The Tribune, Chandigarh, India

ARTICLE

Learning from elections
Government must act decisively
by B.G. Verghese

Everybody was waiting for the UP election and the five-state polls generally. The electorate has spoken and the writing is on the wall. Some have clearly won while others have equally clearly lost. Among the proudest winners is the Election Commission led by Syed Yakub Quraishi who deserves the nation’s thanks for further tightening up the electoral process against criminalisation, money power, paid news and other ills. The need for institutional electoral and party-political reform has been underlined once again rather than increased dependency on enhanced policing against electoral thuggery.

There was no Anna impact. And there was no raging and tearing campaign by Team Anna when it was revealed by the CEC that in Punjab 201 candidates had pleaded guilty to indulging in “paid news” in response to 339 notices and 523 alleged violations. What is this if not a dastardly effort to steal an entire election, and subvert the very foundation of Indian democracy.Yet, not a squeak from it or, for that matter, anybody else. Not even the Press Council. How standards have fallen.

The so-called anti-incumbency factor had no effect in Punjab, Manipur and Uttarakhand. In U.P, Mayawati paid a price for arrogance, corruption, monumental waste and abandoning her inclusive Sarvajan plank to hole up in her Bahujan bastion. The Muslim voter was not wooed by Congress lollipops promising enhanced reservation from within the OBC quota. Muslim Indians are by and large modernising and seek equal opportunity and equal citizenship as they battle discrimination, neglect, outworn tradition and dyed-in-the-wool Islamic conservatism. Sturdy “secularists” and conservatives have joined hands to deny them, and more especially Muslim women, the liberating option of a uniform civil code that has been stoutly opposed on the most bogus legal and constitutional grounds.

In Goa, rank corruption and grasping family cabals cooked the Congress’s goose. In Manipur, the sweeping Congress victory marks a stern rebuff to insurgent ultras in the face of poll boycott call by them. The ballot box triumphed over the gun hands down. It also put paid to the idea that the Thangkuls and other Nagas necessarily seek detachment from Manipur. A non-territorial “Nagalim” is feasible at best. A third factor, starkly revealed, is that not too many are really troubled today by AFSPA, which is operative in only a small part of Manipur. It should certainly be liberally amended, but what Ibobi Singh must do now with his super-majority is to give all Manipuris development and good governance.

The biggest casualty of the polls has been the Congress both as the ruling party and leader of the UPA at the Centre. If anti-incumbency has been evident anywhere, it is against the Congress-Centre with its meek submission to coalition blackmail, non-consultation, drift, mounting incompetence, tolerance of venality, inability to communicate and manifestation of divided power-centres. UPA partners and other regional parties have for some time come together to confront the Centre for undermining “federalism”and in preparing the ground to increase their leverage and power in the run-up to and after 2014. There is also talk of a Third Front.

The Congress had hoped that the election outcome, especially in UP, would help stabilise its position at the Centre, especially if the SP needed its support to form a government in Lucknow. It hoped this new balance of forces would enable it to move forward with at least some of the reforms and programmes put on ice since 2010.The SP is in no need of external support in UP. But it might yet extend support to the UPA if it is not gratuitously derided as a “party of goons” by loud-mouthed Congressmen. The party is hopefully turning over a new leaf with authority and “mandate” in Lucknow clearly moving from Mulayam Singh Yadav to his son. Akhilesh has said he will maintain law and order firmly and fairly, avoid vindictiveness, treat all communities equally and promised good governance and development. He has to deliver, but it would be in the Congress’s and the country’s best interest to promise UP every assistance and support to turn around.

Rahul Gandhi and the Gandhi parivar have suffered a major reverse. Rahul quite rightly said that the Congress “fundamentals” were weak. Sonia Gandhi in turn quipped that there were perhaps too many leaders in UP. Both are right. Rahul, no more a “youth”, attempted to and was allowed to run the UP campaign from “Delhi” along with a cabal of Delhi Congress leaders. The UP Congress campaign was, therefore, without a local face. On the other hand, the surfeit of “leadership” was evident in the presence of Rahul, Sonia Gandhi, who was content to play second-fiddle to her son, Priyanka and Robert Vadra, who showed up to help the “family”. The message was that Rahul would rule UP from wherever he was. Union Minister Jaiswalwent as far as to say that Rahul could if he wished be sworn in as Prime Minister any time if he so desired.

It is this sort of nonsense and contrived and even irresponsible and negative “angry young man” rhetoric unleashed by Rahul and his henchmen that constituted the Congress campaign. It was a thundering failure in UP, even in Bhatta Parsaul, Amethi and Rae Bareli, and will fail if applied on a wider canvas in India. The Congress needs to rethink Rahul and Rahul needs to reinvent himself if he is to be relevant.

