SPEECH OF SHRIMATI INDIRA GANDHI
PRIME MINISTER AND
MINISTER OF FINANCE
INTRODUCING THE BUDGET FOR THE YEAR 1970-71
Dated : February 28, 1970
I rise to present the Budget for the year 1970-71. The annual Budget is the
most important instrument through which we implement our successive Plans for
development.
2. Before I proceed to delineate the broad features of our present economic
situation and of the Budget, I should like to spell out briefly the main. ingredients
of Government’s approach.
3. It is generally accepted that social, economic and political stability is
not possible without the growth of productive forces and the augmentation of
national wealth. Also, that such growth and increase in wealth cannot be sustained
without due regard to the welfare of the weaker sections of the community.
4. Therefore, it is necessary to devise policies which reconcile the imperatives
of growth with concern for the well-being of the needy and the poor. Measures
have to be devised which, while providing welfare, also add momentum to productive
forces. Any severance of the vital link between the needs of growth and of distributive
justice will produce stagnation or instability. Both must be avoided.
5. The provision of adequate employment opportunities is not just a welfare
measure. It is a necessary part of the strategy of development in a poor country
which can ill-afford to keep any resources unutilised or under-utilised. Greater
attention to dry farming areas is not merely to avoid inequalities in the rural
areas. It is also an essential part of any programme to achieve sustained increases
in agricultural production. Encouragement to small enterprises and to new entrepreneurs
is vital to build up managerial and entrepreneurial talent which is all too
scarce today. Without some restraint on urban land values and individual ownership
of urban property, we cannot adequately develop housing and other amenities
necessary to wrest the maximum benefit from the vast productive investments
already made in our over-crowded towns and cities. The weaker sections of the
society are also the greatest source of potential strength. We cannot provide
for all the urgent needs of society with our limited resources. But a balance
has to be struck between outlays which may be immediately productive and those
which are essential to create and sustain a social and political framework which
is conducive to growth, in the long.
6. Economic conditions in the country at present permit and indeed require a
more vigorous effort to stimulate growth. During 1969-70, the first year of
the Fourth Plan, there is every likely hood of achieving an over-all rate of
growth of 5 to 51/2 per cent. The modernisation of Indian agriculture is well
on its way; and it has led to a substantial recovery in industrial production.
There has been a welcome increase in foreign exchange reserves; and the general
level of prices over the past two years has been relatively stable. At the same
time, it is necessary to set up new capacity in a number of fields in order
to sustain growing levels of consumption, exports and employment.
7. If the opportunities for growth, which are now available, are to be seized
fully, the Central and State Governments must make adequate provision for developmental
outlays in the coming year. Private investment in agriculture, small industry
and construction has been buoyant for some time now; and there is a revival
of interest in investment in organised industry. A decisive increase in Plan
outlay in the public sector will also stimulate productive investment in the
private sector.
8. Apart from providing for a significantly higher Plan outlay, the Budget for
1970-71 makes special provision for a number of schemes which combine an element
of social welfare with future growth potential.
9.
It is with this positive approach to problems of growth with stability and social
justice, that we have sought to give new emphasis and a new sense of urgency
to economic policy in recent months. The nationalisation of banks, for which
there is overwhelming support in this Honourable House and the country at large,
will, I am sure, be soon put on a stable footing. The Monopolies Act and the
decisions that the Government have already taken in the light of the recommendations
of the Industrial Licensing Policy Inquiry Committee should help to avoid the
concentration of economic power and provide encouragement to small and new entrepreneurs.
At the same time, well -established industrial companies will be able to participate
in the core sector and in industries with export orientation. It has also been
decided that Government as well as financial institutions should assume special
responsibility to promote industrial development in selected backward areas.
The Fourth Plan, as it is now being revised, will take particular care to look
after some of the urgent socio-economic requirements, such as the development
of suitable techniques for dry farming areas, greater employment opportunities
for landless labour, the adequate supply of drinking water and the improvement
of urban environment in many of our congested metropolitan areas.
10. According to Revised Estimates, the deficit at the Centre for 1969-70 is
now estimated to be Rs.290 crores as against the Budget Estimates of Rs.254
crores. The transfer to State Governments, on account of their share in Central
taxes and duties, has increased by Rs.104 crores over the Budget Estimates,
largely as a result of the Finance Commission’s award. A substantial provision
of Rs.275 crores by way of non-Plan assistance to the States had also to be
made so as to enable them to carry out their Plan programmes. As a result of
continued decline in imports, collection under import duties and disbursements
under external aid are not likely to come up to Budget Estimates. On the other
hand, collections under income-tax and non-tax revenues and receipts from market
loans will be larger.
