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| Friday, March 3, 2000, Chandigarh, India  
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Government to hike wheat price
before April 1
MIDI management awards presented Exporters seek income tax sops Government keen to phase out
controls on sugar sector |
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Government to hike wheat price
before April 1 NEW DELHI, March 2 — The Government will raise the prices of wheat sold by Food Corporation of India (FCI) in the open market in line with its decision to revise upward the issue price of the grain for the Public Distribution System (PDS). “We will announce the revised prices of wheat under the open market sale scheme (OMSS) before April 1,” Public Distribution and Consumer Affairs Minister Shanta Kumar told reporters here today. He said the price revision in wheat offered by FCI under the OMSS was necessitated by the proposed increase in issue prices of wheat to match the economic cost for the above poverty line (APL) category and to meet 50 per cent of the cost from the people below the poverty line (BPL) category. The Minister, however, did not specify the extent of hike being planned by the Government. The Government had last year reduced the prices of wheat under the scheme, besides liberalising it to encourage greater offtake of the grain. Currently, FCI offers wheat under OMSS at Rs 688 per quintal in the North Zone, at Rs 705 in the South, at Rs 699 in the East zone and at Rs 697 a quintal in the west zone. PDS price of wheat issued to APL families would rise to Rs 1,178 a quintal and the open market sale prices would not be below this rate, officials said. Mr Shanta Kumar defended the Government’s decision to “remove the crutches” of subsidised foodgrains to Income Tax assesses saying the well off people have to sacrifice something for the sake of the poor. The Government had not made any substantial gains by making the public distribution system more focussed on people living below poverty level (BPL). Had there been no modifications to the Targeted PDS. The subsidy bill on account of it would have been Rs 7,600 crore, including Rs 5,240 crore for BPL and Rs 2,360 crore for above poverty line ( APL) families. After the modification, the PDS subsidy works out to Rs 7,457 crore, which is only a marginal reduction of Rs 143 crore, Mr Kumar said. “We have not effected a major saving in financial terms and we have only channelised the subsidy to the target group”, he said. Under the new scheme, the subsidy for BPL has effectively increased from Rs 5,240 crore to Rs 7,457 crore. Mr Kumar said there were around 35 crore families in the BPL and they would all benefit from the availability of increased wheat and rice in the PDS. On the rationale behind keeping the PDS system alive for APL families, including the taxpayers, Mr Shanta Kumar said the idea was to ensure them assured supply of foodgrains. He admitted that buying foodgrains from a ration shop would not be an attractive proposition but nevertheless it would ensure that supply is available. He said his Ministry
would obtain a list of taxpayers, which was estimated to
be around 7.5 crore people, and it would be on this basis
that sugar would be denied to ration card holders. He was
confident that the system would be put in place by next
month. |
Export
sector cold-shouldered THOUGH the industry appreciates the general view of the Finance Minister on the compulsions and constrains which have governed the approach and the policies in the formulation of the Budget 2000, concerns of the industry and the likely adverse effect cannot simply be wished away. The economy had shown signs of recovery after a long spell of recessionary trends in the last three years. The recovery needed to be changed into full-blown boom. Unfortunately, the dividend tax on corporates & continuation of surcharge on individuals and corporate income tax are likely to dampen the capital market sentiment which in turn will retard the industrial growth. The introduction of Cenvat at 16 per cent immediately after one year of rationalised excise duty structure and pushing most of the items of 8 to 16 per cent has undoubtedly been a great shock to many in the industry which will take time for adjustment and absorption both by the industry and the market. In the short run it will cut down on profits of the manufacturing sector engaged in these products. The manufacturers will have to achieve further economies or to pass on the burden to consumers. The Finance Minister seems to have cold-shouldered the manufactured product export sector by announcing a phased and total withdrawal of benefits under Section 80 HHC of Income Tax Act. This will impair the competitiveness of Indian exports at least in the short run. The textile sector, particularly the composite mills processing cotton fabrics, have not received due consideration in the Budget. The sterner duty levied on independent processors is not more than one-third of the duty that the composite mills have to pay on the same product and same process. This will threaten the survival of composite mills. The industry has been
offered only a little relief in the marginal increase in
the stentor duty on independent processors which will
reduce disparity from 3.5 times to 3 times in the duty
payable by the composite sector over independent
processors. |
Doubling
of dividend tax uncalled for THE Budget appears to be a balancing endeavour by the Finance Minister and in general shows a good trend of subsidy reduction, privatisation, selling of assets of sick PSUs to finance the employees’ voluntary retirement, sops for venture capital etc. The substantial allocation for social sector is a very healthy sign. Encouragement to housing activity and concession of two houses will encourage building activities. The emphasis on family welfare following the population policy is most heartening. However, there are one or two negative features which the Finance Minister could have avoided. Whereas gradual phasing out of tax holiday on export profits can be understandable as part of the subsidy abolition, the doubling of dividend tax was uncalled for. After a long and deep recessionary period, any serious setback in the stock market will send very adverse signals. Its negative psychological effect will be more harmful than any fiscal gain that the Finance Minister may get. Also in the process of simplification of excise duty regime there has to be some long term strategy. It was not long back when we were told that the excise duty would be at 3 levels i.e. 5 per cent, 10 per