The BJP failed in equal measure. Uma Bharati, symbolising the Babri demolition, proved a liability as did a corrupt Kushwaha. Narendra Modi did not dare campaign in UP else the party could have lost more seats. The crime of 2002 stares him in the face.

What now? The so-called critical Presidential poll is a party-political non-issue. The President’s office is and must remain non-partisan and non-executive. The Rashtrapati should be a person of stature, integrity and wisdom who commands respect. Who nominates the candidate hardly matters. Consultations are indicated.

The important thing now is for the government to govern. The onus is on Dr Manmohan Singh to take the lead. He is now the true face of the UPA as the elections have brought about a power shift.The President’s Address and the Budget should send out a bold message of consolidation and reform. Allies must, of course, be consulted; but the onus of saying “no” and playing spoiler at a time when the country is in troubled waters should be fairly and squarely placed on them.

Should the government be stymied, no other Congress or Opposition leader or group is going to be able to form another government, forcing dissolution of the Lok Sabha and a general election this autumn. It is only by showing leadership and imagination that the Congress will survive. If the government acts decisively it will garner support or, by going down fighting, enable the Congress to live to fight again. If it drifts – it will drift to disaster and take the country down with it.

MIDDLE

All over Mysore ‘pak’
by J.S. Raghavan

Pity, in as much as idli and dosa have made inroads into North Indian kitchens, Mysore ‘pak’ had not yet met with such success and this piece is a little bit of PR work done for that mouth-watering South Indian sweet.

This crumbly wonder was concocted first by the Mysore palace innovator-cook Madappa with ‘besan’, sugar syrup and ghee on which he didn’t go easy. It appears the pleased maharaja ordered Mandappa to run a kiosk outside the palace grounds so that the commoners could enjoy the new sweet. Ever since, this yummy slab of pale yellow colour has become a must, down South during a festival to cheer the revellers having a sweet tooth, along with the globular laddu, differing sharply in shape like Laurel and hardy, yet eminently edible.

Among the yardsticks deployed by finicky men to rate a lady’s performance in the kitchen, the quality of Mysore ‘pak’ she prepares would rank next only to the piping hot, frothy, aromatic filter coffee. The algorithm would be deemed so crucial that my fastidious aunt will offer special invocation to Lord Vigneshwara, the remover of the spanner in the works, before lighting the oven to embark on Operation Mysore Pak.

A good Mysore ‘pak’ worth its salt (rather sugar) should not be granite hard but semi-hard; solid enough to remain together but soft enough to be bitten without breaking the tooth of its connoisseur underpinned into the gum with costly root canal dentistry.

Diamonds are used to cut diamonds but a novice’s Mysore ‘pak’ cannot be broken by another Mysore ‘pak’. A six-pound sledge hammer may well do the job but a cynic cautions that it might depend on the quality of the tempered steel head used in that carpentry tool.

Fierce battles have been fought in the past during weddings, the cause célèbre being the solidity of Mysore ‘pak’. In one such skirmish, angry words having escalated into rash deeds, the choleric uncle of the bridegroom with a short fuse picked up the brick-hard pieces from the nearby basin and with oodles of aggression chucked them one by one at the bride’s father, his father-in-law and the head cook (the prime accused) as if giving rigorous catch practice to slip fielders. Inasmuch as his intention was bad, his aim was poor and so the missiles missed their target and hit innocent bystanders and tube lights. Eventually, the wedding was called off by the bride’s father, who declared that their Mysore ‘pak’ may be hard but the hearts of the men of the bridegroom’s side were harder.

Husbands given to a wry sense of humour hint their disapproval by finding alternate usage for the stony Mysore ‘paks’ their wives have produced by treating them as paperweights or wedges to steady the wooden tables that shake their legs. Once, my own uncle, who is picky about the food that should propitiate his taste buds, was to miss his wife for a long period. She craftily arranged an aged lady cook short on looks who could cook only passable staple food. The proxy was given a hurried tuition on the art of making Mysore ‘pak’.

On the festival day that intervened, my uncle invited me over to join him to taste the substitute’s product. The thin lady nervously brought a few anaemic-looking pieces on a circular plate and withdrew tactfully not to be caught in the line of instant fire. With his long, strong fingers, he tried to break one into a small bit to sample as his orthodoxy deemed directly biting a taboo. In the struggle that ensued, the solid stood unbroken, providing concrete evidence of the cook’s lack of expertise. “This is not Mysore pak” he growled with disappointment. And angrily spat the punch line. “This is an eyesore ‘pak’.”

