Madam Speaker, I rise to present the
Union Budget for 2010-11.
In 2009, when I presented the interim Budget in February and the
regular Budget in July in this august House, the Indian economy
was facing grave uncertainties. Growth had started decelerating
and the business sentiment was weak. The economy's capacity to
sustain high growth was under serious threat from the widespread
economic slowdown in the developed world.
2. It was not clear to us, as also to the policy makers in many
other countries, how this crisis would eventually unfold. What
would be its impact on the growth momentum of the Indian economy?
How soon will we be able to turnaround the fortunes of our
economy? The short term global outlook was bleak and the consensus
was that year 2009 would face the brunt of this crisis across the
3. At home, there was added uncertainty on account of the delayed
and sub-normal south-west monsoon, which had undermined the kharif
crop in the country. There were concerns about production and
prices of food items and its possible repercussions on the growth
of rural demand.
4. Today, as I stand before you, I can say with confidence that we
have weathered these crises well. Indian economy now is in a far
better position than it was a year ago. That is not to say that
the challenges today are any less than what they were nine months
ago when UPA under the leadership of Mrs Sonia Gandhi was elected
back to power and Prime Minister Dr. Manmohan Singh formed the
Government for the second term.
5. The three challenges and the medium term perspective that I had
outlined in my last Budget Speech remain relevant, even today.
These would continue to engage the Indian policy-planners for the
next few years.
6. The first challenge before us is to quickly revert to the high
GDP growth path of 9 per cent and then find the means to cross the
'double digit growth barrier'. This calls for imparting a fresh
momentum to the impressive recovery in growth witnessed in the
past few months. In this endeavour, I seek Lord Indra's help to
make the recovery more broad-based in the coming months.
7. Growth is only as important as what it enables us to do and be.
Therefore, the second challenge is to harness economic growth to
consolidate the recent gains in making development more inclusive.
The thrust imparted to the development of infrastructure in rural
areas has to be pursued to achieve the desired objectives within a
fixed time frame.
8. We have to strengthen food security, improve education
opportunities and provide health facilities at the level of
households, both in rural and urban areas. These are issues that
require significant resources, and we have to find those
9. The third challenge relates to the weaknesses in government
systems, structures and institutions at different levels of
governance. Indeed, in the coming years, if there is one factor
that can hold us back in realising our potential as a modern
nation, it is the bottleneck of our public delivery mechanisms.
There have been many initiatives in this regard, in different
sectors, at different points of time. Some of them have been
effective in reforming the way the Government works in those
areas. But we have a long way to go before we can rest on this
10. The Union Budget cannot be a mere statement of Government
accounts. It has to reflect the Government's vision and signal the
policies to come in future.
11. With development and economic reforms, the focus of economic
activity has shifted towards the non-governmental actors, bringing
into sharper focus the role of Government as an enabler.
12. An enabling Government does not try to deliver directly to the
citizens everything that they need. Instead it creates an enabling
ethos so that individual enterprise and creativity can flourish.
Government concentrates on supporting and delivering services to
the disadvantaged sections of the society.
13. It is this broad conceptualisation of the Budget that informs
my speech today. I would now begin by presenting a brief overview
of the economy.
Overview of the Economy
14. Yesterday, I laid on the table of the House the Economic
Survey, which gives a detailed analysis of the economic situation
of the country over the past twelve months. I intend to highlight
only a few salient features that form the backdrop of this Budget.
15. The fiscal year 2009-10 was a challenging year for the Indian
economy. The significant deceleration in the second half of
2008-09, brought the real GDP growth down to 6.7 per cent, from an
average of over 9 per cent in the preceding three years. We were
among the first few countries in the world to implement a
broad-based counter-cyclic policy package to respond to the
negative fallout of the global slowdown. It included a substantial
fiscal expansion along with liberal monetary policy support.
16. The effectiveness of these policy measures became evident with
fast paced recovery. The economy stabilised in the first quarter
of 2009-10 itself, when it clocked a GDP growth of 6.1 per cent,
as against 5.8 per cent in the fourth quarter of the preceding
year. It registered a strong rebound in the second quarter, when
the growth rate rose to 7.9 per cent. With the Advance Estimates
placing the likely growth for 2009-10 at 7.2 per cent, we are
indeed vindicated in our policy stand. The final figure may well
turn out to be higher when the third and fourth quarter GDP
estimates for 2009-10 become available.
17. This recovery is very encouraging for it has come about
despite a negative growth in the agriculture sector. More
importantly, it is the result of a renewed momentum in the
manufacturing sector and marks the rise of this sector as the
growth driver of the economy. The growth rate in manufacturing in
December 2009 was 18.5 per cent— the highest in the past two
decades. There are also signs of a turnaround in the merchandise
exports with a positive growth in November and December 2009 after
a decline of about twelve successive months. Export figures for
January are also encouraging. Significant private investment can
now be expected to provide the engine for sustaining a growth of 9
per cent per annum. With some luck, I hope to breach the 10 per
cent mark in not-too-distant a future.
18. A major concern during the second half of 2009-10 has been the
emergence of double digit food inflation. There was a momentum in
food prices since the flare-up of global commodity prices
preceding the financial crisis in 2008, but it was expected that
the agriculture season beginning June 2009 would help in
moderating the food inflation. However, the erratic monsoons and
drought like conditions in large parts of the country reinforced
the supply side bottlenecks in some of the essential commodities.
This set in motion inflationary expectations. Since December 2009,
there have been indications of these high food prices, together
with the gradual hardening of the fuel product prices, getting
transmitted to other non-food items as well. The inflation data
for January seems to have confirmed this trend.
19. Government is acutely conscious of this situation and has set
in motion steps, in consultation with the State chief ministers,
which should bring down the inflation in the next few months and
ensure that there is better management of food security in the
20. Managing a complex economy is a difficult task, more so when
it is a growing economy in a globalised world. And yet, choices
have to be made and they have to be well-timed.
21. After successfully managing the effects of the global
slowdown, we need to strengthen the domestic macroeconomic
environment to help consolidate the rebound in growth and sustain
it over the medium term. We need to review the stimulus imparted
to the economy and move towards the preferred path of fiscal
consolidation that facilitated the remarkable growth in the
pre-crisis five year period. We need to make growth more
broad-based and ensure that supply-demand imbalances are better
22. The success of the fiscal stimulus in supporting domestic
demand could be traced to its composition. The approach of the
Government was to increase the disposable income in the hands of
the people by effecting reductions in indirect taxes and by
expanding public expenditure on programmes like the Mahatma Gandhi
National Rural Employment Guarantee Scheme and rural
infrastructure. Now that the recovery has taken root, there is a
need to review public spending, mobilise resources and gear them
towards building the productivity of the economy.
23. In shaping the fiscal policy for 2010-11, I have acted on the
recommendations of the Thirteenth Finance Commission. It has
recommended a calibrated exit strategy from the expansionary
fiscal stance of last two years. The Commission has recommended a
capping of the combined debt of the Centre and the States at 68
per cent of the GDP to be achieved by 2014-15.
24. As a part of the fiscal consolidation process, it would be for
the first time that the Government would target an explicit
reduction in its domestic public debt-GDP ratio. I intend to bring
out, within six months, a status paper giving a detailed analysis
of the situation and a road map for curtailing the overall public
debt. This would be followed by an annual report on the subject.
25. I am happy to inform the Honourable Members that the process
for building a simple tax system with minimum exemptions and low
rates designed to promote voluntary compliance, is now nearing
completion. On the Direct Tax Code the wide-ranging discussions
with stakeholders have been concluded. I am confident that the
Government will be in a position to implement the Direct Tax Code
from April 1, 2011.
