.
4.9 All these adverse factors would have raised budgetary deficit to a very
high level, but for the fact that the position has been retrieved to a large
extent by the buoyancy in tax receipts.
4.10 Receipts from Customs are expected to yield Rs.1300 crores against the
Budget estimates of Rs.936 crores - the improvement being mainly on account
of larger import of fertilizers, iron and steel, and a large increase in the
prices of items like fertilizers, machinery and equipment.
4.11 Income and Corporation Taxes are now expected to yield Rs.1460 crores as
against the original Budget estimate of Rs.1370 crores.
4.12 There is not likely to be any appreciable increase in the collection of
Union Excise duties over the Budget estimate, as adjusted by levies imposed
in the Second Finance Act, 1974.
4.13 The strategy of concentration on higher income groups and a general tightening
of the tax machinery in all branches has yielded good results. I would like
to commend the devotion to duty and the zeal shown by the officers and staff
of the revenue collecting agencies.
4.14 External receipts on account of loans, show an increase of nearly 43 crores
mainly on account of larger receipts against debt relief from the members of
the India Consortium, and larger nonproject loans from IDA. Grants from external
sources in the revised estimates in terms of actual receipts show an increase
of about Rs.60 crores mainly on account of assistance which India has received
from EEC and the UN Fund for Emergency Relief for countries most seriously affected
by the oil crisis, and additional assistance from some other countries.
4.15 Even at the risk of rendering the supply position in the domestic market
a little difficult, the Government took the hard decision of allowing the export
of nearly half a million tonnes of sugar. While improving our balance of payments
position, this has also benefited the Budget to the extent of Rs.125 crores
by way of profits.
4.16 Even with these various improvements, the year may end with a deficit of
Rs.625 crores. However, nearly Rs.330 crores of this is on account of payments
for stocks on hand of imported food and fertilizers, which will soon be recovered.
As both these commodities have been purchased abroad, by drawing down our foreign
exchange reserves, there is no resultant increase in money supply and the deficit
to the extent of Rs.330 crores is, therefore, non-inflationary in character.
V
BUDGET ESTIMATES 1975-76
5.1 In the context of continuing shortages in the economy, and the impact of
the price rise, framing the budget for the next year has not been an easy task.
While developmental requirements must receive the highest priority, the draft
on the budget for essential non- Plan requirements like Defence, the food subsidy,
and the maintenance of social services cannot be ignored, and are substantial.
I have endeavoured to balance two paramount but somewhat conflicting needs in
this Budget - the short-term need to keep in check inflationary pressures, and
the equally important requirement to sustain the tempo of development, which,
in the ultimate analysis, is the real solution to the problem of inflation.
I am only too well aware that any slackening of our development effort will
compound our problem in the future.
5.2 The projections of receipts for next year at the existing rates of taxation
take into account the satisfactory trends witnessed in the current year. Income
and Corporation Taxes are expected to yield Rs.1570 crores and Union Excise
duties Rs.3500 crores. Receipts from interest tax are expected to be Rs.60 crores.
Customs receipts will, however, be less by Rs.50 crores next year because of
lower imports of steel, and the bunching of fertiliser imports towards the end
of the current year.
5.3 The Budget also assumes a credit of Rs.125 crores towards profits on export
of sugar on the assumption that exports next year will at least be of the same
order as this year.
5.4 Receipts from external loans are estimated at the same level as this year’s
revised estimates. The steep rise in the prices of petroleum products has greatly
strained our balance of payments. The position would have been worse but for
generous gestures by Iran, Iraq and Abu Dhabi. We hope to, secure oil credits
from these countries which will provide a support of Rs.230 crores to the Budget
during 1975-76.
5.5 In view of the pressing need to save maximum resources for the Plan, utmost
care has been taken to contain non-Plan expenditure. But we have to provide
for minimum needs in certain areas which are important for security, the maintenance
of development work, and for safeguarding the interests of the weaker sections
of society. Apart from debt servicing and other obligatory items of expenditure
next year, Defence expenditure would be Rs.2274 crores as against Rs.2157 crores
in the current year. Food subsidy for 1975-76 is estimated at Rs.295 crores.
As the performance of public sector undertakings is expected to improve, non-Plan
assistance to these undertakings will be less next year by Rs.78 crores than
the provision in the current year of Rs.217 crores. The outgo on fertiliser
transactions next year is estimated at Rs.140 crores.
5.6 The entire question of dearness allowance increases to Central Government
employees is to be discussed with their representatives in the next few weeks.