11. Since several States continue to have gaps in resources, it would be prudent
to provide in advance for special assistance to them. Accordingly, it is proposed
to provide Rs. 175 crores in the Budget next year to cover the gaps in the resources
of certain States since otherwise it would be difficult for them to undertake
worthwhile Plan programmes. Provision for Plan assistance to the States is also
being increased from Rs.615 crores this year to Rs.635 crores next year. If
State Governments are able to raise additional resources and keep a careful
watch on non-Plan expenditure, it should be possible for them to increase their
Plan outlay from roughly Rs.950 crores this year to about Rs.115 0 crores next
year, i. e. an increase of the order of 2 0 per cent.
12. It is proposed to raise Central Plan outlays, including those on centrally
sponsored schemes from Rs.1223 crores this year to Rs.1411 crores next year,
i. e. by roughly 15 per cent. The Centre’s Plan next year provides Rs.39
crores more for agriculture and allied programmes, Rs.84 crores more for transport
and communications, Rs.31 crores more for power and Rs.28 crores more for social
services, including family planning. The Plan outlay of the Union Territories
is also being augmented from Rs.66 crores to Rs.76 crores.
13. Taking the Centre, States and the Union Territories together, the Plan outlay
will increase from Rs.2239 crores in 1969-70 to Rs.2637 crores in 1970-71 i
e. by about Rs.400 crores. At this stage, this represents a substantial effort
to accelerate the pace of development. In addition to the Plan provisions made
in the Budget, institutional finance to assist industry and agriculture will
also be mobilised on a larger scale next year. With the considerable step up
in Plan outlay and the increased provision of institutional finance, there should
be significant increase in employment opportunities in the coming year.
14. Programmes of rural development which will be given special emphasis, with
the help of Plan provisions and Institutional. Finance, are summarised in a
memorandum which is being separately circulated to Honourable Members. This
memorandum also outlines some of the new initiatives which we propose to take
in order to combine growth with a greater regard for the welfare of the most
needy sections of society. I shall, therefore, refer to them only briefly here.
(a) Special schemes for small farmers are being taken up in 45 districts and research on dry farming techniques is being accelerated.
(b) It is proposed to provide next year a sum of Rs.25 crores for selected rural works programmes particularly in areas which are prone to famine. This provision will be outside the Plan and will form part of the amount set aside for drought relief during the year.
(c) An Urban Development Corporation with an authorised share capital of Rs.10 crores is being set up. The Corporation will borrow in the market to supplement its share capital and to set up a revolving fund for financing activities, such as slum clearance, housing and urban land development.
(d) A substantial provision has been made in the Fourth Plan for the supply of drinking water. I have written to the Chief Ministers that the bulk of this provision should be used to provide drinking water to those areas which have no easy access to this basic requirement rather than to improve existing facilities in bigger towns.
To provide more comprehensive benefits to industrial workers, who are liable to pay contribution to the Employees Provident Fund at the rate of 8 per cent of their pay, it is proposed that a part of the contribution of employers and employees should be supplemented by a contribution from the Government to make up a separate fund from which family pensions as well as a lump sum payment in the event of death will be provided.
(f) The minimum pension as also family pension for Central Government employees is proposed to be increased to Rs.40 per month. This decision will apply to those receiving’ pension at present as well as to those entitled to pensions in future. For industrial employees also, the scheme, to which I referred earlier, provides for a minimum family pension of Rs.40 per month.
(g) To supplement existing schemes for school-feeding and the like, a beginning is being made with a programme to meet the nutritional requirements of the age group 0-3. A provision of Rs.4 crores is being made in the Budget for children in tribal development blocks and in city slums. From time to time, the programme will be extended with the help of specially designed schemes to raise additional resources.
15. At the existing rates of taxation, revenue receipts are likely to increase
from Rs.3587 crores this year to Rs.3867 crores next year. After allowing for
statutory transfer to the States, the revenue receipts available to the Centre
will increase from Rs.2965 crores to Rs.3167 crores. Revenue expenditure next
year is expected to increase by Rs.176 crores, of which Rs.68 crores is on Plan
schemes and Rs.108 crores on non- Plan items. Total non-Plan expenditure has
been restricted to the minimum and will increase by about 4 per cent.
16. Honourable Members will also be glad to note that the internal resources
of public sector enterprises, which are available for their expansion, will
increase from Rs.162 crores this year to Rs.2 02 crores next year. Market loans
are estimated at Rs.162 crores next year as against Rs.141 crores in the current
year. Receipts under PL 480 and other food aid, including some on revenue account,
are expected to decline from Rs.239 crores this year to Rs.161 crores in 1970-71.