26. On Goods and Services Tax, we have been focusing on generating
a wide consensus on its design. In November, 2009 the Empowered
Committee of the State Finance Ministers placed the first
discussion paper on GST in the public domain. The Thirteenth
Finance Commission has also made a number of significant
recommendations relating to GST, which will contribute to the
ongoing discussions. We are actively engaged with the Empowered
Committee to finalise the structure of GST as well as the
modalities of its expeditious implementation. It will be my
earnest endeavour to introduce GST along with the DTC in April,
People's ownership of PSUs
27. While presenting the Budget for 2009-10, I invited people to
participate in Government's disinvestment programme to share in
the wealth and prosperity of the Central Public Sector
28. Since then, ownership has been broad based in Oil India
Limited, NHPC, NTPC and Rural Electrification Corporation while
the process is on for National Mineral Development Corporation and
Satluj Jal Vidyut Nigam. The Government will raise about Rs.25,000
crore during the current year. Through this process, I propose to
raise a higher amount during the year 2010-11. The proceeds will
be utilised to meet the capital expenditure requirements of social
sector schemes for creating new assets.
29. Listing of Central Public Sector Undertakings improves
corporate governance, besides unlocking the value for all
stakeholders—the government, the company and the shareholders.
Market capitalization of five companies which have been listed
since October, 2004 has increased by 3.8 times from the book value
of Rs.78,841 crore to Rs.2,98,929 crore.
30. The effective management of public expenditure by bringing it
in line with the Government's objectives is a part of the fiscal
consolidation process. This calls for proper targeting of
subsidies and expenditure adjustment.
31. I had announced the intent of the Government for the
fertiliser sector in my Budget Speech of 2009. A Nutrient Based
Subsidy policy for the fertiliser sector has since been approved
by the Government and will become effective from April 1, 2010.
This policy is expected to promote balanced fertilization through
new fortified products and focus on extension services by the
fertiliser industry. This will lead to an increase in agricultural
productivity and consequently better returns for the farmers. Over
time, the policy is expected to reduce volatility in the demand
for fertiliser subsidy in addition to containing the subsidy bill.
Government will ensure that nutrient based fertiliser prices for
transition year 2010-11, will remain around MRPs currently
prevailing. The new system will move towards direct transfer of
subsidies to the farmers.
Petroleum and Diesel pricing policy
32. In the last Budget, the constitution of an Expert Group, to
advise the Government on a viable and sustainable system of
pricing of petroleum products, was announced. The Group headed by
Shri Kirit Parikh has submitted its recommendations to the
Government. Decision on these recommendations will be taken by my
colleague, the Minister of Petroleum & Natural Gas, in due course.
33. I am very happy to inform the Honourable Members that we have
not only adhered to the fiscal roadmap that I had presented as a
part of the Budget documents last year, but we have improved upon
it. Except for meeting the liabilities of the year 2008-09, we
have not issued oil or fertiliser bonds. I shall come to the
numbers when I refer to the budget estimates a little later.
Improving Investment Environment
Foreign Direct Investment
34. Foreign Direct Investment (FDI) inflows during the year have
been steady in spite of the decline in global capital flows. India
received FDI equity inflows of US$ 20.9 billion during
April-December, 2009 compared to US$ 21.1 billion during the same
period last year.
35. Government has taken a number of steps to simplify the FDI
regime to make it easily comprehensible to foreign investors. For
the first time, both ownership and control have been recognised as
central to the FDI policy, and methodology for calculation of
indirect foreign investment in Indian companies has been clearly
defined. A consistent policy on downstream investment has also
been formulated. Another major initiative has been the complete
liberalization of pricing and payment of technology transfer fee,
trademark, brand name and royalty payments. These payments can now
be made under the automatic route.
36. Government also intends to make the FDI policy user-friendly
by consolidating all prior regulations and guidelines into one
comprehensive document. This would enhance clarity and
predictability of our FDI policy to foreign investors.
Financial Stability and Development Council
37. The financial crisis of 2008-09 has fundamentally changed the
structure of banking and financial markets the world over. With a
view to strengthen and institutionalise the mechanism for
maintaining financial stability, Government has decided to setup
an apex-level Financial Stability and Development Council. Without
prejudice to the autonomy of regulators, this Council would
monitor macro prudential supervision of the economy, including the
functioning of large financial conglomerates, and address
inter-regulatory coordination issues. It will also focus on
financial literacy and financial inclusion.
38. The Indian banking system has emerged unscathed from the
crisis. We need to ensure that the banking system grows in size
and sophistication to meet the needs of a modern economy. Besides,
there is a need to extend the geographic coverage of banks and
improve access to banking services. In this context, I am happy to
inform the Honourable Members that the RBI is considering giving
some additional banking licenses to private sector players. Non
Banking Financial Companies could also be considered, if they meet
the RBI's eligibility criteria.
Public Sector Bank Capitalisation
39. During 2008-09, the Government infused Rs.1900 crore as Tier-I
capital in four public sector banks to maintain a comfortable
level of Capital to Risk Weighted Asset Ratio. An additional sum
of Rs.1200 crore is being infused now. For the year 2010-11, I
propose to provide a sum of Rs.16,500 crore to ensure that the
Public Sector Banks are able to attain a minimum 8 per cent Tier-I
capital by March 31, 2011.
Recapitalisation of Regional Rural Banks
40. Regional Rural Banks (RRBs) play an important role in
providing credit to rural economy. The capital of these banks is
shared by the Central Government, sponsor banks and State
Governments. The banks were last capitalised in
2006-07. I propose to provide further capital to strengthen the
RRBs so that they have adequate capital base to support increased
lending to the rural economy.
41. Improvement in corporate governance and regulation is an
important part of the overall investment environment in the
country. Government has introduced the Companies Bill, 2009 in the
Parliament, which will replace the existing Companies Act, 1956.
The proposed new bill will address issues related to regulation in
corporate sector in the context of the changing business
42. Government has provided interest subvention of 2 per cent on
pre-shipment export credit up to March 31, 2010 for exports in
certain sectors. I propose to extend the interest subvention of 2
per cent for one more year for exports covering handicrafts,
carpets, handlooms and small and medium enterprises.
Special Economic Zones (SEZs)
43. The SEZs have attracted significant flows of domestic and
foreign investments. In first three quarters of 2009-10 exports
from SEZs recorded a growth of 127 per cent over the corresponding
period last year. Government is committed to ensuring continued
growth of SEZs to draw investments and boost exports and
44. The agriculture sector occupies centre-stage in our resolve to
promote inclusive growth, enhance rural incomes and sustain food
security. To spur the growth in this sector, the Government
intends to follow a four-pronged strategy covering (a)
agricultural production; (b) reduction in wastage of produce;
(c) credit support to farmers; and (d) a thrust to the food
45. The first element of the strategy is to extend the green
revolution to the eastern region of the country comprising Bihar,
Chattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa, with
the active involvement of Gram Sabhas and the farming families.
For the year 2010-11, I propose to provide Rs.400 crore for this
46. In the 60th year of the Republic, it is proposed to organise
60,000 "pulses and oil seed villages" in rain-fed areas during
2010-11 and provide an integrated intervention for water
harvesting, watershed management and soil health, to enhance the
productivity of the dry land farming areas. I propose to provide
Rs.300 crore for this purpose. This initiative will be an integral
part of the Rashtriya Krishi Vikas Yojana.
47. The gains already made in the green revolution areas have to
be sustained through conservation farming, which involves
concurrent attention to soil health, water conservation and
preservation of biodiversity. I propose an allocation of Rs.200
crore for launching this climate resilient agriculture initiative.
48. The second element of the strategy relates to reduction of
significant wastages in storage as well as in the operations of
the existing food supply chains in the country. This needs to be
addressed. As the Prime Minister has said recently, "We need
greater competition and therefore need to take a firm view on
opening up of the retail trade." It will help in bringing down the
considerable difference between the farm gate prices, wholesale
prices and retail prices.