It is now widely recognised that evolving effective measures for remedying the
causes of inflation, though unpleasant and hard, should be preferred to frequent
adjustment of prices, incomes and wages, which greatly hampers the process of
planned growth. In a country where there is considerable unemployment and underemployment,
an excessive preoccupation with the current consumption of those who are fully
employed erodes investible resources and seriously affects the pace at which
new employment opportunities can be created to alleviate the sufferings of those
who are unemployed. Additionally an increase in monetary rewards, not justified
by an increase in the country’s productive capacity, accentuates inflationary
pressures in the economy; this may also threaten the security currently enjoyed
by those who are fully employed. While I am, therefore, aware of the hardship
caused to Government employees by price rises, I earnestly hope that in our
forthcoming discussions the dearness allowance question will be considered in
this larger perspective.
5.7 After a careful and detailed sectoral review of the Plan requirements for
next year, it was felt that the allocation in the Central Budget for the Central,
State and Union Territory Plans should be at least Rs.3612 crores, if our long-term
objectives and urgent priorities are to be adequately fulfilled. This budgetary
support of Rs.3612 crores includes Rs.1054 crores for States and Union Territories
Plans, including the hill and tribal areas sub-Plans, the requirements of the
North-Eastern Council and assistance for power schemes channelled through the
Rural Electrification Corporation. It also includes Rs.100 crores of special
advance Plan assistance to certain States which may have gaps in resources on
the basis of Central assistance at the current year’s level, to ensure
adequate investment in important projects in the core sectors of irrigation
and power. Budgetary support for the Central Plan will be Rs.2558 crores. The
total Central Plan outlay next year inclusive of extra budgetary resources will
be Rs.3154 crores. The States and Union Territories Plans will be of the order
of Rs.2806 crores. Thus, the total Plan size for 1975-76 will be Rs.5960 crores
which in financial terms represents an increase of 23 per cent over the 1974-75
Plan of Rs.4844 crores.
5.8 Budgetary provision for the Central Plan of Rs.2558 crores represents a
step up of Rs.429 crores over the revised estimate of Rs.2129 crores in the
current year. I am conscious that a more substantial step up in the Plan investment
to provide for achievement of draft Fifth Plan targets in all sectors would
have been desirable from the long-term perspective of the economy. But we cannot
forget that large scale deficit financing leading to further price increases
will substantially erode the real content of the Plan and cause more damage
to the programme of planned development. We have, therefore, as I stressed earlier,
adopted a selective approach and given priority to key sectors of the economy
like agriculture, power, fertilizers, coal, petroleum, essential industries
like cement, paper and ship-building, and transport over all other sectors,
and even over long gestation projects in the core Sectors.
5.9 As agriculture is the backbone of the economy, special care has been taken
to step up the investment in this Sector substantially - from Rs.193 crores
in the Revised Estimates to Rs.270 crores. The allocations include Rs.50 crores
for the Agricultural Refinance Corporation, Rs.25 crores for drought prone areas
programme, Rs.22 crores for small farmers and marginal farmers development,
Rs.16 crores for command area development, Rs.23 crores for agricultural research
and education, and Rs.43 crores for the cooperative sector, including the cooperative
fertiliser factories.
5.10 There will be an increase of Rs.84 crores in investment in fertiliser production
over the current year’s level of Rs.192 crores. Adequate funds are being
provided for Nangal Expansion, Ramagundam, Talcher, Haldia and Cochin Phase-II,
and for several new plants such as Trombay IV and V, Bhatinda and Panipat and
a new project at Sindri.
5.11 The Budget support for the power sector including support for Rural Electrification
Corporation will be Rs.140 crores in the next year. Substantial provision has
been made for continuing projects like Badarpur extension, Loktak, Baira Slul
and Inter-State Transmission Lines. Further, there will be an aggregate provision
of the order of Rs.900 crores in the State Plans for power.
5.12 Budget provision for coal represents a substantial increase from Rs.141
crores in this year’s Revised Budget to Rs.229 crores. Coal Mines Authority
and Bliarat Coking Coal Ltd., have been allowed larger provisions to enable
the achievement of the target of production of 135 million tonnes by the end
of the Fifth Plan. Provision has also been made for stabilising the production
of lignite at Neyvell at 4.5 million tonnes.
5.13 Budget provision for petroleum and petro- chemicals has also been greatly
stepped up to Rs.170 crores in 1975-76 as against Rs.60 crores in 1974-75 Revised
Estimates. There will be a considerable increase in the provision for the Oil
and Natural Gas Commission, Oil India and Indian Petro-Chemicals Corporation.
As the House is aware, a cess was levied in the current year for the development
of the oil industry, and the 011 Industry Development Board was set up to coordinate
the various development projects to be undertaken for oil development. A sum
of Rs.61 crores from this cess over and above the budgetary support will accrue
to this Board next year to be used for oil development.
