STATEMENT
BY SHRI Y B CHAVAN
MINISTER OF FINANCE PROPOSING
ADDITIONAL MEASURES
FOR MAXIMUM MOBILISATION OF RESOURCES FOR DEFENCE EFFORT
Dated : December 13, 1971
I rise to
take the Honourable House into confidence regarding the additional measures
we propose to adopt for ensuring the maximum mobilisation of resources for the
defence effort. But before I do so, I would like to review briefly the developments
since the presentation of the Budget in May.
2. Honourable Members will remember that the regular Budget for the current
year as it was finally passed had envisaged a substantial increase in the outlay
on the Plan and on social welfare as also a modest provision of Rs. 60 crores
for providing relief to refugees from Bangla Desh. The last provision had to
be increased by Rs.200 crores in August and another demand for Rs.100 crores
is before the Parliament.
3, In addition to this staggering burden of refugee relief which has been mitigated
only in part by assistance from the international community, we have had to
reckon with natural calamities in a number of States including the devastating
cyclone that hit the coast of Orissa; and these have necessitated much larger
assistance from the Centre to the States concerned. Defence expenditure is also
likely to exceed the provision envisaged in the Budget. We have not stinted
and will not stint in ensuring that our armed forces are well equipped to carry
out their heroic responsibility to safe-guard the integrity and honour of the
motherland.
4. Against this background, it has been our endeavour for the past several months
to keep the fiscal position under constant review. Our first endeavour has been
to ensure the utmost economy in non-Plan expenditure. Guidelines have been issued
to the Central Ministries to curtail their noncontractual non-Plan expenditure
to the extent of at least 5 per cent and we expect this to result in a sav-ing
of Rs.50 to 60 crores. We have also urged the State Governments and public sector
enterprises to attempt similar economies. In the matter of Plan expenditure
too, the Planning Commission, in consultation with the Ministries and the States,
has been currently engaged in an exercise to explore the scope of effecting
economies in Plan projects without affecting the progress of continuing schemes.
We have also held a series of meetings with the Chief Ministers with a view
to bringing about an orderly reduction in the size of the States’ overdrafts
with the Reserve Bank of India.
5. Alongside with these steps to restrain fiscal expenditure, the Government
have been endeavouring to augment resouces. The Board of Direct Taxes has been
asked to expedite the collection of income and corporation tax arrears; and
total collections under direct taxes this year may well exceed the Budget Estimates
by Rs. 70 crores. Owing to the liberalisation of import licences, I also expect
from collection from Customs to be higher by about Rs. 80 crores than what was
earlier thought of. An improvement in the realisation from small savings over
what was indicated in the Budget is also expected; and the net yield from market
loans has already been better than what I envisaged at the time of the Budget.
Apart from improved collections from existing taxes and other revenue heads,
Honourable Members are aware that I have also initiated some steps in recent
weeks to raise resources through fresh imposts. I am grateful for the most understanding
cooperation extended by the States in this matter. These measures have had a
salutary effect in curbing the overall deficit that was threatening to emerge.
But even so, during the first eight months of the current year. i.e. from end
March to end November, the Centre had already incurred a deficit of Rs. 340
crores as against the provision in the Budget, as finally passed by the Parliament,
Rs. 233 crores for the year as a whole.
6. The desperate attack launched by Pakistan has now added a further dimension
to our economic and fiscal tasks. As I have already said there is no question
of our stinting on the defence effort, Honourable Members may rest assured that
whatever extra outlay will be necessary to back up the heroic deeds of our forces
will be provided for. In addition, the suspension of economic aid on the part
of some foreign countries may call for a fresh look at our overall resource
position; whatever has to be done on this score too will be done. Honourable
Members are aware that in addition to the greatly increased capability of our
industry and agriculture, we have improved our foreign exchange reserves considerably
over recent years. As long as we remain united and determined in our purpose,
there is no need for any apprehension whatsoever that we can be deflected from
our just course by any threats or pressures, economic or otherwise.
7. All this calls for a careful husbanding of resources in the economy, and
the adoption of fiscal and other measures appropriate for promoting economies,
including economies in the use of foreign exchange. In this task, the entire
people have to cooperate with the Government. For, what the nation abstains
from utilising is what is available for the defence effort. On the other hand,
it is all the more incumbent upon us at the present juncture to ensure that
prices are kept stable and essential supplies are made regularly available particularly
to the weaker sections.
8. The Defence of India Rules now permit us to deal effectively with the pricing
and distribution of essential goods. I would however hope that on their own,
the responsible sections of the community, including industrialists and traders,
would take such measures as would make it unnecessary to have recourse to the
Defence of India Rules. While I am aware that trade union leaders and others
are doing their utmost towards strengthening the defence effort, I hope they
would also exert their influ-ence towards restraining such demands as could
lead to an added strain either on the exchequer or on prices. Similarly, companies
too, I hope, would follow a policy of restraint regarding the distribution of
dividends.
