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Thursday,
February 27, 2003, Chandigarh, India  
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Rail Budget ‘market-oriented’
A look back at Budgets —I
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Grasim proposes Rs 130 for L&T cement share
Govt will protect workers
VAT getting into trouble
Grand Vitara in two months
Gold prices turn sharply weak
Water to cost more for industry
Pfizer net up 59.9 pc
LIC to foray into Lanka
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Rail Budget ‘market-oriented’ New Delhi, February 26 “The heartening feature of the railway budget is the new philosophy of going to the market,” said Dr A C Muthiah, FICCI President. The Railway Minister, Mr Nitish Kumar, has attempted to make the railway genuinely market oriented by addressing the basic problem of traffic diversion from the railway network to roads. He said that welcome features of the budget are incentives in freight, provided large volumes of traffic are committed; freight concession even for short haul traffic booked for upto 90 km; rationalisation of tariff classification from 32 to 27 and reduction in “to pay” surcharge and rationalisation of the ratio between freight rates for the highest and the lowest class. The measures, felt the FICCI President, will increase price efficiency of the railways, lead to greater volume of traffic and improve the freight earnings despite drop in rates in many commodities. Expressing similar sentiments, CII president Ashok Soota described it as a rational and balanced railway budget and said the Railway Minister had taken a number of positive and visionary steps particularly focussing on safety and rationalisation of freight structure, reclassification of categories and introduction of new trains. Phdcci and Assocham, however termed the budget proposals as a missed opportunity. Mr PK Jain, President PHDCCI said that the Railway Budget had not done much to rise above the short-term focus in its investment initiatives. Mr Jain said that said that in view of the fact that costs have been surging ahead of revenues for IR, measures to enhance productivity and control administrative expenses and other non-planned expenditure need to be urgently addressed to. Mr M. Rafeeque Ahmed, President of the Federation of Indian Export Organisations, however, said that the Budget had not paid any attention to the export sector. There was also a need to introduce more trains or additional wagons from the upcountry exporting centres to different ports of destinations in the country, he said.
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A look back at Budgets —I A
budget — a broad description of the expenditure and revenues of the Central Government during a financial year — April to next March — is a much expected annual event. In non-election years it is presented to Parliament on the last working day of February, and the whole of March is spent on discussing the provisions. Even though a budget is for the financial year beginning April, the measures become effective as soon as the Finance Minister finishes reading the speech (unless otherwise stated). April first, 2003 the financial year 2003-2004 begins in and it is the 56th financial year when a budget for a year is presented (from February 28, 1948). A flash back
Something like a budget was presented to the Parliament on November 26, 1947 (just 95 days before the next budget day February 28, 1948). While presenting politically free India’s first budget the then finance minister
R.K. Shanmukham Chetty said.....” with the division of the country and emergence of two independent governments in place of the old Central Government (for undivided India) the budget for the year 1947-48 passed by the legislature in March 47 ceased to be operative. He added it was felt that it will be in accordance with the public wish that a budget should be placed before the representatives of the people at the earliest possible moment. In about 9000 words he detailed the economic scene as obtained then. No new taxes were proposed. In his 1948-49 budget speech Mr Chetty described the budget for the seven and a half months (August 15 to March 31) as an interim budget. The term is used to describe a budget for a short term which does not contain new tax proposals. It is also called a vote on account. Mr Chetty resigned in 1948 due to differences of opinion with the Prime Minister. Mr K.C. Neogy held the finance portfolio for a short interval of 35 days and had no opportunity to present a budget. Mr John Mathai presented the budget for 1949-50 and in the budget speech for 1950-51 he said he was happy to present the first budget of the Republic of India. In that budget he announced the setting up of the first Planning Commission. But later he resigned when he felt that the Planning Commission was becoming a super cabinet. Mr C. Deshmukh succeeded him. He was a member of the first Planning Commission and the first Indian Governor of the Reserve Bank of India in pre-independent India. He presented six annual budgets for the years 1951-52 to 1956-57. He began his 1952-53 budget speech saying “I deem it a privilege to present the budget for the first Parliament elected under the Constitution. He resigned following differences of opinion on the report of the State Reorganisation Commission on the formation of big bilingual Bombay state. (Later this was bifurcated into Maharashtra and Gujarat). Mr