5.14 The provisions in the steel sector, particularly for Bokaro and Bhilai
expansion, have been fixed taking into account the likely demand for steel.
Full provision has been made for completion of the Korba Aluminium Project.
5.15 Next year’s Plan makes adequate provision for continuing projects
for cement production and also for 3 new projects. The Paper Mill in Nagaland
is being given high priority. Modernisation of textile mills taken over by the
National Textile Corporation has also received special attention.
5.16 In the Transport and Communications sector, all continuing major ports,
shipping, ship-building and aviation projects have been adequately catered for.
5.17 Social Services have not been neglected. Increased provision over the revised
estimates for this year has been allowed for village and small scale industries,
education, health, family planning, housing and urban development, and welfare
of backward classes.
5.18 As Honourable Members are aware, two schemes, one for compulsory deposit
of increases in wages, and 50 per cent of the additional dearness allowance,
and another for compulsory deposit of a per centage of the income of income-tax
payers, were introduced in July last. These were necessary to counter the serious
imbalances created in the economy by the large increases in money supply. We
are happy that these measures, along with other steps taken to curb inflation,
have had a stabilising effect on prices. While it is the continuing concern
of the Government to curb inflationary trends, it is equally important that
development efforts should be sustained and adequate resources provided for
investment in the vital areas of the economy. In view of this, it has been decided
to take credit for a borrowing of about Rs.100 crores from the Reserve Bank
against the likely addition to blocked deposits which takes place in 1975-76.
5.19 Taking credit for this amount, the budgetary support of Rs.3612 crores
for the 1975-76 Plan will entail a resource gap of Rs.464 crores. Honourable
Members will be keen to know how I propose to deal with this deficit.
PART B
DIRECT TAXES
1.1 Sir, let me present first my proposals in the field of direct taxes. Honourable
Members will recall that the rates of income-tax on personal incomes were reduced
last year on the basis of a recommendation of the Direct Taxes Enquiry Committee.
It was expected that this would lead to better tax compliance. I think the policy
adopted last year should be given a fair trial. I, accordingly, propose not
to make any change in the rates of income-tax in the case of non-corporate taxpayers.
1.2 At present, the basic rate of income-tax in the case of closely-held industrial
companies stands at 55 per cent on the first Rs.2 lakhs of taxable income, and
60 per cent on the balance. On the analogy of the rate structure applicable
to the widely-held companies, I propose to modify this provision so as to apply
the higher rate of 60 per cent on the entire income of such closely-held companies
in cases where the taxable income exceeds Re. 2 lakhs, subject, however, to
the usual marginal relief. This measure will yield Rs.4 crores in a full year
and Rs.3 crores in 1975-76. There will be no change in the rates of income-tax
in the case of other categories of companies.
1.3 The levy of a tax under the interest -tax Act, 1974 on interest received
by scheduled banks has had, the effect of increasing, on an average, the cost
of borrowings from scheduled banks by about one per cent. The levy of this tax
has, therefore, made the acceptance of deposits by non-banking non-financial
companies from the public all the more attractive, specially in the context
of the selective credit control measures adopted by the Reserve Bank. Some corrective
by way of a disincentive to borrowings from the public by these companies seems
to be indicated so that credit planning according to the priorities laid down
by the Government is not defeated. I propose, therefore, that in computing the
taxable income of non-banking non-financial companies, only 85 per cent of the
interest paid by them on public deposits will be allowed as expenditure for
tax purposes. This measure will yield Rs.10 crores in a full year and Rs.7.5
crores in 1975-76.
1.4 The tax holiday concession is at present available in respect of industrial
undertakings that go into production before 1st April, 1976 and ships which
are brought into use before that date. I propose to extend the concession in
these cases for a further period of five years. This concession is at present
available to approved hotels irrespective of the date by which they may start
functioning. I find no justification for giving preferential treatment to approved
hotels over industrial undertakings and ships. I therefore propose to restrict
the concession in the case of approved hotels to cases where these hotels start
functioning before 1st April, 1981.
1.5 At present, dividends declared by companies out of their tax holiday profits
dividends exempt in the hands of shareholders. Experience has shown that this
provision is difficult to administer, since any change in the quantum of income
of the company distributing dividends requires modification of the assessments
of all its shareholders, who may be residing in different parts of the country.
I, therefore, propose to withdraw the exemption in respect of dividends paid
by companies out of their tax holiday profits attributable to the extended period.
Shareholders will, however, not stand to lose, since 1 propose to increase the
quantum of tax holiday profits in the case of companies from 6 per cent to 7.5
per cent per annum of the capital employed in new industrial undertakings, ships
or hotels.