cent and 15 per cent. Last year the Finance Minister justified the multiples of 8 and now we have only 2 higher levels. Perhaps in an effort to raise more revenue, increase in direct taxes was unavoidable. But the Finance Ministry could have gone in more details in micro analysis of each industry that has been made an exception from the rule. I can give example of “watch industry” in which I am involved. Whereas removal of excise duty on watches up to value of Rs 500 is a welcome step, it is illogical that all the components that go to make the watch (below Rs 500) attract excise duty @ 16 per cent mostly raised from earlier level of 8 per cent. We were earlier told that in the normal situation the raw material should attract least rate of duty, next should be the components and the final product should have the highest rate of duty. In this case it is just the reverse. The result will be that grey market will get encouraged. In fact, if an in-depth study of this industry had been done, it probably would have resulted in the logical conclusion that all the watch components should have been made excise duty free. This would have really achieved the objective without much revenue loss. The picture presented by the Budget leads me to believe that the rupee will get depreciated by 5 per cent and the Government will facilitate this. The liberal treatment for Indian companies to become global MNCs is most welcome. However, the level-playing field for the Indian industry is still not there. It is all the more important to ensure that MNCs coming to India do not kill competition. We must not forget that they have much more financial staying power than any Indian industry. Every year the Budget makes the pendulum swing from one side to the other for many industries. In fact, I have known cases where in the last three consecutive years there have been totally changed policies resulting in all the long term policies being thrown haywire and ultimately the industry closing down. Can we not think of the Budget being a process of long-term planning rather than an annual event? We hope this Government stays for its full term and gives permanency to its fiscal policies. We must remember that a good government is that which governs the least. We have noticed some signs of this in the simplification of the excise duty procedure. It is realised that the demands on the country are huge and in a democracy like ours, no policy can survive unless its benefits reach the common man. This Budget has given such intentions but all good intentions weigh far less than just a few well directed actions. The Finance Minister
deserves to be complimented to reduce the deficit to 5.1
per cent for next year against the revised Budget
estimate of the current year of 5.6 per cent. We must not
loose sight of the original budget deficit which was 4
per cent. But deficit cannot be reduced just by more and
more taxes or levies. There is a level beyond which they
start becoming counter productive. Someday sooner than
later, the Finance Minister will have to squarely face
the challenge of this deficit by downsizing the
government machinery, disinvestment of PSUs etc. These
may be politically hard bullets but he will have to bite
them. |
MIDI
management awards presented JALANDHAR, March 2 — The 1999 MIDI-Management Excellence Awards were presented to 18 industrialists and professionals at a function organised by the Management & Industrial Development Institute. The chief guest of the evening was Mr Surjit Singh Minhas, former Speaker Punjab Vidhan Sabha. Amongst those present were Mr J.B. Goyal, IAS, Commissioner-Municipal Corporation, Jalandhar, Mr Ashok Jailkhani, Director-Doordarshan Kendra, Mr G.S. Gosal, PIS, Director of Boilers-Punjab, Industries Dept and Mr K.K. Sharma, Chairman-Citizens Urban Coop. Bank, Jalandhar. The award winners
included Mr Jagmohan Singh, Mr K.L. Chhabra, Mr S.S.
Sawhney, Mr R.K. Goel, Mr Maninder Pal Singh, Mr H.S.
Mann and Mr Navreet S. Hundal, MD, Punjland Overseas
Services, Chandigarh. |
Exporters
seek income tax sops NEW DELHI, March 2 — The exporters today demanded the Government to roll back the move to withdraw in phases income tax concessions, as it would affect the country foreign exchange earnings. The Budget had proposed withdrawal over five years of income tax concession given to exporters under Section 80 HHC. This year’s Budget recommended 20 per cent tax on export earning. While the exporters argued that they had to face stiff competition in the international arena and some kind of incentives like tax concessions should be given, the Union Finance Minister, Mr Yashwant Sinha, had stated that global competition is here within India too. “Income is an income and should be taxed,” Mr Sinha said defending his move to withdraw in phases income tax exemptions to exporters. “The ratio of
direct taxes to the gross domestic product (GDP) has
remained at around 2.8 per cent since the time of
Chidambaram’s dream budget,” Mr G C Srivastava,
Joint Secretary in Central Board of Direct Taxes (CBDT)
said. |
Government keen to phase out controls on sugar sector NEW DELHI, March 2 (PTI) — The Government today said it was committed to reducing controls on the sugar industry even as major sugar producing States called for early implementation of the Mahajan Committee report. Inaugurating the Sugar Tech 2000 organised by CII, Consumer Affairs and Public Distribution Minister, Shanta Kumar said the Government was of the opinion that the sugar industry did not need to be as heavily regulated as it was at the moment. However, the process of liberalisation required it to take some unpopular decisions and the Government was trying to undertake reforms such that the adverse effect was limited, he said according to a CII release. Urging immediate implementation of the Mahajan Committee report which called for phasing out of the sugar mills obligation to give 30 per cent of the production as levy sugar, Maharashtra Chief Minister Vilasrao Deshmukh in his address said any further delay would hamper the industry. Instead, he suggested that the Central Government could procure the sugar required for public distribution system, either through purchase at open market price or through a mutually agreed arrangement with his industry. The abundant opening stock and record production in the country, and the State therefore was against import and supported levy purchase by Central Government, Deshmukh said. He also asked for
further hike in import duty on sugar to provide relief to
the industry and sugar farmers. |
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