Receipts under other aid should be more or less of the same order as this year.
Taking account of all other items, including the provision for the Plan and
for special assistance to the States outside the Plan, the capital account will
show a deficit of Rs.365 crores. The revenue account is expected to show a marginal
surplus of Rs.15 crores.
17. With growing prosperity in rural areas, it has become all the more important
to tap rural savings for further development. Schemes to mobilise savings for
a specific purpose are likely to have greater appeal. A model scheme of debentures
to be issued by State, sponsored institutions has, therefore, been prepared
and it is hoped that rural debentures, floated in accordance with the scheme,
will be an additional instrument for the orderly mobilisation of rural savings.
The extension of banking to rural areas will serve the same purpose. Even today,
our postal system extends to many areas which cannot be- covered by banks in
the near future. The postal system, therefore, also needs to be harnessed for
greater mobilisation of savings. At present our small savings schemes, including
Post Office Savings Bank accounts, otter facilities for savings with a number
of tax concessions. These tax concessions, however, are not of much interest
to the rural population or to low income groups, which by and large, are not
subject to taxation of income. To these groups, a higher rate of interest would
be more attractive than a lower rate with corresponding tax Concessions. Accordingly,
it is proposed to introduce a new series of time deposits, recurring deposits
and savings certificates, which will carry higher rates of interest without
any special tax concessions. The present tax-free facilities will also be continued
with slightly higher rates of interest. The rates of interest on contributions
to the General Provident Fund and the Public Provident Fund are also being enhanced
slightly. I shall have occasion later to refer to some changes in our direct
tax structure, which are designed to promote higher savings. A memorandum giving
the full details of all these changes is being separately circulated.
PART ‘B’
18. The expenditure proposals for 1970-71 which I have just presented have been
aimed at stimulating growth while providing for some measures of social welfare
for the less privileged sections of the community. The same considerations of
growth with social justice must govern the manner in which resources are raised
to meet the requirements of Government.
19. In a country like India, where Government assumes the major part of the
responsibility for the promotion of capital formation, the Government Budget
should yield a substantial revenue surplus to take care of a part of the needs
on capital account. This is all the more so at a time when net receipts under
foreign aid and concessional imports of food grains are declining in keeping
with our objective of achieving self-reliance in the shortest possible time.
At existing rates of taxation, the revenue account for 1976-71 will yield only
a nominal surplus. The ratio of taxation to national income in India is among
the lowest in the world and over the recent past it has declined from the level
of a little over 14 per cent which was already reached in 1965-66. There is
thus need to enlarge the tax base, so as to meet adequately the continuing requirements
of growth and social welfare.
20. In enlarging the tax base, our first concern must be to ensure that the
taxes which are already levied are not avoided or evaded by devices which just
manage to keep on the right side of the law. Accordingly, I have tried to plug
some major loopholes in our tax system and to withdraw some of the concessions
which have outlived their utility. Taxation is also a major instrument in all-modern
societies to achieve greater equality of incomes and wealth. It is, therefore,
proposed to make our direct tax system serve this purpose by increasing income
taxation at the higher levels as well as by substantially enhancing the present
rates of taxation on wealth and gifts. Because of the urgent need to restrain
speculative increases in urban land values and individual holdings of urban
property, the taxation of urban land and buildings is being substantially increased.
At the same time, the concessions available at present to stimulate savings
are being rationalised, so as to make them more effective. Some marginal relief
in direct taxation is also proposed for low income groups. In keeping with the
need to stimulate higher production and investment, no significant change in
corporate taxation is proposed.
21. Nearly 75 per cent of Central tax revenues are derived from indirect taxation,
i.e. from customs and excise duties. Any attempt to impart greater strength
to the fiscal system, therefore, cannot disregard the scope for increase in
indirect taxation. The proposals in this field are designed primarily to raise
additional resources in a manner which helps our progress towards self reliance
and restrains the consumption of certain commodities. Such restraint is necessary
from the economic or the social point of view. By and large, the additional
taxation of investment goods or producer goods has been avoided and the bulk
of the increase is in respect of final consumer goods. Wherever it has been
necessary to touch items of common consumption, an attempt has been made to
safeguard the consumption of the poorer sections of the community to the maximum
extent possible.
DIRECT TAXATION
22. The marginal rates of income taxation will be increased progressively m
all personal incomes above Rs.40,000 per year. With the addition of the surcharge
at 10 per cent, the maximum rate of 93.5 per cent will now be reached in the
slab over its. 2 lakhs as against 82.5 per cent, in the slab over Rs.2.21 lakhs
at present.