49. There is wastage of grain procured for buffer stocks and
public distribution system due to acute shortage of storage
capacity in the Food Corporation of India. This deficit in the
storage capacity is met through an ongoing scheme for private
sector participation where the FCI has been hiring godowns from
private parties for a guaranteed period of 5 years. This period is
now being extended to 7 years.
50. The third element of the strategy relates to improving the
availability of credit to farmers. I am happy to inform the
honourable Members that banks have been consistently meeting the
targets set for agriculture credit flow in the past few years. For
the year 2010-11, the target has been raised to Rs.3,75,000 crore
from Rs.3,25,000 crore in the current year.
51. The Debt Waiver and Debt Relief Scheme for Farmers was a major
initiative of the UPA Government. In view of the recent drought in
some States and the severe floods in some other parts of the
country, I propose to extend by six months the period for
repayment of the loan amount by farmers from December 31, 2009 to
June 30, 2010.
52. In the last budget, I had provided an additional one per cent
interest subvention as an incentive to those farmers who repay
their short-term crop loans as per schedule. I propose to raise
this subvention for timely repayment of crop loans from one per
cent to two per cent for 2010-11. Thus, the effective rate of
interest for such farmers will now be five per cent per annum.
Necessary provision in the Budget has been made.
53. The fourth element of the strategy aims at lending a further
impetus to the development of food processing sector by providing
state-of-the art infrastructure. In addition to the ten mega food
park projects already being set up, the Government has decided to
set up five more such parks.
54. As a part of the farm to market initiative, External
Commercial Borrowings will henceforth be available for cold
storage or cold room facility, including for farm level
pre-cooling, for preservation or storage of agricultural and
allied produce, marine products and meat. Changes in the
definition of infrastructure under the ECB policy are being made.
55. Accelerated development of high quality physical
infrastructure, such as roads, ports, airports and railways is
essential to sustain economic growth. While addressing the policy
gaps in this sector, I propose to maintain the thrust for
upgrading infrastructure in both rural and urban areas. In the
Budget for 2010-11, I have provided Rs.1,73,552 crore, which
accounts for over 46 per cent of the total plan allocations, for
infrastructure development in the country.
56. To make a visible impact in the road sector, Government has
targeted construction of national highways (NHs) at the pace of 20
km per day. To push the pace of implementation, changes have been
made in the policy framework, especially in respect of projects
being executed through public private partnerships (PPPs). For the
year 2010-11, I propose to raise the allocation of road transport
by over 13 per cent from Rs.17,520 crore to Rs.19,894 crore.
57. Honourable Members have already heard from the Railway
Minister about the large investments required to modernise and
expand the network. I have provided Rs.16,752 crore in the Budget
for 2010-11 for Railways to lend her a helping hand. This is about
Rs.950 crore more than last year, when a substantial increase was
made in the budgetary support for Railways.
58. To complement the dedicated freight corridor, the Delhi-Mumbai
Industrial Corridor project has been taken up for integrated
regional development. Preparatory activities have been completed
for creation of six industrial investment nodes with eco-friendly
world class infrastructure.
India Infrastructure Finance Company Limited
59. Government established the India Infrastructure Finance
Company Limited (IIFCL) to provide long term financial assistance
to infrastructure projects. Its disbursements are expected to
touch Rs.9,000 crore by end March 2010 and reach around Rs.20,000
crore by March 2011. IIFCL has also been authorised to refinance
bank lending to infrastructure projects. It has refinanced
Rs.3,000 crore during the current year and is expected to more
than double that amount in 2010-11. The take-out financing scheme
announced in the last Budget is expected to initially provide
finance for about Rs.25,000 crore in the next three years.
60. Government accords the highest priority to capacity addition
in the power sector. The framework for induction of super critical
technology in large capacity power plants of National Thermal
Power Corporation is now in place. The Mega Power Policy has been
modified and is now consistent with the National Electricity
Policy, 2005 and Tariff Policy, 2006. It will help in lowering the
cost of generation and the cost of power purchased by distribution
utilities. I have more than doubled the plan allocation for power
sector from Rs.2,230 crore in 2009-10 to Rs.5,130 crore in
2010-11. This does not include allocations for RGGVY, which is a
part of Bharat Nirman.
61. Coal is the mainstay of India's energy sector and 75 per cent
of the power generation is currently coal based. It is proposed to
introduce a competitive bidding process for allocating coal blocks
for captive mining to ensure greater transparency and increased
participation in production from these blocks.
62. Government proposes to take steps to set up a "Coal Regulatory
Authority" to create a level playing field in the coal sector.
This would facilitate resolution of issues like economic pricing
of coal and benchmarking of standards of performance.
63. The Jawaharlal Nehru National Solar Mission envisages
establishing India as a global leader in solar energy. An
ambitious target of 20,000 MW of solar power by the year 2022 has
been set under the mission. I propose to increase the plan outlay
for the Ministry of New and Renewable Energy by 61 per cent from
Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.
64. The Ladakh region of Jammu and Kashmir faces an extremely
harsh climate and suffers from energy deficiency. To address this
problem, it is proposed to set up solar, small hydro and micro
power projects at a cost of about Rs.500 crore.
Environment and Climate change
65. To ameliorate the negative environmental consequences and
increased pollution levels associated with industrialisation and
urbanisation, I propose to take a number of proactive steps in the
National Clean Energy Fund (NCEF)
66. There are many areas of the country where pollution levels
have reached alarming proportions. While we must ensure that the
principle of "polluter pays" remains the basic guiding criteria
for pollution management, we must also give a positive thrust to
development of clean energy. I propose to establish a National
Clean Energy Fund for funding research and innovative projects in
clean energy technologies. I shall outline the mode of funding for
this initiative in Part B of my speech.
Effluent Treatment Plant, Tirupur
67. The textile cluster for knitwear in Tirupur in Tamil Nadu is a
major contributor to the country's hosiery exports. I propose to
provide a one-time grant of Rs.200 crore to the Government of
Tamil Nadu towards the cost of installation of a zero liquid
discharge system at Tirupur to sustain this industry, which
provides livelihood to lakhs of persons, without undermining the
Special Golden Jubilee Package for Goa
68. I propose to provide a sum of Rs.200 crore as a Special Golden
Jubilee package for Goa to preserve the natural resources of the
state by restoring Goa's beaches which are prone to erosion, and
increasing its green cover through sustainable forestry.
National Ganga River Basin Authority (NGRBA)
69. The "Mission Clean Ganga 2020" under the National Ganga River
Basin Authority (NGRBA) with the objective that no untreated
municipal sewage or industrial effluent will be discharged into
the national river has already been initiated. I propose to double
the allocation for NGRBA in 2010-11 to Rs.500 crore.
70. I am happy to inform the Honourable Members that schemes on
bank protection works along river Bhagirathi and river Ganga-Padma
in parts of Murshidabad and Nadia district of West Bengal have
been included in the Centrally Sponsored Flood Management
Programme. I also propose to provide budgetary support for
drainage scheme of Kaliaghai-Kapaleswari Baghai basin in the
district of Purba and Paschim Midnapore, and Master Plan of Kandi
sub-division in Murshidabad, West Bengal.
71. Recognising the need for developing an alternate port facility
in West Bengal, it is proposed to develop a project at Sagar
Island. Necessary funds will be provided in due course.
72. For the UPA Government, inclusive development is an act of
faith. In the last five years, our Government has created
entitlements backed by legal guarantees for an individual's right
to information and her right to work. This has been followed-up
with the enactment of the right to education in 2009-10. As the
next step, we are now ready with the draft Food Security Bill
which will be placed in the public domain very soon. To fulfil
these commitments the spending on social sector has been gradually
increased to Rs.1,37,674 crore which now stands at 37 per cent of
the total plan outlay in 2010-11. Another 25 per cent of the plan
allocations are devoted to the development of rural
infrastructure. With growth and the opportunities that it
generates, we hope to further strengthen the process of inclusive
73. The Right of Children to Free and Compulsory Education Act,
2009 creates a framework for legal entitlements for all children
in the age group of 6 to 14 years to education of good quality,
based on principles of equity and non-discrimination. In recent
years, Sarva Shiksha Abhiyan (SSA) has made significant
contribution in improving enrolment and infrastructure for
elementary education. About 98 per cent of habitations are now
covered by primary schools. I propose to increase the plan
allocation for school education from Rs.26,800 crore in 2009-10 to
Rs.31,036 crore in 2010-11. In addition, States will have access
to Rs.3,675 crore for elementary education under the Thirteenth
Finance Commission grants for 2010-11.