OPED — DOCUMENT

Excerpts from Part B of the Budget 2012-13 speech

The life of a Finance Minister is not easy. Various players, including policy makers, politicians, agriculturists and business houses, participate in the making of the economy. When everything goes well with the economy, we all share in the joy. However, when things go wrong, it is the Finance Minister who is called upon to administer the medicine. Economic policy, as in medical treatment, often requires us to do something, which, in the short run, may be painful, but is good for us in the long run. As Hamlet, the Prince of Denmark, had said in Shakespeare’s immortal words, "I must be cruel only to be kind."

With this reminder, let me now turn to the tax proposals.

Last year, I had set the compass for movement towards the DTC in Direct Taxes and GST in Indirect Taxes. My tax proposals for fiscal year 2012-13 mark further progress in that direction.

DIRECT TAXES

Last year I provided relief to individual taxpayers by enhancing the exemption limit as a move towards DTC rates. Although DTC will not be effective from this year, I propose to introduce the DTC rates for personal income tax. I propose to enhance the exemption limit for the general category of individual taxpayers from Rs 1,80,000 to Rs2,00,000. This measure will provide tax relief up to Rs2,000 to every taxpayer of this category. I also propose to raise the upper limit of the 20 per cent tax slab from Rs8 lakh to Rs10 lakh. The proposed personal income tax slabs are:

Income up to Rs 2 lakh	Nil
Income above Rs 2 lakh and up to Rs 5 lakh	10 per cent
Income above Rs 5 lakh and up to Rs 10 lakh	20 per cent
Income above Rs 10 lakh	30 per cent

These changes will provide substantial relief to taxpayers.

I propose to allow individual taxpayers a deduction of up to Rs 10,000 for interest from savings bank accounts. This would help a large number of small taxpayers with salary incomes up to Rs 5 lakh and interest from savings bank accounts up to Rs 10,000, as they would not be required to file income tax returns.

Within the existing limit for deduction allowed for health insurance, I propose to allow a deduction of up to Rs 5,000 for preventive health check-up.

Senior citizens who do not have any income from business are proposed to be exempted from the payment of advance tax.

In the case of corporates, I am not proposing any change in the tax rates. However, I propose certain measures to allow corporates to access lower cost funds and to promote higher level of investments in several sectors.

In order to provide low cost funds to some stressed infrastructure sectors, the rate of withholding tax on interest payments on external commercial borrowings is proposed to be reduced from 20 per cent to 5 per cent for three years. These sectors are: power; airlines; roads and bridges; ports and shipyards; affordable housing; fertilizer; and dams.

The restriction on Venture Capital Funds to invest only in nine specified sectors is proposed to be removed. It is further proposed to remove the cascading effect of Dividend Distribution Tax (DDT) in a multi-tier corporate structure. I also propose to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies to India at a lower tax rate of 15 per cent as against the tax rate of 30 per cent for one more year, i.e., up to March 31, 2013.

Investment linked deduction of capital expenditure incurred in the following businesses is proposed to be provided at the enhanced rate of 150 per cent, as against the current rate of 100 per cent: Cold chain facility; warehouses for storage of food grains; hospitals; fertilisers; and affordable housing.

The following new sectors are proposed to be added for the purposes of investment linked deduction: beekeeping and production of honey and beeswax; container freight station and inland container depots; warehousing for storage of sugar.

To promote investment in research and development, it is proposed to extend the weighted deduction of 200 per cent for R&D expenditure in an in-house facility beyond March 31, 2012, for a further period of five years.

I also propose to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services in order to facilitate growth in the agriculture sector.

For SMEs, the turnover limit for compulsory tax audit of accounts as well as for presumptive taxation is proposed to be raised from Rs 60 lakh to Rs 1 crore.

In order to augment funds for SMEs, I propose to exempt capital gains tax on sale of a residential property, if the sale consideration is used for subscription in equity of a manufacturing SME company for purchase of new plant and machinery.

Considering the shortage of skilled manpower in the manufacturing sector and to generate employment, I propose to provide weighted deduction at the rate of 150 per cent of expenditure incurred on skill development in manufacturing sector in accordance with specified guidelines.

In order to reduce transaction costs in the capital markets, I propose reduction in Securities Transaction Tax (STT) by 20 per cent (from 0.125 per cent to 0.1 per cent) on cash delivery transactions.

In order to moderate the outgo on profit linked deductions, I propose to extend the levy of Alternate Minimum Tax (AMT) on all persons other than companies, claiming profit linked deductions.