1.6 In order to channelise corporate savings into high priority industries,
I propose to exempt from income-tax, inter-corporate dividends derived by domestic
companies from new companies engaged in the manufacture of fertilisers, pesticides,
paper and cement.
1.7 As Honourable Members are aware, initial depreciation allowance at the rate
of 20 per cent of the cost of machinery and plant is allowed in respect of the
priority industries listed in the Ninth Schedule to the income-tax Act. Having
regard to the importance of pesticides to our economy for increasing agricultural
production, I propose to extend the benefit of initial depreciation allowance
to the Pesticides industry also.
1.8 As another measure for promoting investment in desired areas, I propose
to exempt from wealth-tax for a period of five years investment in equity shares
of new companies engaged in priority industries listed in the Ninth Schedule
to the income-tax Act.
1.9 Under a provision made in the Finance Act, 1974, development rebate is admissible
in respect of ships which were ordered before 1st December, 1973 if such ships
are acquired before 1st June, 1975. In view of the time lag involved in acquiring
ships, I propose to extend this concession to ships which will be acquired before
1st January, 1977, provided orders for their acquisition were placed before
1st December, 1973.
1.10 Under the existing law, a deduction equal to 20 per cent of the profits
and gains derived from the business of publication of books is allowed in computing
taxable income. This concession is available for a period of five years ending
with the assessment year 1975-76. I propose to extend this concession for another
five years.
1.11 Our development efforts can be sustained only through promotion of savings.
I have, therefore, decided to liberalise the concession currently available
under the income-tax Act in respect of long-term savings through provident funds,
life insurance, etc. so as to allow a deduction in respect of 100 per cent of
the first Rs.4, 000 of the qualifying savings plus 50 per cent of the next Rs.6,
000 of such savings plus 40 per cent of the balance. This measure will result
in a revenue loss of Rs.8 crores in a full year and Rs.6 crores in 1975-76.
1.12 Frequent withdrawals are made from Government Provident Funds. I have,
therefore, decided to introduce an incentive bonus scheme to benefit those Government
employees who do not withdraw any amount from their provident fund accounts
during the year. The bonus will be allowed on the subscriptions made during
that year and will be calculated at the rate of 3 per cent for employees drawing
pay up to Rs.500 per month and 1 per cent for employees drawing pay above Rs.500
per month.
1.13 Honourable Members will notice that a package of measures has been proposed
for improving the investment climate, namely, extension of tax holiday, exemption
of inter-corporate dividends derived from new companies engaged in high priority
industries, exemption from wealth-tax of equity shares in new companies engaged
in certain priority industries, and incentives to greater savings. Despite the
severe constraint of resources, I have thought it advisable to propose these
fiscal incentives as, in my view, investment in priority sectors has to be encouraged
now if we are not to compound our difficulties in the future. These fiscal measures
will reinforce the other measures that the Government have taken for encouraging
greater production in certain vital sectors.
1.14 In order to give some relief to middle class families who have to bear
the burden of providing higher education to their children, I propose to allow
a deduction in respect of expenses incurred by individuals in this regard. In
respect of children attending degree or post-graduate courses in medicine, engineering
or other technical subjects, the amount of deduction will be Rs.1, 000 per child
and in respect of children attending degree or post-graduate courses in other
subjects or diploma courses in medicine, engineering or other technical subjects,
the amount of deduction will be Rs.500 per child. The new concession will be
available in the case of individuals whose gross total income does not exceed
Rs.12, 000 per annum and restricted to two children in any case. This measure
will result in a reduction of revenue of Rs.7 crores in a full year and a little
over Rs.4 crores in 1975 -76.
1.15 At present, income from live-stock breeding and poultry and dairy farming
is exempt from income-tax. This exemption is prone to abuse by showing income
which would otherwise be chargeable to tax as exempt income. I, accordingly,
propose to restrict the exemption to Rs.10, 000 in a year. This will mean an
additional revenue of Rs.2 crores in a full year and Rs.1.2 crores in the financial
year 1975-76.
1.16 I propose to exempt from income-tax retrenchment compensation paid to workmen
under the Industrial Disputes Act or other similar laws up to a maximum of Rs.20,000.
1.17 There are at present certain income-tax exemption limits applying to salaried
assessees relating to house rent allowance and leave travel concessions. These
are being liberalised. Indian technicians employed abroad are also proposed
to be given some tax relief.
1.18 In order to simplify and rationalise the procedure for assessment of foreign
shipping enterprises, the accounts of which are not easily accessible, I propose
to provide that the income of such enterprises shall be taken at 7.5 per cent
of the aggregate of their gross earnings from traffic originating in India and
other earnings received in India. This change is also in line with the practice
in some other countries.