74. An Annual Health Survey to prepare the District Health Profile
of all Districts shall be conducted in 2010-11. The findings of
the Survey should be of immense benefit to major public health
initiatives particularly the National Rural Health Mission, which
has successfully addressed the gaps in the delivery of critical
health services in rural areas.
75. I propose to increase the plan allocation for the Ministry of
Health and Family Welfare, from Rs.19,534 crore to Rs.22,300 crore
76. To reach the benefits of banking services to the 'Aam Aadmi',
the Reserve Bank of India had set up a High Level Committee on the
Lead Bank Scheme. After careful assessment of the recommendations
of this Committee, and in further consultation with the RBI, it
has been decided to provide appropriate Banking facilities to
habitations having population in excess of 2000 by March, 2012. It
is also proposed to extend insurance and other services to the
targeted beneficiaries. These services will be provided using the
Business Correspondent and other models with appropriate
technology back up. By this arrangement, it is proposed to cover
Financial Inclusion Fund (FIF) and the Financial Inclusion
77. In 2007-08 the Government had set up a Financial Inclusion
Fund and a Financial Inclusion Technology Fund in NABARD, to reach
banking services to the unbanked areas. To give momentum to the
pace of financial inclusion, I propose an augmentation of Rs.100
crore for each of these funds, which shall be contributed by
Government of India, RBI and NABARD.
78. In the words of Mahatma Gandhi "Just as the universe is
contained in the self, so is India contained in the villages". For
UPA Government, development of rural infrastructure remains a high
priority area. For the year 2010-11, I propose to provide
Rs.66,100 crore for Rural Development.
79. Mahatma Gandhi National Rural Employment Guarantee Scheme has
completed four years of implementation during which it has been
extended to all districts covering more than 4.5 crore households.
The allocation for NREGA has been stepped up to Rs.40,100 crore in
2010-11. Bharat Nirman has made a substantial contribution to the
upgradation of rural infrastructure through its various
programmes. For the year 2010-11, I propose to allocate an amount
of Rs.48,000 crore for these programmes.
80. Indira Awas Yojana is a popular rural housing scheme for
weaker sections. Taking note of the increase in the cost of
construction, I propose to raise the unit cost under this scheme
to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly
areas. For the year 2010-11, the allocation for this scheme is
being increased to Rs.10,000 crore.
81. As a part of the strategy to bridge the infrastructure gap in
backward districts of the country, the Backward Region Grant Fund
has proved to be an effective instrument. I propose to enhance the
allocation to this fund by 26 per cent from Rs.5,800 crore in
2009-10 to Rs.7,300 crore in 2010-11. I have also provided an
additional central assistance of Rs.1,200 crore for drought
mitigation in the Bundelkhand region in the Budget.
Urban Development and Housing
82. "Swarna Jayanti Shahari Rozgar Yojana" designed to provide
employment opportunities in urban areas, has been strengthened
with focus on community participation, skill development and self
employment support structures. For the year 2010-11, I propose to
increase the allocation for urban development by more than 75 per
cent from Rs.3,060 crore to Rs.5,400 crore. In addition, the
allocation for Housing and Urban Poverty Alleviation is also being
raised from Rs.850 crore to Rs.1,000 crore in 2010-11.
83. While presenting the Union Budget for the year 2009-10, I had
announced a Scheme of one per cent interest subvention on housing
loans up to Rs.10 lakhs where the cost of the house does not
exceed Rs.20 lakhs. I propose to extend this Scheme up to March
31, 2011. Accordingly, I propose to provide a sum of Rs.700 crore
for this Scheme for the year 2010-11.
84. The Rajiv Awas Yojana (RAY) for slum dwellers and urban poor
was announced last year to extend support to States that are
willing to provide property rights to slum dwellers. This scheme
is now ready to take off. I propose to allocate Rs.1,270 crore for
2010-11 as compared to Rs.150 crore last year. This marks an
increase of over 700 per cent. The Government's efforts in the
implementation of RAY would be to encourage the States to create a
slum free India at the earliest.
Micro, Small & Medium Enterprises
85. Micro, Small and Medium Enterprises (MSMEs) contribute 8 per
cent of the country's GDP, 45 per cent of the manufactured output
and 40 per cent of our exports. They provide employment to about 6
crore persons through 2.6 crore enterprises. To resolve a number
of issues which affect the growth of this sector, Prime Minister
constituted a High-Level Task Force which held detailed
discussions with all stake holders and drew up an agenda for
action. A High Level Council on Micro and Small Enterprises will
monitor the implementation of the recommendations and the agenda
for action. I propose to raise the allocation for this sector from
Rs.1,794 crore to Rs.2,400 crore for the year 2010-11.
86. A loan agreement for US $ 150 million has been signed between
the Government of India and the Asian Development Bank on 22nd
December, 2009 for implementing the comprehensive Khadi Reforms
Programme. This programme will cover 300 selected Khadi
87. The programme for linking Self Help Groups (SHGs) with the
banking system has emerged as the major micro-finance initiative
in the country. It was re-designated as the 'Micro-Finance
Development and Equity Fund' in 2005-06 with a corpus of Rs.200
crore. The fund corpus is being doubled to Rs.400 crore in
National Social Security Fund for unorganised sector workers
88. Recognising the need for providing social security to the
workers in the unorganised sector, and as a follow up to the
Unorganised Sector Workers Social Security Act, 2008, it has been
decided to set up a National Social Security Fund for unorganised
sector workers with an initial allocation of Rs.1,000 crore. This
fund will support schemes for weavers, toddy tappers, rickshaw
pullers, bidi workers etc.
89. The Government had launched Rashtriya Swasthya Bima Yojana on
October 1, 2007 to provide health insurance cover to below poverty
line workers and their families. It became operational on April 1,
2008 and so far more than 1 crore smart cards have been issued
under this scheme. In view of the success of the scheme, it is now
proposed to extend its benefits to all such Mahatma Gandhi NREGA
beneficiaries who have worked for more than 15 days during the
preceding financial year.
90. To encourage the people from the unorganised sector to
voluntarily save for their retirement and to lower the cost of
operations of the New Pension Scheme (NPS) for such subscribers,
Government will contribute Rs.1,000 per year to each NPS account
opened in the year 2010-11. This initiative, "Swavalamban" will be
available for persons who join NPS, with a minimum contribution of
Rs.1,000 and a maximum contribution of Rs.12,000 per annum during
the financial year 2010-11. The scheme will be available for
another three years. Accordingly, I am making an allocation of
Rs.100 crore for the year 2010-11. It will benefit about 10 lakh
NPS subscribers of the unorganised sector. The scheme will be
managed by the interim Pension Fund Regulatory and Development
91. I also appeal to the State Governments to contribute a similar
amount to the scheme and participate in providing social security
to the vulnerable sections of the society.
92. Prime Minister's Council on National Skill Development has
laid down the core governing principles for operating strategies
for skill development. The Council has a mission of creating 50
crore skilled people by 2022. Of these, the target for the
National Skill Development Corporation, which has started
functioning from October, 2009, is 15 crore. It has completed a
comprehensive skill gap study of 21 high growth sectors and
approved three projects worth about Rs.45 crore to create 10 lakh
skilled manpower at the rate of one lakh per annum. Other projects
are in advanced stages of consideration.