23. Simultaneously, the existing rates of ordinary wealth tax are being, enhanced.
At present, these rates vary from 0.5 per cent to 3 per cent. They will now
vary from 1 per cent at the lowest slab to 5 per cent at the highest slab. For
the individual, who derives his entire income from wealth, the combined effect
of income and wealth taxation, as now proposed, will impose an effective ceiling
on income after tax, when such income reaches approximately Rs.25,000 per annum.
On the other hand, there will be an inbuilt incentive in favour of earned incomes.
When income is wholly earned, for example, there will be no absolute ceiling,
as the highest marginal tax of 93.5 per cent will leave some room for increase
in income after tax at all levels.
24. Honourable Members are aware that we are at present examining practical
means of imposing a ceiling on urban property. While the legal and other aspects
of the matter are being examined, it is proposed to increase the additional
wealth tax on urban lands and buildings, so that the objective of a ceiling
on urban property is achieved, at least in part, within the framework of the
powers already available to the Centre. At present, the additional wealth tax
on urban lands and buildings is leviable, in the case of individuals and Hindu
undivided families, on the value of lands and buildings situated in cities and
towns with a population exceeding one lakh and with an initial exemption ranging
from Rs.4 to Rs.7 lakhs in different categories of cities. The tax is leviable
on the balance at rates ranging from 1 per cent to 4 per cent. The maximum rate
is reached when the value of urban lands and buildings exceeds Rs.19 to R s.22
lakhs. It is now proposed to levy a tax of 5 per cent on the value of urban
lands and buildings in excess of Rs.5 lakhs and at the rate of 7 per cent on
the value in excess of Rs.10 lakhs. No distinction will be made in regard to
the exemption on the basis of the population of the area, in which the properties
are situated. The definition. of an urban area is also being enlarged to include
areas within the limits of any municipality or other similar authority having
a population of 10, 000 or more, with powers to cover by notification areas
upto 8 kilometres outside such limits. Business premises will continue to be
excluded from the proposed levy as at present. However, guest houses maintained
by those liable to pay this tax will not be reckoned as business premises. Provisions
are also being made to prevent avoidance of the tax by transfer, from individual
or joint Hindu family ownership, to ownership by partnership firms, associations
of persons and closely-held companies. Another measure which is intended to serve a similar purpose, provides for the taxation of capital gains arising
from the sale or transfer of agricultural land situated within urban areas.
25. One of the major devices leading to tax evasion and avoidance is the creation
of private trusts. At present discretionary trusts are taxed on their income
and wealth at the rates applicable to individuals. These lower rates lead to
the proliferation of such trusts. It is proposed that in future, discretionary
trusts would be taxed at a flat rate of 65 per cent on their incomes and 1.5
per cent on their wealth or at the rates applicable in the case of individuals,
whichever is higher. Provision is, however, being made for exemption from these
flat rates for certain categories of existing discretionary trusts.
26. In the case of charitable and religious trusts, exemption from tax would
be allowed only in respect of income actually, applied to the purposes of the
trust in the same year, or within three months of the close of the year. Further,
the exemption will be forfeited altogether if the trust funds, constituting
its corpus or income, are invested in a concern in which The author or founder
of the trust or any of his relatives is substantially interested and the amount
of the investment exceeds 5 per cent of the capital of that concern. These provisions
will curb the use of the funds of charitable and religious trusts to acquire
control over industry and business. Some changes are also being made to prevent
indirect benefits being enjoyed by the authors or founders of such trusts. On
the, other hand, the present complete exemption from tax, which applies to Universities
and other educational institutions, will also be applied in the case of hospitals
and other similar institutions.
27. At present, one residential house is exempted from wealth tax, irrespective
of its value, if it is situated in a place with a population not exceeding 10,000.
For houses situated in larger towns, the monetary limit for exemption is Rs.1
lakh. The monetary limit of Rs.1 lakh will now be applied uniformly irrespective
of the location of the residential house.
28. The rates of gift tax are also being revised to bring them more in line
with the rates of estate duty and the present exemption limit of Rs.10,000 in
respect of gifts made during a year is being lowered to Rs.5,000. 29. Those
who are united in Heaven should not be put asunder by a mere tax collector.
On this view, the income and wealth of husband, wife and minor children should
be aggregated for purposes of income and wealth taxation. But in matters like
this, enforced unity sometimes leads to sharper division. It is, therefore,
proposed to examine the matter in greater detail and to bring forward the necessary
legislation subsequently, giving opportunity for discussion in this House and
outside.