I propose to introduce a General Anti Avoidance Rule (GAAR) in order to counter aggressive tax avoidance schemes, while ensuring that it is used only in appropriate cases, by enabling a review by a GAAR panel.

I propose a series of measures to deter the generation and use of unaccounted money. To this end, I propose:

n Introduction of compulsory reporting requirement in case of assets held abroad.
n Allowing for reopening of assessment up to 16 years in relation to assets held abroad.
n Tax collection at source on purchase in cash of bullion or jewellery in excess of Rs 2 lakh.
n Tax deduction at source on transfer of immovable property (other than agricultural land) above a specified threshold.
n Tax collection at source on trading in coal, lignite and iron ore.
n Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value.
n Taxation of unexplained money, credits, investments, expenditures etc., at the highest rate of 30 per cent irrespective of the slab of income.

My proposals on Direct Taxes are estimated to result in a net revenue loss of Rs 4,500 crore for the year.

INDIRECT TAXES

Service Tax

Last year, I had initiated a public debate on the desirability of moving towards taxation of services based on a negative list. In the debate that continued for the better part of the year, we received overwhelming support for this new concept.

Thus, I propose to tax all services except those in the negative list. The list comprises 17 heads and has been carefully drawn up, keeping in view the federal nature of our polity, the best international practices and our socio-economic requirements.

The important inclusions in the negative list comprise all services provided by the government or local authorities, except a few specified services where they compete with private sector. The list also includes pre-school and school education, recognised education at higher levels and approved vocational education, renting of residential dwellings, entertainment and amusement services and a large part of public transportation, including inland waterways, urban railways and metered cabs.

Agriculture and animal husbandry enjoy a very important place in our lives. Practically all services required for cultivation, breeding, production, processing or marketing up to the stage the produce is sold in the primary markets are covered by the list.

In addition to the negative list, there is a list of exemptions which include health care, services provided by charities, religious persons, sportspersons, performing artists in folk and classical arts, individual advocates providing services to non-business entities, independent journalists, and services by way of animal care or car parking.

To take financial services to the doorsteps in rural areas, I have also exempted the services of business facilitators and correspondents to banks and insurance companies.

Construction services relating to specified infrastructure, canals, irrigation works, post-harvest infrastructure, residential dwelling, and low-cost mass housing up to an area of 60 sq m under the Scheme of Affordable Housing in Partnership are also included in the exemptions. To make the life of those who already own an apartment a little easier, I propose to raise the exemption for the monthly charges payable by a member to a housing society from Rs 3,000 to Rs 5,000.

As a measure of harmonisation between Central Excise and Service Tax, a number of alignments have been made. These include a common simplified registration form and a common return for Central Excise and Service Tax, to be named EST-1. This common return will comprise only one page, which will be a significant reduction from the 15 pages of the two returns at present.

Revision Application Authority and Settlement Commission are being introduced in Service Tax to help resolve disputes with far greater ease.

Cascading of taxes has been significantly reduced by permitting utilisation of input tax credits in a number of services such as catering, restaurants, hotel accommodation, pandal and shamiana and transport sectors.

Place of Supply Rules, that will determine the location where a service shall be deemed to be provided, are being placed in public domain for stakeholders’ comments and shall be notified when the negative list is put into effect.

Looking at our vast commitments and to maintain a healthy fiscal situation, I propose to raise the service tax rate from 10 per cent to 12 per cent, with consequential changes in rates for services that have individual tax rates.

My proposals from service tax are expected to yield additional revenue of Rs 18,660 crore. Keeping in mind that the share of services in GDP is 59 per cent, you would agree that the proposed increase is not too harsh.

Other indirect taxes

In the wake of the global financial crisis in 2008-09, the standard rate of excise duty for non-petroleum goods was reduced from 14 per cent to 8 per cent in a phased manner. This rate was raised from 8 per cent to 10 per cent in Budget 2010-11. Given the imperative for fiscal correction, I propose to now raise the standard rate from 10 per cent to 12 per cent, the merit rate from 5 per cent to 6 per cent, and the lower merit rate from 1 per cent to 2 per cent. However, the lower merit rate for coal, fertilisers, mobile phones and precious metal jewellery is being retained at 1 per cent.

Large cars currently attract excise duty depending on their engine capacity and length. In keeping with the increase proposed in the standard rate, I propose to enhance the duty from 22 per cent to 24 per cent. In the case of cars that attract a mixed rate of duty of 22 per cent + Rs15,000 per vehicle, I propose to increase the duty and switch over to an ad valorem rate of 27 per cent.

No change is proposed in the peak rate of customs duty of 10 per cent on non-agricultural goods. Barring a few individual items, the rates below the peak are also being retained.