Allocations and numbers don’t synchronise with the projections. This Government keeps on talking of long-term solutions for every problem but should we all starve and wait in the short-term?
The biggest problem with the longest Budget speech is there was no comparative on allocations to any scheme with that of the previous year. The Budget, which is called “Book of Accounts”, has no meaning without numbers. Let’s try to decode the Budget on some hits and mostly misses.
The Government proposed new tax slabs for individuals. Old slabs and tax rates were as follows — Rs 2.50 lakh at NIL, Rs 2.50-5 lakh at five per cent, Rs 5-10 lakh at 20 per cent above Rs 10 lakh at 30 per cent. But if you had income up to Rs five lakh, then the tax was zero through a rebate. The new slabs and rates proposed are as follows Rs 2.50 lakh at NIL, Rs 2.50-5 lakh at five per cent, Rs 5-7.5 lakh at 10 per cent, Rs 7.5-10 lakh at15 per cent, Rs 10-12.50 lakh at 20 per cent, Rs 12.50-15 lakh at 25 per cent, above Rs 15 lakh at 30 per cent. But in the new regime, there are no exemptions and deductions. The common man has an option of going with the old regime or switching over to the new one. Thus, every person has to calculate his income in both regimes and then choose one that works for him best. Thus, when the Government talks about simplification of income tax laws and return filing mechanisms, such a tax regime just ties us down to deeper complications.
In order to boost the manufacturing sector, new provisions were introduced in September 2019, offering a concessional corporate tax rate of 15 per cent to the newly-incorporated domestic companies in the manufacturing sector, which intend to roll out by March 31, 2023. This concessional tax rate benefit of 15 per cent has now been extended to new domestic companies engaged in the generation of electricity. But is the power infrastructure ready?
This Budget allocates Rs 22,000 crore for power, renewable energy sector, discom reforms. Gas grid is proposed to be extended to 27,000 km (which is 16,000 km now) and gas price discovery will also be reformed. The Budget also intends to promote smart metering with all the State and Union Territories to replace conventional electricity meters by pre-paid smart meters in next three years. Pre-paid meters are against the vision of the Government. Taking electricity to every household has been a major promise but now they are moving towards pre-paid meters and privatisation of electricity. In a country where many people are still below the poverty line pre-paid electricity meters will make electricity a luxury item whereas it is a basic necessity.
The FM has proposed to sell the balance Government holding in IDBI bank to private, retail and institutional investors through the stock exchange. Certain specified categories of Government securities would be opened fully for non-resident investors, apart from being available to domestic investors as well. The Government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO), ostensibly to keep it transparent. Sale of stake in LIC is a one-off event and it is important to note that on an ex-LIC basis, the fiscal deficit may be well above four per cent next year. As LIC has stakes in almost every company in India whether private or PSU, selling its stake can also be termed against “national interest.” Already there is huge stress on the economy and by selling stakes in LIC, one thing is clear. That the company that till now bailed out many PSUs will bail out the Government itself.
Any tax system requires trust between taxpayers and the administration. To improve trust between the taxation department and the assessee, the Government will amend the provisions of the Income Tax Act to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter. This is a welcome step towards enhancing investor confidence and trust.
The zero-Budget natural farming, which was mentioned in the July 2019 Budget, was explained further in this Budget. Integrated farming systems in rain-fed areas will be expanded. Multi-tier cropping, bee-keeping, solar pumps, solar energy production in non-cropping season will be added. The portal on “jaivikkheti” — online national organic products market — will also be upgraded. The PM-KUSUM scheme to provide loans to farmers for setting up stand-alone solar pumps, will be expanded. Further it is also proposed to help another 15 lakh farmers solarise their grid-connected pump sets. In addition, a scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid would be operationalised.
For the sector comprising agriculture and allied activities, irrigation and rural development, an allocation of about Rs 2.83 lakh crore has been made for the year 2020-21. The problem with such an approach is that most of it is just repackaging and rewording of existing schemes.
To connect farm with markets it is proposed that railways will introduce a Kisan Express and Ministry of Civil Aviation will launch Krishi Udaan to help farmers transport perishable goods quickly. The Kisan Rail will be set up through PPP arrangement to transport perishable goods across the country at a faster pace. Further the Railways will also build cold supply chain for milk, meat and fish by setting up train services for the purpose. However, an amount for the same has not been allocated and the Government has simply expressed its intent to move in this direction but done nothing concrete.
To achieve the twin objectives of giving impetus to the domestic industry and also to generate resource for health services, the Budget imposes a nominal health cess, by way of a duty of customs, on imports of medical equipment, keeping in view that these goods are now being made significantly in India. Further it is proposed that the proceeds from this cess shall be used for creating infrastructure for health services in the aspirational districts. Given the fact that the generic drugs are yet to take off and patient trust is hard-earned, there is no mention of how India-made equipment can be pushed in terms of quality and volumes.
To achieve higher export credit disbursement, a new scheme, NIRVIK, is being launched, which provides for higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim settlements.
The best thing about this scheme is that it proposes to digitally refund to exporters, duties and taxes levied at the Central, State and local levels, such as electricity duties and VAT on fuel used for transportation, which are not getting exempted or refunded under any other existing mechanism. Electricity Duty and VAT on Petroleum goods constitutes substantial part of costs.
This Budget is full of promises with dreams for the future. But how these dreams will be achieved has not been explained. Also, allocations and numbers don’t synchronise with the projections. This Government keeps on talking of long-term solutions for every problem but should we all starve and wait in the short-term?
(The writer is an author and GST and economics specialist)