1.19 At present, contributions made to an approved gratuity fund are allowed
as deduction in computing the taxable income. A doubt has been expressed that,
under the relevant provisions as presently worded, provisions made in the books
of account by taxpayers would also qualify for deduction. This is clearly not
the intention. Since the employer continues to have control over these funds,
I propose to provide specifically that no deduction for tax purposes will be
allowed in respect of such provisions made to provide for future gratuities.
1. 2 0With a view to curtailing ostentatious expenditure in business and professions,
I propose to deny depreciation in respect of imported cars which are acquired
after 28th February, 1975. Simultaneously, I propose to allow full depreciation
in respect of indigenous cars, irrespective of their cost.
1.21 At present, trees standing on agricultural land do not qualify for exemption
from wealth-tax. In order to encourage planting and conservation of trees, I
propose to exempt the value of trees standing on agricultural land from wealth-tax,
except in respect of orchards and plantations.
1. 22 Under Corporation Tax, the full year effect of the proposals is Rs.14.0
crores and the yield for 1975-76 will be Rs.10.5 crores. As a result of the
concessions given, there will be a net reduction of Rs.13.0 crores under income-tax
in a full year and Rs.9.0 crores in 1975-76. The impact of this reduction in
1975-76 on the Central revenues will be Rs.2. 26 crores.
II
INDIRECT TAXES
2.1 I now come to my proposals relating to Indirect Taxes. 2.2 While I have
had to impose levies covering a wide range of commodities, I have done my best
to reduce to the minimum the burden that would fall on lie more vulnerable sections
of the community. It has also been my endeavour to select items which largely
figure in the pattern of consumption of the more affluent sections of society.
I have also attempted to select those commodities which are significant in our
export efforts so that consumption is thereby reduced in the home market releasing
an export surplus which would earn us valuable foreign exchange.
EXCISE DUTIES
2.3 The recent spurt in the price of sugar in the international market provides
us an excellent opportunity to increase our exports of this commodity, even
at some sacrifice. With a view to reducing consumption of sugar for less essential
uses and releasing more quantities for export, I propose that the Basic excise
duty on free sale sugar may be stepped up from 30 per cent ad valorem to 37-1/2
per cent ad valorem. I do not propose to make any change in the present effective
rate of duty an levy sugar, which now accounts for 65 per cent of the total
internal releases, so that the average citizen is assured of his quota of sugar
at a reasonable price. The proposed increase in duty on free sale sugar will
yield an additional revenue of Rs.30.25 crores.
2.4 Khandsarl Sugar is at present chargeable to a duty of 17.5 per cent ad valorem.
However, there is a scheme of compounded levy under which Khandsari sugar units
opting for the scheme pay a fixed sum by way of duty for every week of working,
depending on the number and size of the centrifuges used by them. As the compounded
levy results in a disproportionately low duty incidence on these Khandsari units
in comparison with the incidence on regular vacuum pan sugar mills, I propose
to withdraw the compounded levy scheme. All the Khandsari units will, hereafter,
work under the normal Central Excise procedure and pay duty at 17.5 per cent
ad valorem. From this proposal I expect to raise an additional revenue of Rs.19.60
crores.
2.5 The duty on tea produced in the various Zones has remained unchanged for
the last five years. Tea prices both in the Indian and London auctions have
substantially risen during this period. I, therefore, propose to increase the
existing basic duty m loose tea produced in Zones 1, 11, IV and V by 10 to 15
paise per kg. Tea of Zone III at present bears the highest rate of duty and
there is need for giving some relief because of the low yield and the high cost
of cultivation. As more than 90 per cent of the Tea produced in this Zone is
exported and since the price increases in respect of these teas have been the
least, I propose to reduce the present basic duty for this Zone by 10 paise
per Kg. Apart from bringing in revenue, the proposed increase in duty on Teas
of Zones I, II, IV and V will help in making more -tea available for export.
With a view to ensure that the increase in excise duty on tea does not hit exports,
I also propose to raise the ceiling limit on the quantum of rebate admissible
for exported teas under the present scheme from the existing level of 75 paise
per kilogram to 85 paise per kilogram. The net effect of the proposed changes
will bean additional revenue of Rs.3.40 crores.
2.6 Cement is another potential foreign exchange earner, and for similar reasons,
I propose to step up the basic duty m cement from 30 per cent ad valorem to
35 per cent ad valorem. This proposal will yield an additional revenue of Rs.15.95
crores.
2.7 The import of crude petroleum and petroleum products continues to demand
a large share of the total available foreign exchange resources. I feel that
so long as energy shortages persist, there is a case for making petroleum products
more expensive so as to promote greater economy and efficiency in their use.