T.T. Krishnamachari started a tradition, so to say. After assuming office he felt that the calculations made in the 1956-57 budget had gone away. So on November 30, 1956, when the next budget day was just 90 days away he sought Parliament’s permission to levy new taxes and explained the need for it. His argument was that sometimes a year is too long a period to wait and make changes. A mid-course correction becomes necessary. He presented the annual budget for 1957-58 and later resigned. So Mr Jawahar Lal Nehru, then Prime Minister himself took charge of the finance
portfolio and presented the budget for 1958-59. In the opening para of his budget speech Mr Nehru said....” according to custom, the budget statement for the coming year has to be presented today (February 28, 1958). By an unexpected and unhappy chain of circumstances, the Finance Minister who would normally have made this statement is no longer with us. This heavy duty has fallen upon me almost at the last moment.” Mr Morarji Desai was then given the Finance
portfolio and he presented five annual budgets in his first stint - those for 1959-60 to 1962-64. Mr T.T. Krishnamachari become the Finance Minister for the second time and he presented the annual budgets for 1963-64 and 1964-65. On August 19, 1965 (less than six months after he had presented his budget) he sought permission to levy new taxes. He resigned later that year. Mr Sachindra Choudury became the Finance Minister and he presented the budget for 1966-67. Mr Morarji Desai later became Deputy Prime Minister and also Finance Minister for the second term. He presented the annual budgets for the three years 1967-68 to 1969-70. He resigned in July 1969 protesting against the Nationalisation of Banks by an Ordinance on a Saturday evening. He felt social control of banks as it existed then was better than nationalisation. Mrs Indira Gandhi presented the budget for 1970-71. So far she has been the only woman Finance Minister. Mr
Y.B. Chavan, her cabinet colleague presented the next four budgets for 1971-72 to 1974-75. Following the tradition set up by his predecessor in office 15 years earlier he came to Parliament twice — December 1971 and July 1974 to seeking permission to levy new taxes in addition to those levied in the budgets for those years. The two budgets for 1975-76 and 1976-77 were presented by Mr C. Subramaniam. He cast the tax net over the largest area. Till then a budget used to give a long list of items which were taxed and the items on which the rate of tax had been increased and sometimes the tax had been reduced. Mr Subramaniam introduced a tariff schedule called T I 68 in which all items manufactured for sale, not else specified were included. The tax on such items was one per cent. But later this was raised. The first non-Congress Ministry assumed office in 1977 and Mr H.M. Patel presented the budgets for 1977-78 and 1978-79. His successor was Choudhury Charan Singh who presented the budget for 1979-80. To be continued
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Grasim proposes Rs 130 for L&T cement share Mumbai, February 26 Grasim informed the BSE about its alternate proposal for vertical demerger of L&T’s cement business and stated that the value of Rs 130 per share was based on a combination of methods and ratio of equity value of L&T’s remaining business to that of cement was 1.25:1. Assuming that a vertical split would create two separate entities, the A V Birla group company said it had “valued the cement business at Rs 130 per share and the rest L&T’s businesses at Rs 162.50 per share and hence, the equity value of entire L&T worked out at Rs 292.50 per share”. Grasim, which holds a just over 15 per cent stake in L&T, had made an open offer for acquiring an additional 20 per cent equity at Rs 190 per share. The offer has been put on hold by SEBI pending investigations over the “control” issue. This alternate proposal was submitted by Grasim to L&T on January 27 and was circulated to the latter’s Board at a meeting held two days later. Grasim also clarified that the offer price of Rs 130 per share was based on limited published information available to it about the cement and engineering major and therefore depending on any further information, the offer price was likely to change. This proposal has been referred to ICRA for evaluation by the L&T Board.