93. It is proposed to launch an extensive skill development
programme in the textile and garment sector by leveraging the
strength of existing institutions and instruments of the Textile
Ministry. The resources of the private sector will also be
harnessed by incentivising training through an outcome - based
approach. Through these instruments, the Ministry of Textiles has
set an ambitious target of training 30 lakh persons over 5 years.
94. I propose to step up the plan outlay for Women and Child
Development by almost 50 per cent. Several new initiatives that
were launched in 2009-10 are now ready for implementation. A
mission for empowerment of women is being set up. The ICDS
platform is being expanded for effective implementation of the
Rajiv Gandhi Scheme for Adolescent Girls.
95. To further improve female literacy rate, the Government has
recast the earlier National Literacy Mission as a new programme
"Saakshar Bharat". It was launched in September, 2009 with a
target of 7 crore non-literate adults which includes 6 crore
96. A Mahila Kisan Sashaktikaran Pariyojana to meet the specific
needs of women farmers is being launched. I have provided Rs.100
crore for this initiative as a sub-component of the National Rural
97. I am happy to inform the Honourable Members that I propose to
enhance the plan outlay of the Ministry of Social Justice and
Empowerment to Rs.4500 crore. This amounts to an increase of 80
per cent as compared to 2009-10. This will support the programmes
being implemented for the target population groups covering the
Scheduled Castes, Other Backward Classes, persons with
disabilities, senior citizens and victims of alcoholism and
substance abuse. With this enhancement, the Ministry will be able
to revise rates of scholarship under its post-matric scholarship
schemes for SCs and OBC students, which is long overdue.
98. The allocation will also assist in establishing an Indian Sign
Language Research and Training Centre for the benefit of the
hearing impaired. District Disability Rehabilitation Centres are
being set up in 50 additional districts along with two composite
regional centres for persons with disabilities.
99. I also propose to raise the plan allocation for the Ministry
of Minority Affairs from Rs.1,740 crore to Rs.2,600 crore for the
year 2010-11. This marks an increase of nearly 50 per cent. I am
happy to inform the Honourable Members that we are close to
achieving the target of 15 per cent priority sector lending to
minorities in the current year. This will be maintained for the
next three years.
Strengthening transparency and public
100. The UPA Government has made a serious attempt to create an
environment that supports transparency and accountability in the
working of the public institutions in the country. As Honourable
Members are aware, a number of legislative and administrative
measures have been taken in this regard.
Financial Sector Legislative Reforms Commission
101. Most of our legislations governing the financial sector are
very old. Large number of amendments to these Acts made at
different points of time has also increased ambiguity and
complexity. The Government proposes to set up a Financial Sector
Legislative Reforms Commission to rewrite and clean up the
financial sector laws to bring them in line with the requirements
of the sector.
Administrative Reforms Commission
102. The Administrative Reforms Commission constituted by the UPA
Government in its first term has submitted 15 reports, of which 10
reports have been examined by the Government. Out of the 800
identified recommendations for implementation so far, 350
recommendations have been implemented and 450 are under
Unique Identification Authority of India (UIDAI)
103. In my last Budget Speech, I had announced the constitution of
the Unique Identification Authority of India, its broad working
principles and the timelines for delivery of the first UID
numbers. I am happy to report that the Authority has been
constituted and it will be able to meet its commitments of issuing
the first set of UID numbers in the coming year. It would provide
an effective platform for financial inclusion and targeted subsidy
payments. Since the UIDAI will now get into the operational phase,
I am allocating Rs.1,900 crore to the Authority for 2010-11.
Technology Advisory Group for Unique Projects (TAGUP)
104. An effective tax administration and financial governance
system calls for creation of IT projects which are reliable,
secure and efficient. IT projects like Tax Information Network,
New Pension Scheme, National Treasury Management Agency,
Expenditure Information Network, Goods and Service Tax, are in
different stages of roll out. To look into various technological
and systemic issues, I propose to set up a Technology Advisory
Group for Unique Projects under the Chairmanship of Shri Nandan
Independent Evaluation Office (IEO)
105. The Government had announced the setting-up of an Independent
Evaluation Office to undertake impartial and objective assessments
of the various public programmes and improve the effectiveness of
the public interventions. It has been decided that it would be an
independent entity under a Governing board chaired by the Deputy
Chairman, Planning Commission. The IEO would evaluate the impact
of flagship programmes and place the findings in the public
domain. It would be funded by the Planning Commission.
Symbol for Indian Rupee
106. In the ensuing year, we intend to formalise a symbol for the
Indian Rupee, which reflects and captures the Indian ethos and
culture. With this, Indian Rupee will join the select club of
currencies such as the US Dollar, British Pound Sterling, Euro and
Japanese Yen that have a clear distinguishing identity.
Security and Justice
107. Secure borders and security of life and property fosters
development. I propose to increase the allocation for Defence to
Rs.1,47,344 crore. This would include Rs.60,000 crore for capital
expenditure. Needless to say, any additional requirement for the
security of the nation will be provided for.
108. In 2009-10, the overall internal security and law and order
situation in the country remained largely under control. Several
new measures were taken by the Government to strengthen the
security apparatus of the country. These include
operationalisation of the National Investigation Agency (NIA),
establishment of four NSG Hubs, augmentation of the Intelligence
Bureau and its Multi-Agency Centre.
109. There was decline in violence in Jammu and Kashmir in the
year 2009. We have taken a number of confidence building measures.
As one more such measure, Government proposes to recruit about
2,000 youth as constables in five Central Para Military Forces in
the year 2010.
110. To address the development problems of the thirty three left
wing extremism affected districts, a Task Force headed by the
Cabinet Secretary was formed for promoting coordinated efforts
across a range of development and security measures. It has been
decided that Planning Commission will prepare an integrated action
plan for the affected areas. Adequate funds will be made available
to support the action plan. I appeal to the misguided elements to
eschew violence and join the development process.
National Mission for Delivery of Justice and Legal Reforms
111. To provide timely delivery of justice to all, the Government
has approved the setting up of the National Mission for Delivery
of Justice and Legal Reforms. The objective of the mission is to
help reduce legal backlog in courts from an average of 15 years at
present to 3 years by 2012. It would also help in improving the
legal environment for business. The Thirteenth Finance Commission
has provided grants amounting to Rs.5,000 crore for the States to
improve the delivery of justice, including strengthening of
alternate dispute resolution mechanisms.
Budget Estimates 2010-11
I now turn to the Budget Estimates for 2010-11.
112. The Gross Tax Receipts are estimated at Rs.7,46,651 crore.
The Non Tax Revenue Receipts are estimated at Rs.1,48,118 crore.
The net tax revenue to the Centre as well as the expenditure
provisions in 2010-11 have been estimated with reference to the
recommendations of the Thirteenth Finance Commission.
113. The total expenditure proposed in the Budget Estimates for
2010-11 is Rs.11,08,749 crore, which is an increase of 8.6 per
cent over the total expenditure in BE 2009-10. The Plan and Non
Plan expenditures in BE 2010-11 are estimated at Rs.3,73,092 crore
and Rs.7,35,657 crore, respectively. While there is a 15 per cent
increase in Plan expenditure, the increase in Non Plan expenditure
is only 6 per cent over the BE of previous year. With this level
of Plan expenditure, I am confident that the total Plan
expenditure would be very close to 100 per cent of the expenditure
envisaged in the Eleventh Five Year Plan.