Against this background, the duty on motor spirit is proposed to be raised by
10 paise per litre. I also propose to increase the duty on furnace oil to induce
replacement of oilfired equipment by coal-fired equipment. Such a duty will
be an added reason to replace obsolescent equipment with modern efficient units,
even in installations which continue to use oil. However, taking into consideration
its use by various industries, the increase proposed is modest - a little less
than 3 paise per litre. Low Sulphur Heavy Stock used for electricity generation
will, however, continue to be exempt as at present. These levies on petroleum
products will together yield an additional revenue of Rs.26. 00 crores.
2.8 There has been a fall in the proportion of aluminium of electrical conductor
grade produced in recent years compared to the commercial grade. Since it is
of paramount importance that there should be no shortage of aluminium of electrical
conductor grade required by various power systems, I propose to increase by
Rs.2 000 per tonne the excise, duty on commercial grade aluminium thereby providing
encouragement for greater production of electrical conductor grade aluminium.
The proposed increase in duty on aluminium will yield an additional revenue
of Rs.15. 00 crores.
2.9 I shall now turn to a product on which all Finance Ministers have had to
rely heavily namely, tobacco and its products. The Tobacco Excise Tariff Committee
has recommended a uniform tariff rate for all forms of non-flue-cured unmanufactured
tobacco, other than that used for the manufacture of cigarettes, supplemented
by a low rate of excise duty on certain specified tobacco products namely, biris
and chewing tobacco sold under a brand name, and snuff. Following the Committee’s
recommendation, I propose to levy a uniform total excise duty of Rs. 3 per kilogram
on non-flue-cured unmanufactured tobacco other than that used for the manufacture
of cigarettes. This will mean A reduction of Rs.1. 60 per kg. in the total duty
for biri tobacco, and of Re. 0. 25 per kg. for hookah, chewing and snuff tobacco.
However, in the case of stalks I propose to fix the duty at Rs.2 per kg. against
the present rate of Rs.0.65 per kg. There is already a duty of Rs.3.60 per thousand
on biris manufactured with the aid of machines. I now propose to levy a duty
of Re.1 per thousand on handmade biris also p of which 80 paise will be in the
form of Basic duty and 20 paise in the form of Additional excise duty in lieu
of sales-tax. For the sake of administrative convenience, this levy will be
restricted to biris sold under brand names. The duty on machine made biris will
be correspondingly stepped up from Rs.3.60 to Rs.4.60 per thousand. It will
be noticed that those smokers who are not unduly discriminating and are content
with unbranded handmade biris which bear no excise duty should benefit from
the reduction in duty on biri tobacco. I also propose to levy a duty of 10 per
cent ad valorem on chewing, tobacco sold under brand names and on snuff. An
exemption to the extent of 5 per cent will, however, be provided in respect
of chewing tobacco whose value does not exceed Rs.10 per kg. If the smokers
of branded biris are called upon to pay more, equity requires that those smoking
pipes and cigarettes should not be denied the privilege of helping the developmental
effort. Accordingly, I propose to raise the effective duty on cigarettes also.
The effective Basic duty on cigarettes is now 85 per cent ad valorem, if the
value of the cigarettes does not exceed Rs.10 per thousand, and increases by
3 per cent ad valorem for every additional rupee or part thereof in excess of
Rs.10 per thousand. This duty will be increased by 5 per cent ad valorem at
all price levels except that the ceiling level of Basic duty will continue to
remain at 250 per dent ad valorem, Similarly I also propose to raise the Basic
effective duty on smoking mixtures by 5 per cent ad valorem. On account of the
rationalisation of duty on unmanufactured tobacco there will be a reduction
of revenue to the extent of Rs.8. 25 crores. But the net additional revenue
from tobacco and tobacco products will be Rs.26. 88 crores.
2.10 Both for raising revenues and as a measure of rationalisation I propose
to readjust the rates of duty on rayon and synthetic yarns (including blended
yarns), and on rayon or artifical silk fabrics. I propose to shift partially
the burden of excise duty on artsilk fabrics from the fabric stage to the yarn
stage, since collection of revenue at the yarn stage is administratively easier
and Provides fewer loopholes. The additional excise duty levied on artsilk fabrics
in lieu of sales-tax, and the handloom cess, will continue to be levied at the
fabric stage; but there will be no basic excise duty on artsilk fabrics except
in the case of those fabrics whose value exceeds Rs.15 per sq. metre. This will
result in a loss of revenue of Rs.22 crores; to neutralise this loss, and to
earn additional revenue, I propose to increase the duty on rayon and synthetic
yarns suitably. I also propose to levy a new duty of Rs.20 per kg. on textured
yarns in addition to the duty leviable on base yarn used in their manufacture,
and to withdraw the existing concessions on knitted fabrics. No increase is
proposed on tyre cord yarn and on glass yarn which go into industrial production,
and on wastes.
