Key Features of Budget 2010-2011
CHALLENGES
To quickly revert to the high GDP growth path of 9 per cent and then find the
means to cross the ‘double digit growth barrier’.
To harness economic growth to consolidate the recent gains in making
development more inclusive.
To address the weaknesses in government systems, structures and institutions at
different levels of governance.
OVERVIEW OF THE ECONOMY
India among the first few countries in the world to implement a broad-based
counter-cyclic policy package to respond to the negative fallout of the global
slowdown.
The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10
pegged at 7.2 per cent. The final figure expected to be higher when the third and
fourth quarter GDP estimates for 2009-10 become available.
The growth rate in manufacturing sector in December 2009 was 18.5 per cent –
the highest in the past two decades.
A major concern during the second half of 2009-10 has been the emergence of
double digit food inflation. Government has set in motion steps, in consultation
with the State Chief Ministers, which should bring down the inflation in the next
few months and ensure that there is better management of food security in the
country.
CONSOLIDATING GROWTH
Fiscal Consolidation
With recovery taking root, there is a need to review public spending, mobilise
resources and gear them towards building the productivity of the economy.
Fiscal policy shaped with reference to the recommendations of the Thirteenth
Finance Commission, which has recommended a calibrated exit strategy from
the expansionary fiscal stance of last two years.
It would be for the first time that the Government would target an explicit
reduction in its domestic public debt-GDP ratio.
Tax reforms
On the Direct Tax Code (DTC) the wide-ranging discussions with stakeholders
have been concluded – Government will be in a position to implement the DTC
from April 1, 2011.
Centre actively engaged with the Empowered Committee of State Finance
Ministers to finalise the structure of Goods and Services Tax (GST) as well as
the modalities of its expeditious implementation. Endeavour to introduce GST
by April, 2011
People’s ownership of PSUs
Ownership has been broad based in Oil India Limited, NHPC, NTPC and Rural
Electrification Corporation while the process is on for National Mineral
Development Corporation and Satluj Jal Vidyut Nigam. This will raise about
Rs 25,000 crore during the current year.
Higher amount proposed to be raised during the year 2010-11.
Fertiliser subsidy
A Nutrient Based Subsidy policy for the fertiliser sector has been approved by the
Government and will become effective from April 1, 2010.
This will lead to an increase in agricultural productivity and better returns for the
farmers, and overtime reduce the volatility in demand for fertiliser subsidy and
contain the subsidy bill.
Financial Stability and Development Council
An apex level Financial Stability and Development Council to be set up with a
view to strengthen and institutionalise the mechanism for maintaining financial
stability.
This Council would monitor macro-prudential supervision of the economy,
including the functioning of large financial conglomerates, and address inter-
regulatory coordination issues.
Banking Licences
RBI is considering giving some additional banking licenses to private sector
players.
Non Banking Financial Companies could also be considered, if they meet the
RBI’s eligibility criteria.
Public Sector Bank Capitalisation
Rs.16,500 crore provided to ensure that the Public Sector Banks are able to attain
a minimum 8 per cent Tier-I capital by March 31, 2011.
Recapitalisation of Regional Rural Banks (RRB)
Government to provide further capital to strengthen the RRBs so that they have
adequate capital base to support increased lending to the rural economy.
Corporate Governance
Government has introduced the Companies Bill, 2009 in the Parliament to
replace the existing Companies Act, 1956, which will address issues related to
regulation in corporate sector in the context of the changing business
environment.
Exports
Extension of existing interest subvention of 2 per cent for one more year for
exports covering handicrafts, carpets, handlooms and small and medium
enterprises.
Agriculture Growth
Government will follow a four-pronged strategy, covering
(a) Agricultural production
Rs. 400 crore provided to extend the green revolution to the eastern region of the
country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal
and Orissa.
Rs. 300 crore provided to organise 60,000 “pulses and oil seed villages” in rain-
fed areas during 2010-11 and provide an integrated intervention for water
harvesting, watershed management and soil health, to enhance the productivity
of the dry land farming areas.
Rs. 200 crore provided for sustaining the gains already made in the green
revolution areas through conservation farming, which involves concurrent
attention to soil health, water conservation and preservation of biodiversity.
(b) Reduction in wastage of produce
Government to address the issue of opening up of retail trade. It will help in
bringing down the considerable difference between farm gate, wholesale and
retail prices.
Deficit in the storage capacity met through an ongoing scheme for private sector
participation – FCI to hire godowns from private parties for a guaranteed period
of
7 years.
(c) Credit support to farmers
Banks have been consistently meeting the targets set for agriculture credit flow
in the past few years. For the year 2010-11, the target has been set at
Rs.3,75,000 crore.
In view of the recent drought in some States and the severe floods in some other
parts of the country, the period for repayment of the loan amount by farmers
extended by six months from December 31, 2009 to June 30, 2010 under the
Debt Waiver and Debt Relief Scheme for Farmers.
Incentive of additional one per cent interest subvention to farmers who repay
short-term crop loans as per schedule, increased to 2% for 2010-11.
(d) Impetus to the food processing sector
In addition to the ten mega food park projects already being set up, the
Government has decided to set up five more such parks.
External Commercial Borrowings to be available for cold storage or cold room
facility, including for farm level pre-cooling, for preservation or storage of
agricultural and allied produce, marine products and meat.