114. Honourable Members will agree that fiscal policy has to be
guided by the required framework for fiscal prudence. In the
Medium Term Fiscal Policy Statement presented along with Budget
2009-10, I had laid down a road map for fiscal deficit. I am happy
to report that in keeping with my commitment, I have been able to
present the Budget for 2010-11 with a fiscal deficit of 5.5 per
cent. In the Medium Term Fiscal Policy Statement being presented
to the House today, along with other Budget documents, the rolling
targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per
cent for 2011-12 and 2012-13, respectively. These projections
improve upon the recommendations of the Thirteenth Finance
115. While presenting the Budget for 2009-10, I had expressed my
concern about the high level of fiscal deficit. I had also stated
that the Government will address this issue in right earnest to
come back to the path of fiscal consolidation at the earliest. I
am happy to report that against a fiscal deficit of 7.8 per cent
in 2008-09, inclusive of oil and fertiliser bonds, the comparable
fiscal deficit is 6.9 per cent as per the Revised Estimates for
2009-10. Both these deficit figures are based on the revised GDP
numbers published by the Central Statistical Organisation and
include what were earlier referred to as below the line items.
This marks an improvement of about one per cent in fiscal deficit
during the current year. I have made a conscious effort to avoid
issuing bonds to oil and fertiliser companies. I would like to
continue with this practice of extending Government subsidy in
cash, thereby bringing all subsidy related liabilities into our
116.The fiscal deficit of 5.5 per cent of GDP in 2010-11 works out
to Rs.3,81,408 crore. Taking into account the various other
financing items for fiscal deficit, the actual net market
borrowing of the Government in 2010-11 would be of the order of
Rs.3,45,010 crore. There will be enough space to meet the credit
needs of the private sector. The Government will plan the
borrowing programme in consultation with the RBI.
PART - B
I shall now present my tax proposals.
117. While formulating them, I have been guided by the principles
of sound tax administration as embodied in the following words of
"Thus, a wise Collector General shall conduct the work of revenue
collection.... in a manner that production and consumption should
not be injuriously affected.... financial prosperity depends on
public prosperity, abundance of harvest and prosperity of commerce
among other things."
118. I had stated last year that tax reform is a process and not
an event. The process I had outlined in the area of direct taxes
was to release a draft Direct Taxes Code along with a Discussion
Paper. In the area of indirect taxes, the reform initiative was
the introduction of a Goods and Services Tax. I have presented the
developments in both reform initiatives in Part 'A' of my Speech.
119. We have continued on the path of computerisation in core
areas of service delivery in the administration of direct taxes.
This will reduce the physical interface between taxpayers and tax
administration and speed up procedures and processes. The
Centralised Processing Centre at Bengaluru is now fully functional
and is processing around 20,000 returns daily. This initiative
will be taken forward by setting up two more Centres during the
120. As a part of Government's initiative to move towards citizen
centric governance, the income tax department has introduced
"Sevottam", a pilot project at Pune, Kochi and Chandigarh through
Aayakar Seva Kendras. These provide a single window system for
registration of all applications including those for redressal of
grievances as well as paper returns. This year the scheme will be
extended to four more cities.
121. To achieve the roll-out of GST by April 2011, the indirect
tax administrations at the Centre and the States need to revamp
their internal work processes based on the use of Information
Technology. I am happy to inform Honorable Members that project
ACES - Automation of Central Excise & Service Tax, has already
been rolled out throughout the country this year. This will impart
greater transparency in tax administration and improve the
delivery of taxpayer services. Similarly, a Mission Mode Project
for computerisation of Commercial Taxes in States has been
approved recently. With an outlay of Rs.1133 crore of which the
Centre's share is Rs.800 crore, the project will lay the
foundation for the launch of GST.
122. I mentioned last year, that the income tax return forms
should be simple and user friendly. The income tax department is
now ready to notify SARAL-II form for individual salaried
taxpayers for the coming assessment year. This form will enable
individuals to enter relevant details in a simple format in only
123. To expeditiously resolve disputes with taxpayers I propose to
expand the scope of cases which may be admitted by the Settlement
Commission to include proceedings related to search and seizure
cases pending for assessment. I also propose to expand the scope
of Settlement Commission in respect of Central Excise and Customs
so that certain categories of cases that hitherto fell outside its
jurisdiction may be admitted.
124. Last year, amendments to the statute enabled Government to
enter into tax treaties with specified territories besides
sovereign states. We have commenced bi-lateral discussions to
enhance the exchange of bank related and other information to
effectively track tax evasion and identify undisclosed assets of
resident Indians lying abroad.
I shall now deal with direct taxes.
125. Last year I provided relief to individual taxpayers by
enhancing the exemption limit for all taxpayers and withdrawing
the surcharge on personal income tax. Taxpayers have responded
positively to these concessions by contributing a higher level of
taxes. There is a persuasive case for further relief by broadening
the current tax slabs which I propose as follows:
Income upto Rs.1.6 lakh: Nil
Income above Rs.1.6 lakh and upto Rs.5 lakh: 10 per cent
Income above Rs.5 lakh and upto Rs.8 lakh: 20 per cent
Income above Rs.8 lakh: 30 per cent
126. The proposed broadening of tax slabs will provide substantial
relief to a large number of taxpayers.
127. To promote savings as well as to ensure their utilisation for
the thrust area of infrastructure, I propose to allow a deduction
of an additional amount of Rs.20,000 for investment in long-term
infrastructure bonds as notified by the Central Government. This
would be over and above the existing limit of Rs.1 lakh on tax
savings. I am sure that these reliefs will put more money in the
hands of individual taxpayers for both consumption as well as
128. Besides contributions to health insurance schemes which is
currently allowed as a deduction under the Income-tax Act, I
propose to allow contributions to the Central Government Health
Scheme also as a deduction under the same provision.
129. Taking forward my initiative of phasing out surcharge, I
propose to reduce the current surcharge of 10 per cent on domestic
companies to 7.5 per cent. At the same time, I propose to increase
the rate of Minimum Alternate Tax (MAT) from the current rate of
15 per cent to 18 per cent of book profits. This will further
promote inter-se equity among corporate taxpayers.
130. The President, in her address to the Parliament in June 2009,
had declared this decade as the Decade of Innovation. Last year, I
extended the scope of weighted deduction on expenditure incurred
on in-house research and development (R&D) to all manufacturing
businesses except for a small negative list. To further encourage
R&D across all sectors of the economy, I now propose to enhance
the weighted deduction on expenditure incurred on in-house R&D
from 150 per cent to 200 per cent. I also propose to enhance the
weighted deduction on payments made to National Laboratories,
research associations, colleges, universities and other
institutions, for scientific research from 125 per cent to 175 per
131. Currently, any payment made to an approved scientific
research association is eligible for weighted deduction. The
income of the approved scientific research association is exempt
from tax. I propose that payments made to approved associations
engaged in research in social sciences or statistical research
would be allowed a weighted deduction of 125 per cent. The income
of such approved research associations shall be exempt from tax.
132. In my Budget Speech last year, I stated that profit linked
deductions are inherently inefficient and liable to misuse. To
incentivise businesses in priority sectors, I introduced
investment linked deduction as an alternative to profit linked
deduction. To give a boost to investment in the tourism sector
which has high employment potential, I propose to extend the
benefit of investment linked deduction under the Act to new hotels
of two-star category and above anywhere in India.
133. To provide one time interim relief to the housing and real
estate sector which was impacted by the global recession, I
propose to allow pending projects to be completed within a period
of five years instead of four years for claiming a deduction on
their profits. I also propose to relax the norms for built-up area
of shops and other commercial establishments in housing projects
to enable basic facilities for their residents.
134. All businesses with a turnover exceeding Rs.40 lakh are
currently required to have their accounts audited. A similar
provision also applies to all professions whose receipts exceed
Rs.10 lakh. I, as Finance Minister, had introduced these limits in
my budget of 1984. It is high time to reduce the compliance burden
on small taxpayers. I, therefore, propose to enhance these limits
to Rs.60 lakh in the case of businesses and Rs.15 lakh in the case
135. To facilitate the business operations of small taxpayers, I
had extended the scope of presumptive taxation to all small
businesses with a turnover of up to Rs.40 lakh. To further reduce
the compliance burden on small taxpayers, I now propose to enhance
this limit to Rs.60 lakh.