30. At present, income upto Rs.1,000 from investment in the Unit Trust and upto
another Rs.1,000 of dividends an shares in Indian companies as well as the whole
of the interest earned on a number of small savings schemes and Post Office
savings accounts is exempt from income tax. There is no reason why a distinction
should be made between such investments, and investments in other financial
assets, such as securities of the Central or State Governments, approved rural
debentures, deposits in banking companies, cooperative banks and land mortgage
or land development banks and the new small savings scheme and Post Office deposit
accounts which are not to enjoy any special tax concessions. It is, therefore,
proposed that income upto Rs. 3,000 will be exempt from income tax, provided
it is derived from investments in Unit Trust or shares in Indian companies or
any of the other categories which I have just mentioned. The exemption in respect
of small savings schemes and Post Office savings accounts, where special tax
concessions are available, will continue to be available additionally.
31. Similarly, it is proposed that, apart from the present general exemption
of Rs.1 lakh in the case of individuals and Rs.2 lakhs in the case of Hindu
undivided families and a residential house upto the value of R s. 1 lakh, investments
in a wide variety of financial assets upto a total of R s. 1.5 lakhs will be
exempt from wealth tax. Even today, investments in specified small savings certificates,
Post Office savings accounts and five-year fixed deposits with the Central Government
are exempt from wealth tax and any one who takes the maximum advantage of these
provisions can claim exemption upto Rs.1.2 lakhs. The enlarged limit of Rs.1.5
lakhs will now include investments in the Unit Trust, shares of Indian companies,
securities of the Central or State Governments, approved rural debentures, the
new small savings schemes and Post Office deposit accounts and deposits in banking
companies, cooperative banks and land mortgage or development banks.
32. Or the other hand, in view of these generalised provisions to encourage
savings, there is no reason to continue the scheme of tax credit certificates
in respect of investments in new equity issues. These will accordingly be discontinued
in relation to new equity issues after 31st March 1970. Existing concessions
regarding contributions to life insurance, provident funds, etc., will continue.
33. Suggestions have been made, from time to time, that the exemption limit
for income tax should be raised as a measure of relief to lower income groups
and in the interest of better tax administration. It has been urged that by
removing a large number of small assesses from the scope of income taxation,
Income-tax Officers will have more time to devote to larger cases where the
gain to revenue would be correspondingly greater. In a poor country like ours,
the present exemption limit which varies from Rs.4,000 to Rs.4,800 in accordance
with the number of dependents, cannot be considered unreasonably low in relation
to the average level of income in the country. At the same time, there is considerable
force in the argument that tax administration would improve if income tax authorities
did not have to devote so much time to smaller cases. Faced with this dilemma,
I have decided to appeal to the higher court of family planning, and I propose
to do away with the present system where exemption is related to the number
of dependents. In future, a uniform exemption limit of Rs.5,000 will apply in
the case of all non-corporate assesses irrespective of whether they are married
or have any children. This will make for greater administrative simplicity and
give a small benefit to all income tax-payers. The relief will be naturally
greater for those who continue to seek relief from matrimony or parenthood as
well. The change in respect of the exemption limit would involve some loss of
revenue. But I have taken no debit for it as it should be more than offset by
the improvement in tax administration resulting from greater concentration on
cases involving the bigger assesses.
34. It is also proposed to provide a minimum deduction of Rs.20 per month in
lieu of the cost of travel to work to all salaried assesses. At present, deductions
ranging from Rs.5 per month to Rs.250 per month are permissible for people who
travel to work on a bicycle, motor-cycle, scooter, moped or a motor car. The
deduction of Rs.20 per month would be available to those who travel to work
on a bicycle or by public conveyance or by any other mode. At the same time,
the higher deduction of Rs.250 per month for a motor par which is applicable
to higher income groups is being reduced to Rs.200 per month, as there is no
reason why those who presumably own a more expensive car should be given a larger
deduction. On balance, the revenue loss from travel concession to the lower
income groups would be met by the corresponding gain from the reduction in the
concession to the higher income group.
35. It has been decided to leave the present structure of corporate taxation
more or less alone in the interest of maintaining a stable climate for investment
decisions. The only significant change is that all entertainment expenditure
incurred in India in business and. the professions will now be disallowed in
computing profits. Similarly, expenditure on guesthouses, other than holiday
homes for the benefit of employees on leave, will be disallowed. Those who enjoy
the hospitality of their business friends should now no longer find their sense
of gratitude diminished by the thought that a part of the hospitality is really
paid for by the Exchequer.