PTI
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Govt will protect workers New Delhi, February 26 The assurance came from Labour Minister Sahib Singh Verma in the Rajya Sabha while making a statement on a calling attention notice by CPM leader Dipankar Mukherjee and others. “Protection of the interest of employees is an integral part of the disinvestment policy,” he said. Disinvestment of the PSUs has been undertaken in the changing economic framework characterised by removal of restrictions in global trade, services and capital. But suitable provisions related to employees’ interests are included in shareholders’ agreement signed at the time of disinvestment. “Whenever manpower rationalisation is found to be necessary, the government offers a voluntary retirement package to surplus workers. The compensation under this is better as compared to the retrenchment under the Industrial Disputes Act 1947,” he said. While there may have been a decline in employment in certain sectors like agriculture, mining and quarrying, electricity, gas and water supply and in community, social and personal services, buoyant growth has been recorded in others. Participating in the discussion, Mr Jeebon Roy CPM spoke about the negative impact of hiring workers on contract basis. About 2 crore workers were currently demonstrating on streets across the country to protest against the government’s policies. Mr Manoj Bhattarcharya (RSP) said the government had
bent before global financial lending institutions. Lakhs of factories, especially in the small scale sector, have been closed down. The government should also look into the problems of agricultural workers, he said. |
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VAT getting into trouble VAT is getting into many problems. While it is a tax on the value addition of a product, at the same time, a taxpayer is being highly devalued. There is no Indian state where businessmen have not protested against it. In Punjab, the main thrust of protest is against the provision for prosecution. Taxpayers and tax collectors will remain the same under VAT. Then why is there so much distrust, when VAT is supposed to remove it. World-over, 123 countries have VAT with an average rate of 14.4 per cent, which includes almost all indirect taxes. VAT accounts for 5.1 per cent of the GDP in these countries. In our case, sales tax yield is only 1.5 per cent of the GDP. If all the indirect taxes are converted into VAT then the VAT rate will be 44 per cent. This is how we are supposed to face competition in WTO regime. States have not realised the fact that their revenue under VAT will increase significantly. The total production of the manufacturing sector of the country is estimated at about Rs 22.50 lakh crore. On an average, 65 per cent (about Rs 15 lakh crore) of the goods produced move across the states. States collect about Rs 15,000 crore as CST. Based on this, goods under the CST are worth Rs 3.75 lakh crore. So of the total movement of goods across the states, Rs 11.25 lakh crore remain outside the CST. Bulk of this may pertain to stock transfers. Under VAT, stock transfers will go. States will get a huge tax revenue. Where is the loss of revenue to states under VAT? Thankfully states have agreed to do away with entry tax. VAT is in the interest of states and additional taxes like entry tax and local taxes should be merged with it to make it successful. States have agreed to a revenue neutral rate of 12.5 per cent. This is much on the higher side. To make the matter complicated states can have three rate categories, zero, four and 12.5 per cent. Liquor and petroleum products are put under the 20 per cent category. Some petroleum products are basic input to industry. With crude price going skyward the rate for fuel oils should be four per cent at the most. Punjab’s VAT draft provides for a large number of documents, each running into pages. There should be only one simple format for furnishing statement. The draft is silent on off set for the CST, which is vital for VAT. It says nothing on entry tax or other local taxes. |
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Grand Vitara in two months Chandigarh, February 26 He said, the Grand Vitara XL 7 would be the first model to be launched by the Suzuki Motor Corporation in India, after it took management of MUL in May, 2002.There were a few SUVs in India, and the utility vehicles here were not performing well. Mr Arora claimed that the SUVs were very popular in the European and American markets. In the USA, the SUVs enjoyed a market share of over 22 per cent of the total four-wheeler market.
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Gold prices turn sharply weak
Mumbai, February 26 Standard gold opened sharply weak at Rs 5700, however, fresh fag-end low-level buying, pushed the prices moderately higher to close at Rs 5710, still showing a sharp setback of Rs 50 over yesterday's close of Rs 5760. Ten-tola gold bar (.999 purity) also opened sharply weak at Rs 66,850 and improved in line with standard gold, before closing at Rs 66,950 revealing a fall of Rs 650 over the previous close of Rs 67,600. The rates: Ready silver .999 (per kilo) 7895, standard gold (ten gram) 5710 and ten-tola gold bar (.999) 66,950.
PTI
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Water to cost more for industry
New Delhi, February 26 The Rajya Sabha today returned the Water (Prevention and Control of Pollution) Cess (Amendment) Bill, 2003, with a voice vote. The Lok Sabha has already passed the Bill seeking to double the cess on water for the industrial and domestic users. Industry will be levied a cess of ten paise per kololitre instead of five paise earlier. For the domestic users, the cess will increase to three paise per kilolitre from two paise per kilolitre. For the processing the cess will go up from ten paise per kilolitre from twenty paise. Replying to a brief debate on the Bill, Environment Minister T.R. Baalu said the increase of cess was meant to augment the resources of the Central and state pollution control boards. Responding to the criticism that his ministry has no teeth, Mr Baalu said the government would also consider bringing a comprehensive Bill for checking pollution.
UNI
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Pfizer net up 59.9 pc
Mumbai, February 26 Pfizer’s total income went up by 67.76 per cent to Rs 602.50 crore in fiscal 2002 from Rs 359.14 crore in the previous fiscal. The company’s board has recommended a dividend at 75 per cent, or Rs 7.50 per share which includes a one-time special dividend of Rs 2.50 per share consequent to exceptional income received.
UNI
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LIC to foray into Lanka
Kanpur, February 26 With encouraging response from the market in Nepal and Dubai, the corporation has decided to launch a joint venture with a leading local group in Sri Lanka from April 1, LIC Chairman S.B. Mathur said. Mr Mathur said the corporation was also examining prospects of entering into business in New Zealand, Kenya, Tanzania and some other African countries soon.
UNI
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