136. The threshold limits of payments below which tax is not
deductible at source have remained unchanged for a long time. I
propose to rationalise these thresholds.
137. Relaxing the current provisions on disallowance of
expenditure, I propose to allow deduction of such expenditure, if
tax has been deducted at any time during the financial year and
paid before the due date of filing the return. This will allow
most deductors additional time up to September of the next
financial year. At the same time, I propose to increase the
interest charged on tax deducted but not deposited by the
specified date, from 12 per cent to 18 per cent per annum.
138. Last year, I had provided for the taxation of the newly
introduced Limited Liability Partnership (LLP) on the same lines
as exists for a general partnership firm. To facilitate the
conversion of small companies into LLPs, I propose that this will
not be subject to capital gains tax.
139. Under the current provisions of the Act, "the advancement of
any other object of general public utility" cannot be considered
as "charitable purpose" if it involves carrying on of any activity
in the nature of trade, commerce or business. I have received
representations from many organisations seeking some relaxation in
this restriction. I propose that this restriction would not be
applicable if the receipts from such activities do not exceed
Rs.10 lakh in the year.
140. My proposals on direct taxes are estimated to result in a
revenue loss of Rs.26,000 crore for the year.
141. The major objectives that have guided me in the formulation
of my proposals on indirect taxes are the need to achieve some
degree of fiscal consolidation without impairing the recovery
process and moving forward on the road to GST.
142. Unlike the time I presented the last Budget, symptoms of
economic recovery are more widespread and clear-cut now. The three
fiscal stimulus packages that the Government introduced in quick
succession have helped the process of recovery significantly. The
improvement in our economic performance encourages a course of
fiscal correction even as the global situation warrants caution.
Therefore, I propose to partially roll back the rate reduction in
Central Excise duties and enhance the standard rate on all
non-petroleum products from 8 per cent to 10 per cent ad valorem.
The specific rates of duty applicable to portland cement and
cement clinker are also being adjusted upwards proportionately.
Similarly, the ad valorem component of excise duty on large cars,
multi-utility vehicles and sports-utility vehicles which was
reduced as part of the first stimulus package, is being increased
by 2 percentage points to 22 per cent.
143. In the wake of spiralling petroleum prices, Government
provided full exemption from basic customs duty to crude petroleum
and proportionately reduced the basic duty on refined petroleum
products in June, 2008. Compared to the international price of the
Indian crude basket of US$ 112 per barrel at that time, the prices
are much softer at present. In view of the pressing need to move
back to a fiscal consolidation path, I propose to restore the
basic duty of 5 per cent on crude petroleum; 7.5 per cent on
diesel and petrol and 10 per cent on other refined products. I
also propose to enhance the Central Excise duty on petrol and
diesel by Re.1 per litre each.
144. Since I quit smoking many years ago, I would urge others to
also follow suit, as smoking is injurious to health. To this end,
I am making some structural changes in the excise duty on
cigarettes, cigars and cigarillos coupled with some increase in
rates. I also propose to enhance excise duty on all non-smoking
tobacco such as scented tobacco, snuff, chewing tobacco etc. In
addition, I propose to introduce a compounded levy scheme for
chewing tobacco and branded unmanufactured tobacco based on the
capacity of pouch packing machines.
145. Let me now turn to some much-needed incentives in thrust
areas for sustainable growth and development.
Agriculture & Related Sectors
146. In supporting the strategy outlined for development of
agriculture earlier in my speech, I propose to address a few key
areas that call for focused attention. These are:
(i)A strong supply chain for perishable farm produce to reach
consumption and processing centres promptly;
(ii) Infrastructure and technology to convert such produce into
value-added products; and
(iii)Infusion of technology to augment agricultural production.
147. Similar attention needs to be paid to related sectors such as
apiary, horticulture, dairy, poultry, meat, marine and
148. For achieving these objectives, I propose to provide:
• project import status with a concessional import duty of 5 per
cent for the setting up of mechanised handling systems and pallet
racking systems in 'mandis' or warehouses for food grains and
sugar as well as full exemption from service tax for the
installation and commissioning of such equipment.
• project import status at a concessional customs duty of 5 per
cent with full exemption from service tax to the initial setting
up and expansion of
Cold storage, cold room including farm pre-coolers for
preservation or storage of agriculture and related sectors produce
; and processing units for such produce.
• Full exemption from customs duty to refrigeration units required
for the manufacture of refrigerated vans or trucks.
149. I also propose to provide:
• Concessional customs duty of 5 per cent to specified
agricultural machinery not manufactured in India;
• Central excise exemption to specified equipment for
preservation, storage and processing of agriculture and related
sectors and exemption from service tax to the storage and
warehousing of their produce; and
• Full exemption from excise duty to trailers and semi-trailers
used in agriculture.
150. Concessional import duty was provided to specified machinery
for use in the plantation sector in the year 2003. This exemption
is to lapse in July 2010. The modernization of this
labour-intensive sector is yet to reach the expected level. I
propose therefore, to extend it up to March 31, 2011 along with a
CVD exemption. I hope this will provide sufficient time for the
sector to achieve the desired objective.
151. One of the prerequisites for agricultural productivity is
access to good quality and disease-resistant seeds. I propose to
exempt the testing and certification of agricultural seeds from
152. I also propose to exempt the transportation by road of
cereals and pulses from service tax. Their transportation by rail
would remain exempt.
153. I propose two measures under the Central Excise law to ease
the cash flow position for small-scale manufacturers hard hit by
the economic slowdown. First, they would be permitted to take full
credit of Central Excise duty paid on capital goods in a single
installment in the year of their receipt. Secondly, they would be
permitted to pay Central Excise duty on a quarterly, rather than
monthly basis. These measures that come into effect on the April
1, 2010 should provide them considerable relief.
154. Harnessing renewable energy sources to reduce dependence on
fossil fuels is now recognised as a credible strategy for
combating global warming and climate change. To build the corpus
of the National Clean Energy Fund announced earlier, I propose to
levy a clean energy cess on coal produced in India at a nominal
rate of Rs.50 per tonne. This cess will also apply to imported
155. In pursuance of Government's resolve to implement the
National Solar Mission, I propose to provide a concessional
customs duty of 5 per cent to machinery, instruments, equipment
and appliances etc. required for the initial setting up of
photovoltaic and solar thermal power generating units. I also
propose to exempt them from Central Excise duty. Similarly, ground
source heat pumps used to tap geo-thermal energy would be exempt
from basic customs duty and special additional duty.
156. Wind energy has shown promising growth in the country in
recent years. As a measure of further relief, I propose to exempt
a few more specified inputs required for the manufacture of rotor
blades for wind energy generators from Central Excise duty.
157. LED lights are staging a debut as a highly energy-efficient
source of lighting for streets, homes and offices. Central Excise
duty on these is being reduced from 8 per cent to 4 per cent at
par with Compact Fluorescent Lamps.
158. Full exemption from Central Excise duty was provided to
electric cars and vehicles that offer an eco-friendly alternative
to petrol or diesel vehicles. The manufacturers of such vehicles
have expressed difficulty in neutralising the duty paid on their
inputs and components. I propose to remedy this by imposing a
nominal duty of 4 per cent on such vehicles. I also propose to
exempt some critical parts or sub-assemblies of such vehicles from
basic customs duty and special additional duty subject to actual
user condition. These parts would also enjoy a concessional CVD of
4 per cent.
159. The humble cycle rickshaw is now being acclaimed as an
environment-friendly means of transport. CSIR has developed an
innovative product called 'soleckshaw' to replace
manually-operated rickshaws. It runs on batteries which are
charged by solar power. I propose to provide a concessional excise
duty of 4 per cent to this product. Its key parts and components
are also being exempted from customs duty.