2.11 I, propose to raise the existing duties on superfine and fine cotton yarns
which are used by the composite mills, by powerlooms, and in the hosiery and
sewing thread sectors of the cotton textile industry. As a sequel to increase
in the rates of duty on cotton yarn I also propose to raise suitably the rates
of compounded levy paid by composite mills on cotton yarn and mixed yarn used
by them. In order that the increases in yarn duty may not hit the handlooms,
the duty on yarn cleared from the mills in the form of straight reel hanks used
mostly by the handloom sector is being kept unchanged.
2.12 In 1973 Government appointed a High Powered Study Team to examine in depth
the problems of the Handloom Industry. This body has observed in its report
that powerlooms are in a Position to undercut handlooms in their legitimate
market, and has recommended that the compounded levy on powerlooms may be fixed
at Rs.300 per powerloom per annum irrespective of the number of looms in a unit.
The matter has been carefuly examined by Government and I now propose to increase
the compounded levy an powerlooms to Rs.2 00 per loom per annum on all those
units with less than 50 powerlooms each.
2.13 There are reports that some mills take undue advantage of existing concessional
rates of duty prescribed for clearance of fents and rags. With a view to eliminate
this abuse, a two-tier duty structure is proposed to be introduced for cotton
fents and rags, the lower level applying to fents and rags cleared up to a prescribed
limit, and the higher level, to clearances above that limit. The various proposals
m textiles will yield an additional revenue of Rs.49.10 crores.
2.14 Although air conditioners already carry a duty of 75 per cent ad valorem,
I propose to raise this level to 100 per cent ad valorem. I similarly propose
to raise the duty on parts of refrigerating and air conditioning plants and
machinery from 100 per cent ad valorem to 125 per cent ad valorem. Duty on refrigerators,
and refrigerating machinery and appliances, as well as Air coolers, is however
being kept unchanged. Parts of refrigerating machinery for cold storage plants,
hospitals and factories also will continue to pay the present concessional duty#
I further propose to raise the Basic duty on Cosmetics and Toilet preparations
from the present rate of 3 0 per cent ad valorem to 40 per cent ad valorem.
Since this item also carries an Auxiliary duty of 50 per cent of the effective
Basic duty there will be a total increase of 15 per cent ad valorem in the duty.
Shampoos will also henceforth pay a Basic duty of 40 per cent.
2.15 Those blessed by fortune to have enough cash and other valuables with them
to necessitate the purchase of safes and strong boxes cannot legitimately complain
against my next proposal which is to raise the duty on safes, strong boxes and
similar articles from 10 per cent ad valorem to 20 per cent ad valorem. The
combined revenue effect of my proposals for increase in duty on air conditioners
and parts, cosmetic and toilet requisites and safes, strong boxes and the like
will be Rs.7.65 crores.
2.16 As a revenue measure, I propose to increase by 5 per cent the effective
duties on synthetic organic dye-stuffs and synthetic organic derivatives, chinaware
and porcelainware, and glass and glassware, except laboratory glassware. I also
propose to make some changes in the existing basis for grant of duty concession
to small scale manufacturers of chinaware and porcelainware, but these changes
will be made effective only from 1st April, 1975. My proposals regarding synthetic
organic dyestuffs, glass and glassware and chinaware and porcelainware will
yield an additional revenue of Rs.10. 20 crores.
2.17 I propose to increase the duty on packing and wrapping paper, pulp boards
and duplex and triplex boards from 80 paise per kilogram to Rs.1.20 per kilogram.
This will yield an additional revenue of Rs.9.80 crores.
2.18 I propose to increase the present effective duty on electric wires and.
cables, excluding those used for telecommunication and high voltage transmission
lines, by varying rates ranging between 2-1/2 and 5 per cent ad valorem. I also
propose to raise the duty on electric fans marginally, but there will be no
increase in the duty on industrial fans. The proposed increases in the duty
on electric wires and cables and fans will yield an additional revenue of Rs.4.30
crores.
2.19 Rationalisation of the tariff entries and exemption notifications relating
to gramophones, record players, tape-recorders, permanent magnets, vehicular
tyres, components of motor vehicles, wool tops, concessions for the use of rice
bran oil and minor oils in the manufacture of soap, and of cotton-seed oil in
the manufacture of vegetable products has been proposed. I also propose to rationalise
the tariff for exposed cinematograph films, and to increase the differential
between coloured films on the one hand and black and white films on the other.
All these measures will yield an additional revenue of Rs.6.84 crores.