36. The combined effect of the increases in direct taxation in a full year would
be a gain to revenue of Rs. 36 crores. In fact, when the measures to plug loopholes
such as the revised procedure for the taxation of trusts become fully effective,
the revenue gain will be substantially larger. The additional revenue from wealth
tax will become available only in 1971-72. The additional revenue from income
tax also will be available only in part during 1970-71 by way of advance tax
and deductions at source. Thus, despite the substantial measures of additional
direct taxation, the net addition to the Centre’s resources from these
changes in 1970-71 would be RS.5 crores only. But it will rise to Rs.23 crores
in 1971-72. The States will gain to the extent of Rs.10 crores in 1970-71 and
Rs.13 crores in 1971-72.
INDIRECT TAXATION
37. Turning now to indirect taxation, it is proposed to abolish or reduce export
duties on a number of items so as to maintain their competitive position in
world markets. The duty on jute canvas, jute webbings, jute tarpaulin cloth
and manufactures thereof is being reduced from its. 500 to Rs.200 per metric
tonne. The most important change relates to tea, where the export duty is being
abolished altogether. At the same time, the excise duty on loose as well as
package teas is being raised with the provision for ad hoe rebate on exports
at rates varying with the price of exported tea. On balance, the duty burden
on the export of all teas will be reduced with a margin in favour of teas fetching
a higher value so as to encourage the export of quality teas. The export duty
reductions will mean a loss in revenue of Rs.9.75 crores.
38. In order to give impetus to import substitution, the import duty on machinery
is being raised from 271/2 per cent to 35 per cent ad valorem. This increase,
however, will not apply to the machinery which is required for the initial setting
up of projects, or for substantial expansion of existing projects, whether in
the public or the private sector. The import duty on ‘ motor vehicle parts,
pharmaceutical chemicals and non-electrical instruments, apparatus and appliances
will be increased by 10 per cent ad valorem. The duty on certain plastic material
and nichrome and other electrical resistance wires will be raised from 60 per
cent to 100 per cent ad valorem.
39. There is a proposal regarding customs duties which is intended neither to
replace imports by domestic production nor to produce revenue. In order to curb
conspicuous consumption and as a modest gesture of personal, if not political,
reconciliation, I propose to increase the duty on whisky, brandy, gin and wines.
40. Inclusive of additional duties corresponding to the changes in excise duties
to which I will soon turn, the additional revenue from, import duties will amount
to Rs.29.75 crores. Thus, the net gain in customs revenue after adjusting the
export duty loss will be Rs.20,00 crores.
41. It has often been suggested that the scope for excise taxation should be
widened to include taxation at a low rate of about 10 per cent on practically
the whole range of manufactured products. Without going that far, it is proposed
to levy a 10 per cent ad valorem excise duty on a number of new items including
office machines, metal containers, sparking plugs, stainless steel blades, slotted
angles, iron safes and safe deposit vaults. The levy on office machines will
cover items like typewriters, calculating machines, cash registers, cheque-writing
machines, computers and intercom devices. The duty on metal containers will
be confined to those intended for the packaging of goods for sale, including,
casks, drums, cans, gas cylinders and rigid containers. The additional revenue
from these new duties will amount to Rs.10. 40 crores.
42. Similarly, among chemical products, duty at the rate of 10 per cent ad valorem
will now be levied on calcium carbide, bleaching powder and sodium hydrosulphite
and the present duty of 5 per cent on soda ash and caustic soda will be raised
to 10 per cent. An excise duty of Rs.300 per metric tonne is also being levied
on synthetic rubber. These changes will bring in an additional revenue of Rs.5.30
crores.
43. A 10 per cent ad valorem duty was levied last year on prepared and preserved
foods. The scope of the duty was, however, limited by notification to preserved
and canned fruits, jams, jellies, fruit juices, squashes and certain meat products.
I propose now to remove the bias against fruits and meat by extending the scope
of the levy to include products such as vegetable juices, synthetic syrups and
sherbets, de-hydrated peas, malted foods, instant coffee, instant - tea, jelly
crystals, custard and ice-cream powders, biscuits, cocoapowder, drinking chocolate,
pasteurised butter, processed cheese, branded aerated waters, glucose and dextrose.
I hope Honourable Members will not accuse me of having preferences of my own
as. even under my proposals. aerated waters, biscuits, butter and cheese will
be taxed only when manufactured with the aid of power and there will be total
exemption from tax for baby foods and branded ‘deshi’ ghee. These
proposals will yield an additional revenue of Rs.8. 68 crores.
