M A I N   N E W S

No change in personal and corporate IT
*Small cars, ice-creams, soft drinks cheaper
*Major thrust to farm sector
*Rs 100 crore allocated for PAU
T R Ramachandran
Tribune News Service

HIGHLIGHTS

No change in personal income tax rates. Major thrust to agriculture sector. Farm credit to be increased to Rs 1,75,000 crore. Efforts to create huge job opportunities in manufacturing and services sectors. Defence allocation increased by Rs 6,000 crore. Service Tax increased to 12 per cent from 10 per cent. More services brought under service tax net. Excise duty on small cars, aerated drinks reduced. Duty on cigarettes increased. Cancer, AIDS drugs to become cheaper. One by six criteria for filing IT returns abolished. Peak customs duty reduced to 12.5 per cent from 15 per cent. Rs 4813 crore for mid-day meal scheme. Fiscal deficit pegged at 2.1 per cent. India can be hub for world in gems and jewellery, textiles and automobiles. Food processing to be treated as priority sector for bank credit. Limit of FII investment in government securities increased.

New Delhi, February 28
Proposing no change in the personal and corporate Income Tax, the Union Finance Minister, Mr P. Chidambaram, has slashed excise duties on a number of items, including small cars and aerated soft drinks, and brought 16 more items like ATM operations and luxury class air travel under the service tax net.

In his Budget for 2006-07, the minister sought to undertake a delicate balancing act by focussing on agriculture and endeavouring to create huge job opportunities in the manufacturing and services sectors.

The peak rate of customs duty for non-agriculture products has been reduced from 15 per cent to 12.5 per cent. Customs duty on vanaspati has been increased to 80 per cent to protect the domestic industry.

Cancer and AIDS patients will get relief by the reduction of customs duty on 10 anti-AIDS and 14 anti-cancer drugs to 5 per cent. Duty on certain life saving drugs has been reduced from 15 per cent to 5 per cent. These drugs will also be exempt from excise duty and countervailing duty.

A grant of Rs 50 crore each has been proposed for three universities— University of Calcutta, University of Mumbai and University of Madras—for specified research departments and research programmes.

A special grant of Rs 100 crore has also been allocated for Punjab Agricultural University, Ludhiana, in acknowledgement of its pioneering contribution to Green Revolution.

In abolishing the one by six criteria for mandatory filing of tax returns, Mr Chidambaram, who presented the Budget in the Lok Sabha today, has outlined the roadmap for developing India as a hub for the gems and jewellery industry, textiles, automobiles, steel, metals and petroleum products for the world.

In respect of gems and jewellery, he proposed that an expert body will look into the potential of this sector encompassing the prevalent taxation practices in the country and abroad and make its recommendations.

The allocation for Defence is being raised from Rs 83,000 crore to Rs 89,000 crore because of the enhanced expenditure on the modernisation of the defence forces. The government has fulfilled the long-standing demand of retired Armed Forces Personnel Below Officer Rank (PBOR) for better pension benefits. As many as 12 lakh PBOR have benefited to the tune of Rs 460 crore from January 1 this year.

Mr Chidambaram expressed his resolve to continue with the controversial Fringe Benefit Tax and the Banking Cash Transaction Tax. As expected he taxed smokers by raising the excise duty on cigarettes by 5 per cent.

Jammu and Kashmir will continue to receive special assistance. In addition to the state plan for 2006-07, which has been fixed at Rs 2,300 crore, Rs 848 crore is being made available for the reconstruction plan in the sensitive border state. Special Central Plan assistance of Rs 1,300 crore has been earmarked to enable Jammu and Kashmir undertake reforms in the power sector.

Considering the problems faced by farmers, the minister proposed granting relief to those who had availed crop loans from scheduled commercial banks, RRBs and PACS for Kharif and Rabi 2005-06. An amount equal to 2 percentage points of the borrower’s interest liability on the principal amount up to Rs 1,00,000 will be credited to the farmer’s bank account before March 31, 2006. A sum of Rs 1,700 crore has been provided for this purpose.

Banks are being asked to increase the level of credit to Rs 175,000 crore in the next fiscal and add another 50 lakh farmers to their portfolio. Simultaneously, the banks will open a separate window for self-help or joint liability groups of tenant farmers and ensure that a certain proportion of the total credit is extended to them. A committee on Financial Inclusion is being constituted to suggest a plan for designing and delivering credit to small and marginal farmers having no access to it at present.

Farmers will also receive short-term credit at 7 per cent with an upper limit of Rs 3,00,000 on the principal amount. The details of this policy will be announced shortly and it will come into force from Kharif 2006-07.

Taking note of the enormous benefits that the food processing industry can bring to agriculture and job creation, it is being treated as a priority sector for bank credit. NABARD will create a separate window with a corpus of Rs 1,000 crore for refinancing loans to the sector especially for agro processing infrastructure and market development. The government will also set up the National Institute of Food Technology Entrepreneurship.

A Task Force has been set up to facilitate development of large Petroleum, Chemicals and Petro-chemical Investment Regions. It is expected that in 2006-07 at least three such Investment Regions will be developed.

Even as the Telecommunications sector is recording one of the fastest growth rates in the world and is expected to reach 250 million connections by December 2007, the Ministry of Power has invited bids for five ultra mega power projects of 4000 MW each, of which two will be pit head and three coastal.

Durable reforms have become imperative in transmission and distribution and the Prime Minister will set up an empowered committee of chief ministers and power ministers.