9. 1 have little doubt that, irrespective of creed or class, each member of
the community will contribute his or her mite to the defence effort. Honourable
Members are aware of the important role of the National Defence Fund. On two
occasions during the past decade, when we were similarly attacked, namely, 1962
and 1965 we had a most encouraging response from the public to this Fund. The
response on the present occasion, I am sure, would be no less. In contributing
to the national effort, we should not also overlook the needs of other agencies
such as the Red Cross or the Prime Minister’s Relief Fund on which also
much greater responsibility - will devolve at the present juncture.
10. There are in addition several other special schemes in operation for the
mobilisation of savings, including the large array of national savings certificates;
and I would urge that the people contribute generously to these schemes too.
In this connection, I wish to express my appreciation to representatives of
Central Government employees who have shown the utmost sense of responsi-bility
and patriotism in offering, as 1 will have occasion to elaborate in another
statement which I propose to make shortly, that a part of their emoluments may
be credited to their provident fund accounts or to the National Defence Fund.
I hope and trust their example will be followed by all sections of society who
will save additionally at least one day’s income in a month and contribute
it to the National Defence or to the various savings schemes.
11. We are proposing to float soon a new series of National Defence Loans to
which banks and other institutions should be in a position to contribute substantially.
It is my hope that the response to these National Defence Loans will not be
less than Rs. 100 crores.
12. But Honourable Members will appreciate that we have to be prepared for all
eventualities. We must take measures whereby a general restraint would be exercised
on the demand for imports. We have also to take particular care to restrain
the use of strategic commodities, such as steel and steel products, as well
as of non-ferrous metals such as zinc, aluminium and copper. Whatever fiscal
measures would bring about a reduced level of utilisation of imported goods
and, in general, would lower consumption of scarce commodities have to be enforced
in the present circumstance
13. Powers are already available under Section 4 of the Finance Act, 1971 to
impose a levy by way of a regulatory duty on customs to exercise restraint on
imports. I propose to avail of thin power in the present context and impose
a general levy of 2.5 per cent of the value of all imports with the exception
of foodgrains, books and a few other special categories. In addition, the same
regulatory provision is also proposed to be invoked to impose on a few specified
items a higher rate of duty of 10 per cent.
14. A corresponding provision exists in Section 7 of the Finance Act, 1971 giving
the Central Government powers to impose regulatory duties of excise to achieve
a similar purpose in relation to domestically produced goods. It is proposed
to invoke this provision in relation to a few com-modities, such as iron and
steel products, copper, zinc, aluminium and unmanufactured tobacco. The additional
duty on iron and other metals will apply only to domestic production without
any corresponding countervailing duty on imports and will thus narrow the difference
between domestic and import prices. The duties on the three non-ferrous metals
are so graded as to promote general economy in their use as well as to encourage
greater use of aluminium. The duty on unmanufactured tobacco, which was not
touched in the last Budget, will yield a significant revenue of about Rs. 9
lifts in a full year.
15. There is one further proposal in relation to the jute industry where profitability
has increased greatly as a result of buoyancy in the market for jute products
both at home and abroad. I propose to take advantage of this situation and increase
the export duty on carpet backing and hessian by Rs.400 per tonne. I also propose
to increase the excise duty on sacking by Rs. 175 per metric tonne.
16. Notifications giving effect to all the above proposals are being issued
and these will come into effect immediately. Copies of these Notifications are
being laid on the table of the House.
17. It Is also proposed to levy a surcharge of 2.5 per cent on income-tax payable
by all companies, including foreign companies. The new surcharge will be applicable
with reference to current incomes which will fall due for assessment in the
assessment year 1972-73. It will not be possible to collect the new levy through
the existing scheme of advance tax payments in the Innome-tax Act. It will,
therefore, be necessary to sponsor a Bill to achieve the object. The bill will,
inter alia, provide that an amount equal to 2.5 per cent of the advance tax
otherwise payable for the financial year 1971-72 should be paid before 15.3.1972.
Credit in respect of the surcharge thus collected will be allowed against the
income-tax liability for the assessment year 1972-73. The yield from this measure
in a full year will be of the order of Rs. 10 crores out of which Rs, 7. 5 crores
is expected to be realised this year. I am bringing forward a separate bill
to give effect to these proposals.
18. The combined revenue effect of all the measures proposed will be Rs.135
crores in a full year of which Rs.60 crores will be under Customs and Rs.65
crores under Central Excise. In the remainder of the current fiscal year, the
yield will be roughly Rs.40 crores.
19. Honourable Members, I am sure, would agree that the measures I have proposed
will strengthen the economy in meeting the present challenge. The heroism and
valour of our men in the Army, Navy and the Air Force and in other para-military
forces demand a similar dedica-tion on the part of all of us to contribute our
utmost to the defence effort. Sir, it is in that endeavour that I have claimed
the indulgence of this Honourable House to make this statement.