44. The duty on sanitary ware and glazed tiles of porcelain will be raised from
15 per cent and 10 per cent respectively to 25 per cent. The duty on room air
- conditioners will be raised from 40 per cent to 53-1/3 per cent and a similar
increase is also being made in respect of larger refrigerators with a capacity
exceeding 165 litres. The duty on parts of refrigerators, air-conditioning plants
and machinery is also being raised from 53-1/3 per cent to 66-2/3 percent. Components
and machinery required for cold storage plants, air-conditioning of hospitals
run by Government, local bodies and public trusts, as well as factory establishments
will, however, be exempted from the scope of the increase. It will be seen that
small size refrigerators will not be affected. I propose, very reluctantly,
to withdraw the exemption in favour of television sets and impose a duty of
20 per cent ad valorem. The gain to revenue from these measures will be Rs.2.24
crores.
45. In the case of aluminium, the existing specific duties are being replaced
by ad valorem duties. With a certain degree of rationalisation, this will produce
an additional revenue of Rs.4.70 crores. The duty on rigid plastic boards and
unsupported P.V. C. sheets is also being rationalised by transferring the incidence
to the end product and this will yield an additional revenue of Rs.96 lakhs.
46. It is proposed to increase the basic excise duty on polyester fibre of 2
deniers or less from Rs.21 to Rs.25 per kilogram with a corresponding increase
in special excise duty. The present nominal duty of 7. 8 paise per sq. metre
on artificial silk fabrics which include rayon, nylon, terylene, terycot and
terywool fabrics is being replaced by ad valorem duty ranging from 3 per cent
to 10 per cent. The duty will vary according to the value of the fabric and
in the case of the cheaper varieties, whose wholesale price is less than Rs.2.50
per sq. metre, there will in fact be some relief as compared to the present
position. I propose to make no change in relation to cotton fabrics with the
exception of a minor measure of rationalisation, whereby certain fabrics at
present taxed at specific rates, win be subjected to ad valorem levy. The proposals
on synthetic fibre and artificial silk fabrics will yield an additional revenue
of Rs.13. 78 crores.
47. The demand for petroleum products has been increasing very rapidly and it
is necessary to exercise some restraint in the interest of saving valuable foreign
exchange. It is also necessary to curtail the adulteration of diesel oil by
kerosene, which has assumed substantial proportions, and to discourage the use
of furnace oil as a substitute for other fuels such as coal. Accordingly, the
duty on motor spirit is proposed to be, increased by 10 paise per litre, on
superior kerosene by 2 paise per litre and on furnance oil by 2 paise per litre.
The additional excise duty on these three items will yield a revenue of Rs.39.56
crores of which Rs.21.36 crores will be in respect of motor spirit and Rs.9.2
crores in respect of kerosene. The increase in the duty on furnace oil will
not apply to such oil used in coastal shipping and for electricity generation
and there will be no change in the dity on inferior kerosene. Honourable Members
will also note that the increase in the price of superior kerosene will be only
modest, i.e., 3.5 per cent.
48. I am sorry that the smoker’s pocket has to be touched once again.
The duty on cigarettes is being enhanced with the increase ranging from 3 per
cent to 22 per cent ad valorem depending on the value slabs. The cheaper varieties
of cigarettes will go up by only one or two paise per packet of 10 cigarettes.
Assuming that the smoking community remains steadfast in its devotion, the additional
revenue from this measure will be Rs.13. 50 crores.
49. As already mentioned, the excise duty on tea is being raised in order to
release larger quantities for export particularly of quality teas. There will
be no increase in the duty on loose tea produced in zone one and only a marginal
increase of 10 paise per kilo on teas produced in zone two. For other zones,
the increase varies from 45 paise to one rupee per kilo. After allowing for
the rebate on export, there will be an additional revenue of Rs.7. 87 crores
which will be more than offset by the loss in revenue from the abolition of
the export duty on tea.
50. A uniform duty of 23 per cent ad valorem was levied last year on both levy
sugar and free market sugar. Prices of sugar in the free market have declined
substantially since then. Accordingly, it is proposed to increase the duty on
free market sugar from the present level of 23 per cent to 371/2 per cent ad
valorem. In the case of levy sugar, which accounts for 70 per cent of the total,
there would only be a marginal rounding off of the present rate from 23 per
cent to 25 per cent. In line with the step up on free sugar, though not to the
same extent, the tariff rate of duty on khandsari sugar is being increased from
121/2 per cent to 171/2 per cent. But as far as the rates under the compounded
levy system are concerned, which most of the producers elect to adopt, there
will be a reduction on the present rates which are being revised keeping in
view the fall in prices. The net additional revenue from sugar is estimated
at about Rs.28. 50 crores.