2. 20 To remove doubts about the meaning of the expression “skelp % I
propose to add an explanation at the end of Tariff item 26AA and to validate
past levies, assessments and collections of duty in accordance with this explanation.
2.21 As there is a substantial difference between the imported cost of graphite
electrodes and anodes and the indigenous cost of production, I propose to levy
an excise duty of 15% ad valorem on graphite electrodes and anodes. This will
yield a revenue of Rs.1.50 crores.
2.22 I now come to a new concept in Central Excise taxation, Hitherto the Central
Excise tariff covered only certain specified goods. With a view to widen the
coverage of taxable goods and to provide a more dependable, information base
for future revenue raising exercises, I propose to introduce a new item in the
Central Excise Tariff Schedule which,, with a few exceptions, will cover all
do produced for sale or other commercial purpose not elsewhere specified in
the Schedule. Goods covered under this new item will be chargeable to a nominal
duty at the rate of 1 per cent ad valorem. While the tariff item will cover
the production of all factories as defined. in the Factories Act, 1948 I propose
for the sake of administrative convenience to exempt the production of those
factories which employ not more than 49 workers in the case of power-operated
factories, and not more than 99 workers in the case of non-power operated factories.
To further simplify the levy, I also propose to exempt from duty intermediate
products and component parts falling within this item produced in a factory
and consumed within the. same factory for the manufacture of finished goods.
No countervailing duty will be levied on imported goods corresponding to this
new item. This levy is admittedly an experimental measure. I expect that this
measure will yield a revenue of Rs.24. 00 crores per annum.
2.23 The auxiliary duty of excise levied under the Finance Act of 1974 valid
up to 31st of March, 1975 is being continued up to 30th of June, 1976. Mainly
on account of the increase in the basic duty proposed on some items there will
be additional accrual of auxiliary duty also, estimated at Rs.5.34 crores. This
amount, however , has been included in the Revenue Estimates under the respective
items already mentioned.
2.24 The total effect of all the above proposals relating to Central Excise
will be an additional revenue of Rs.250.47 crores. Of this the Union Government’s
share will be Rs.194.81 crores and the States’ share Rs.55.66 crores.
IMPORT DUTIES
2.25 I do not propose any revision of the Customs Tariff rates. But considering
the trend of international prices of non-ferrous metals I propose to increase
the countervailing duty on copper by Re.3500 per tonne and on zinc by Rs.2125
per tonne. These changes will yield an additional revenue of Rs.24.50 crores.
2.26 The increase in Central Excise duty on certain items which I have proposed
earlier will lead to a consequential. increase of Rs.9.55 crores in the collection
of - countervailing duty on imports.
2.27 The auxiliary duty of Customs levied under the Finance Act of 1974 is being
continued up to 30th of June, 1976 and the effective rates of this levy remain
unchanged.
2.28 The various proposals which I have made will yield an increase of Rs.34.05
crores in Customs revenue.
2.29 The yield for 1975-76 for the Centre, taking Union Excise Duties and Customs
Duties together will be Rs.228.86 crores.
CENTRAL SALES TAX
2.30 Before 1 conclude 1 should mention a proposal which I am making to raise
resources for the benefit of the States and Union Territories. The rate of Central
Sales-tax on inter-State sales of goods is being raised from 3 per cent to 4
per cent with a corresponding change in the ceiling prescribed in respect of
local Sales-tax on goods declared to be of special importance in inter-State
trade or commerce. As a result of this proposal being made effective from 1st
July, 1975, the additional collections for those Union Territories whose revenues
form part of the Consolidated Fund of India will amount to Rs.1.75 crores in
the year 1975-76. The States will benefit to the extent of Rs.38.25 crores in
1975-76 through this measure.
III
3.1 To sum up, so far as the Union Budget is concerned, the various proposals
imply, for 1975-76, additional revenue aggregating Rs.239 crores. The budgetary
gap of Rs.464 crores, as indicated earlier, will accordingly be scaled down
to Rs.225 crores.
3.2 The budgetary deficit has thus been kept at a modest level. With the improving
prospects for the availability of food, power and fuel, this order of deficit
is not likely to accentuate inflationary pressures in the economy.
3.3 My major concern in the formulation of this budget has been to stimulate
production by stepping up the pace of investment in areas crucial to the healthy
growth of the economy. The effectiveness of the measures proposed in achieving
the goals that we have set for ourselves will, however, depend in large measure
m the willingness of the different sections of the community to contribute their
utmost to the common endeavour.
3.4 Let us all then, in Government, the Legislature and outside, rededicate
ourselves to this national cause at this juncture and conduct ourselves with
that discipline and determination which the occasion demands.