160. To encourage the use of bio-degradable materials, I propose
to exempt the import of compostable polymer from basic customs
161. Strengthening the public transport system is another means of
reducing dependence on fossil fuels. I propose to grant project
import status to 'Monorail projects for urban transport' at a
concessional basic duty of 5 per cent.
162. Full exemption from import duty is available to specified
machinery for road construction projects on the condition that the
machinery shall not be sold or disposed of for a minimum period of
five years. In view of representations that this leads to idling
of machinery, I propose to allow resale of such machinery on
payment of import duty at depreciated value. It is also being
clarified that the importer is free to relocate such machinery to
other eligible road construction projects.
163. With the subscriber base growing at 14 million per month,
India is one of the fastest growing markets for mobile phone
connections in the world. Domestic production of mobile phones is
now picking up in view of exemptions from basic, CVD and special
additional duties granted to their parts, components and
accessories. To encourage the domestic manufacture of accessories,
these exemptions are now being extended to parts of battery
chargers and hands-free headphones. Also, the validity of the
exemption from special additional duty is being extended till
March 31, 2011.
164. Medical equipment, instruments and appliances are subjected
to a very complex import duty regime based on several long lists
that describe individual items. Multiple rates coupled with
descriptions not aligned with tariff lines, result in disputes and
at times prevent state-of-art equipment from getting the benefit
of exemption. I propose to prescribe a uniform, concessional basic
duty of 5 per cent, CVD of 4 per cent with full exemption from
special additional duty on all medical equipment. A concessional
basic duty of 5 per cent is being prescribed on parts and
accessories for the manufacture of such equipment while they would
be exempt from CVD and special additional duty. Full exemption
currently available to medical equipment and devices such as
assistive devices, rehabilitation aids etc. is being retained. The
concession available to Government hospitals or hospitals set up
under a statute is also being retained.
165. The manufacturers of orthopaedic implants have represented
that their inputs attract a higher rate of duty than the finished
product. I propose to exempt specified inputs for the manufacture
of such implants from import duty.
166. India is a nation of movie-goers. The film industry has been
experiencing difficulties in importing digital masters of films
for duplication or distribution loaded on electronic medium
vis-a-vis those imported on cinematographic film, owing to a
differential customs duty structure. I propose to rationalise this
by charging customs duty only on the value of the carrier medium.
The same dispensation would apply to music and gaming software
imported for duplication. In keeping with the tradition of Indian
cinema, however, I shall provide a surprise ending. In all such
cases the value representing the transfer of intellectual rights
would be subjected to service tax.
167. Cable transmission of infotainment is undergoing a
transformation with the adoption of digital technology. The
multi-service operators need to invest in "Digital Head End"
equipment. To enable this, I propose to provide project import
status at a concessional customs duty of 5 per cent with full
exemption from special additional duty to the initial setting up
of such projects.
168. The prices of precious metals continue to rise. Since the
customs duty is levied on these at specific rates, I propose to
index the rates as follows:
• On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10
• On silver from Rs.1,000 per kg to Rs.1,500 per kg.
169. Gems and jewellery is a traditional item in our export
basket. Rhodium - a precious metal used for polishing jewellery
attracts a basic customs duty of 10 per cent. This is being
reduced to 2 per cent.
170. To encourage domestic refining capacity for gold, I propose
to reduce the basic customs duty on gold ore and concentrates from
2 per cent ad valorem to a specific duty of Rs.140 per 10 grams of
gold content with full exemption from special additional duty.
Further, the excise duty on refined gold made from such ore or
concentrate is being reduced from 8 per cent to a specific duty of
Rs.280 per 10 grams.
171. Full exemption from import duty is available to specified
inputs or raw materials required for the manufacture of sports
goods which are assuming importance as an item of export. This is
being expanded to cover a few more items.
172. In order to incentivise the domestic production of microwave
ovens, I propose to reduce the basic customs duty on one of its
key components, namely magnetrons from 10 per cent to 5 per cent.
173. Presently, there is a value limit of Rs.1 lakh per annum on
duty-free import of commercial samples as personal baggage. I
propose to enhance this limit to Rs.3 lakh per annum.
174. Industry has represented that the exemption from special
additional duty of 4 per cent based on refunds leads to
substantial blockage of funds. To ease this difficulty, I propose
to provide an outright exemption from special additional duty to
goods imported in a pre-packaged form for retail sale. This would
also cover mobile phones, watches and ready-made garments even
when they are not imported in pre-packaged form. The refund-based
exemption is also being retained for cases not covered by the new
175. Toy balloons are a source of joy to millions of children. To
bring a smile to their mothers' faces, I propose to fully exempt
them from Central Excise duty.
176. Some of the other relief measures that I propose are as
• Reduction in basic customs duty on long pepper from 70 per cent
to 30 per cent;
• Reduction in basic customs duty on asafoetida from 30 per cent
to 20 per cent;
• Reduction in central excise duty on replaceable kits for
household type water filters other than those based on RO
technology to 4 per cent;
• Reduction in central excise duty on corrugated boxes and cartons
from 8 per cent to 4 per cent;
• Reduction in central excise duty on latex rubber thread from 8
per cent to 4 per cent; and
• Reduction in excise duty on goods covered under the Medicinal
and Toilet Preparations Act from 16 per cent to 10 per cent.
177. My proposals relating to customs and central excise are
estimated to result in a net revenue gain of Rs.43,500 crore for
178. The service sector contributes nearly 60 per cent of the GDP.
The service tax to GDP ratio however, is only around 1 per cent.
This sector thus, has significant potential to augment revenue.
179. To bridge this gap, I had the option to raise the rate of
service tax to 12 per cent as it was before I introduced the third
stimulus package. I am not resorting to this option to maintain
the growth momentum and also to bring about a convergence in the
rates of tax on goods and services. I, therefore, propose to
retain the rate of tax on services at 10 per cent to pave the way
forward for GST.
180. I had another option - to bring all services under service
tax. I am not opting for this either at this stage. I propose,
however, to bring certain services, hitherto untaxed, within the
purview of the service tax levy. These are being notified
181. I am also proposing certain legislative changes to plug
revenue leakages, to remove distortions and to clarify certain
doubts that have arisen over a period of time. I do not want to
waste the precious time of the House elaborating the details, as
they are available in the Finance Bill and other Budget documents.
182. Export of services, especially in the area of Information
Technology and Business Process Outsourcing, generates substantial
employment and brings in foreign exchange. I propose to ease the
process of refund of accumulated credit to exporters of services
by making necessary changes in the definition of export of
services and procedures.
183. Accredited news agencies which provide news feed online
attract service tax. Acknowledging the yeoman services of such
news agencies in disseminating news, I propose to exempt such news
agencies that meet certain criteria, from service tax.
184. My proposals relating to service tax are estimated to result
in a net revenue gain of Rs.3,000 crore for the year.
185. Copies of notifications giving effect to the changes in
customs, central excise and service tax will be laid on the Table
of the House in due course.
186. My proposals on Direct Taxes are estimated to result in a
revenue loss of Rs.26,000 crore for the year. Proposals relating
to Indirect Taxes are estimated to result in a net revenue gain of
Rs.46,500 crore for the year. Taking into account the concessions
being given in my tax proposals and measures taken to mobilise
additional resources, the net revenue gain is estimated to be
Rs.20,500 crore for the year.
187. We have emerged from the global slowdown faster than any
other nation. I did not hesitate in exercising my judgement on the
course of action last year and I have no hesitation in my mind
now. Our actions today will determine our tomorrow.
188. This Budget belongs to Aam Aadmi. It belongs to the farmer,
the agriculturist, the entrepreneur and the investor. The
opportunity is great. The time is right. I have placed my faith in
the hands of the people who, I know, can be depended upon to rise
to any occasion in national interest. I have placed my faith in
the collective conscience of the nation that can be touched to
scale undreamt of heights in the coming years.
189. Madam Speaker, with these words I commend the Budget to the