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Highlights
- An across-the-board cut on ad-valorem rate to encourage additional spending; additional
Rs 1,400 crore for textile sector.
- A series of steps to boost exports; Rs 350 crore additional funds for export incentives; back-up guarantee to ECGC for up to Rs 350
crore; to be allowed refund of services in some areas.
- Additional plan expenditure up to Rs 20,000 crore in current year; total spending in four months till March expected at Rs 300,000
crore.
- India Infrastructure Finance Company to raise Rs 10,000 crore through tax-free bonds by March 2009.
- Govt departments to be allowed to take up replacement of government vehicles within allowed budget.
- Import duty on Naptha for use in power sector as well as export duty on iron ore to be eliminated.
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New Delhi, December 7
The government today announced major tax cuts across the board for housing sector and duty cuts for companies that provide finance to real estate companies. The move is intended to prop up sagging demand in sectors such as housing, exports, textile and infrastructure.
As part of efforts to boost the housing sector, public sector banks would shortly announce a package for home loan borrowers in two categories - up to Rs 5 lakh and between Rs 5-20 lakh, the statement said, adding additional measures would be taken, as necessary, to promote an accelerated growth trajectory.
Micro and small enterprises, which are facing a credit crunch, would get collateral free lending and the government has doubled the current guarantee cover for loans to up to Rs 1 crore from the existing limit of Rs 50 lakh.
Paying special attention to exports, the government has decided to provide an interest subvention of 2 per cent up to March 2009 for pre and post-shipment export credit for labour-intensive exports like textiles, leather, marine products and SME sector.
Items of handicrafts will be included under Vishesh Krishi and Gram Udyog Yojana among other initiatives. The government has decided to completely lift import duty on Naphtha for use in the power sector while export duty on iron ore fines will be eliminated.
The package, coming on the back of fresh monetary measures announced by the RBI yesterday, includes a 4 per cent cut in ad-valorem duty across the board, to boost additional spending, besides enhanced credit for exporters along with a Rs 10,000-crore mop up for India Infrastructure Finance Company.
“In order to provide a contra-cyclical stimulus via plan expenditure, the government has decided to seek authorisation for additional plan expenditure of up to Rs 20,000 crore in the current year,” an official statement said, adding: “The total spending programme in four months ending March was expected to be Rs 3,00,000 crore.”
As a special gesture for the automobile sector, government departments would be allowed to take up replacement of vehicles within budget. Attaching special significance to infrastructure development, the government has authorised India Infrastructure Finance Co Ltd to raise Rs 10,000 crore through tax-free bonds by March 2009 and said it would be permitted to raise further resources. “In particular, these initiatives would support a public-private partnership programme of Rs 1,00,000 crore in the highways sector,” it said.
The concession is subject to a minimum rate of interest of 7 per cent per annum. Besides, it would provide an additional Rs 1,100 crore for full refund of terminal excise duty/CST and another Rs 350 crore for export incentive schemes and a backup guarantee of Rs 350 crore to Export Credit Guarantee Corporation for providing guarantee for exports to difficult markets and products.
Besides, the lock-in period for loans covered under the existing credit guarantee scheme will be reduced from 24 to 18 months to encourage banks to cover more loans under the guarantee scheme.
These announcements come a day after the RBI announced a refinance facility of Rs 7,000 crore for Small Industries Development Bank of India to facilitate the flow of credit to such industries. As part of the stimulus package, textile sector, the largest provider of employment, would get an additional Rs 1,400 crore towards the entire backlog of the technology upgradation fund.