51. There are also a number of changes proposed in the excise duty structure
by way of rationalisation, simplification or clarification of the present position.
The statutory rate of duty on tin plates, for example, is being raised from
Rs.375 to Rs.400 per metric tonne, in order to remove the present anomaly of
the indigenous tin plates paying a higher cumulative duty than the additional
duty borne by imported tin plates. The excise duty on paints and varnishes manufactured
by units not employing power will be wholly exempted as also the duty on fertilizer
mixtures made out of fertilizers which have already paid duty irrespective of
whether such mixtures are produced by power or not. Some relief, is also being
accorded in the case of strawboards and millboards by revising the excise duty
exemption at certain levels of production. These measures of relief in excise
duties will involve a loss in revenue of Rs.43 lakhs. Certain enabling provisions
of the Finance Act 1969 are also being continued.
52. The total effect of all these proposals relating to excise duties will be
an additional revenue gain of about Rs.135 crores, of which Rs.100 crores will
accrue to the Centre and Rs.35 crores will be the share of the States and Union
Territories.
POSTS AND TELEGRAPHS
53. The Posts and Telegraphs Department is likely to be in deficit next year
also. Accordingly, postal, telegraph and telephone tariffs will be revised to
some extent from dates to be notified. These revisions are outlined in a memorandum
being circulated with the Budget papers. Briefly, there will be some increase
in postal tariffs in respect of parcels, registration fee, despatch of value
payable articles, money order commission, supplementary fee for telegraphic
money orders and book, pattern and sample packets. Phonograms and Greetings
telegrams win cost a little more. Charges for telephone calls beyond the first
750 ‘calls in a quarter will increase from 15 paise to 20 paise per call.
Honourable Members will note that services such as post cards and inland letter
cards, which are generally used by common people, are not being touched; in
the case of money orders also no increase is being made upto Rs.100. The proposed
changes will yield Rs.8. 22 crores in a full year and would leave for next year
a surplus of Rs.1 crore after meeting the anticipated revenue deficit. The effect
of these changes has been accounted for in reckoning the total internal resources
of public undertakings.
SUMMING UP
54. To sum up, the measures for the additional taxation proposed will yield
a total, revenue of about Rs.170 crores in 1970-71 of which Rs.125 crores will
accrue to the Centre and.Rs.45 crores to the States. In subsequent years, when
the full effects of the changes in direct taxation will be felt, the gain to
Central and State revenues would be larger even without allowing for the normal
growth factor. As a result, the budgetary gap at the Centre next year will be
of the order of Rs.225 crores as against the Revised Estimate of Rs.290 crores
for the current year. In view of the recent upward pressure on prices and the
substantial increase in money supply over the past year, some reduction in deficit
financing is clearly desirable. At the same time, a deficit of the order of
Rs.225 crores should not cause concern in view of the present favourable supply
conditions in regard to food grains. The Reserve Bank has already taken a number
of steps recently to control credit; and with continued vigilance in this regard,
the deficit in the Government Budget now proposed should pose no threat to the
general stability of prices. The Central Budget has provided adequately for
the Plans of the States not only by increasing Plan assistance and by providing
for substantial non-Plan assistance but also by raising additional resources
in a manner which would bring considerable gains to the revenues of State Governments.
I hope that against this background, the States will be able to look after their
Plan and non-Plan needs without recourse to unauthorised overdrafts from the
Reserve Bank.
55. Sir, before I conclude, I should like to say that in presenting my first
Budget to this Honourable House, I have become acutely aware of the challenges
as well as the constraints of the contemporary-epoch of development of our national
economy. ‘ At the very beginning of my speech, I endeavoured to set out
the broad framework within which this Budget is cast. That framework, I believe,
is consistent with the political, economic and social realities of our country.
Convinced as I am of its essential soundness, there is no alternative but to
tread a difficult but determined course. If the opportunities for growth which
are so much in evidence are to be seized fully, no effort must be spared in
raising resources for the purpose. To flinch from this effort at this stage
would be to impose even heavier burdens in the years to come. If we allow the
present momentum of growth to wane for the sake of some purely temporary advantage,
we will deny ourselves the cumulative benefits of a higher rate of growth for
all time to come. If the requirements of growth are urgent, so is the need for
some selective measures of social welfare. The fiscal system has also to serve
the ends of greater equality of Incomes, consumption and wealth, irrespective
of any immediate need for resources. At the same time, the needs of these sectors
of our economy which require private Initiative and Investment must also be
kept in mind in the interest of the growth of the economy as a whole. I can
only hope that the proposals I have just presented steer clear of the opposite
dangers of venturing too little or attempting too much. Thank you.