Infrastructure
Rs 1,73,552 crore provided for infrastructure development which accounts for
over
46 per cent of the total plan allocation.
Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore
to Rs 19,894 crore.
Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than
last year.
Energy
Plan allocation for power sector excluding RGGVY doubled from Rs.2230 crore
in 2009-10 to Rs.5,130 crore in 2010-11.
Government proposes to introduce a competitive bidding process for allocating
coal blocks for captive mining to ensure greater transparency and increased
participation in production from these blocks.
A “Coal Regulatory Authority” to create a level playing field in the coal sector
proposed to be set up.
Plan outlay for the Ministry of New and Renewable Energy increased by 61 per
cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.
Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be
set up in Ladakh region of Jammu and Kashmir.
Environment and Climate change
National Clean Energy Fund for funding research and innovative projects in
clean energy technologies to be established.
One-time grant of Rs.200 crore to the Government of Tamil Nadu towards the
cost of installation of a zero liquid discharge system at Tirupur to sustain
knitwear industry.
Rs.200 crore provided as a Special Golden Jubilee package for Goa to preserve
the natural resources of the State, including sea beaches and forest cover.
Allocation for National Ganga River Basin Authority (NGRBA) doubled in
2010-11 to Rs.500 crore.
Schemes on bank protection works along river Bhagirathi and river Ganga-
Padma in parts of Murshidabad and Nadia district of West Bengal included in the
Centrally Sponsored Flood Management Programme.
A project at Sagar Island to be developed to provide an alternate port facility in
West Bengal.
INCLUSIVE DEVELOPMENT
The spending on social sector has been gradually increased to Rs.1,37,674 crore
in
2010-11, which is 37% of the total plan outlay in 2010-11.
Another 25 per cent of the plan allocations are devoted to the development of
rural infrastructure.
Education
Plan allocation for school education increased by 16 per cent from Rs.26,800
crore in 2009-10 to Rs.31,036 crore in 2010-11.
In addition, States will have access to Rs.3,675 crore for elementary education
under the Thirteenth Finance Commission grants for 2010-11.
Health
An Annual Health Survey to prepare the District Health Profile of all Districts
shall be conducted in 2010-11.
Plan allocation to Ministry of Health & Family Welfare increased from Rs
19,534 crore in 2009-10 to Rs 22,300 crore for 2010-11.
Financial Inclusion
Appropriate Banking facilities to be provided to habitations having population in
excess of 2000 by March, 2012.
Insurance and other services to be provided using the Business Correspondent
model.
By this arrangement, it is proposed to cover 60,000 habitations.
Augmentation of Rs.100 crore each for the Financial Inclusion Fund (FIF) and
the Financial Inclusion Technology Fund, which shall be contributed by
Government of India, RBI and NABARD.
Rural Development
Rs. 66,100 crore provided for Rural Development.
Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme
stepped up to Rs.40,100 crore in 2010-11.
An amount of Rs.48,000 crore allocated for rural infrastructure programmes
under
Bharat Nirman.
Unit cost under Indira Awas Yojana increased to Rs.45,000 in the plain areas
and to Rs.48,500 in the hilly areas. Allocation for this scheme increased to
Rs.10,000 crore.
Allocation to Backward Region Grant Fund enhanced by 26 per cent from
Rs.5,800 crore in 2009-10 to Rs 7,300 crore in 2010-11.
Additional central assistance of Rs 1,200 crore provided for drought mitigation
in the Bundelkhand region.
Urban Development and Housing
Allocation for urban development increased by more than 75 per cent from
Rs.3,060 crore to Rs.5,400 crore in 2010-11.
Allocation for Housing and Urban Poverty Alleviation raised from Rs.850 crore
to
Rs.1,000 crore in 2010-11.
Scheme of one per cent interest subvention on housing loan upto Rs.10 lakh,
where the cost of the house does not exceed Rs.20 lakh — announced in
the last Budget — extended up to March 31, 2011. Rs.700 crore provided for
this scheme for the year 2010-11.
Rs.1,270 crore allocated for Rajiv Awas Yojana as compared to Rs.150 crore last
year.
Micro, Small & Medium Enterprises
High Level Council on Micro and Small Enterprises to monitor the
implementation of the recommendations of High-Level Task Force constituted
by Prime Minister.
Allocation for this sector to be increased from Rs.1,794 crore to Rs.2,400 crore
for the year 2010-11.
The corpus for Micro-Finance Development and Equity Fund doubled to Rs.400
crore in 2010-11.
Unorganised Sector
National Social Security Fund for unorganised sector workers
National Social Security Fund for unorganised sector workers to be set up with
an initial allocation of Rs.1000 crore. This fund will support schemes for
weavers, toddy tappers, rickshaw pullers, bidi workers etc.
Rashtriya Swasthya Bima Yojana benefits extended to all such Mahatma Gandhi
NREGA beneficiaries who have worked for more than 15 days during the
preceding financial year.
A new initiative, “Swavalamban” will be available for persons who join New
Pension Scheme (NPS), with a minimum contribution of Rs.1,000 and a
maximum contribution of Rs.12,000 per annum during the financial year 2010-
11, wherein Government will contribute Rs.1,000 per year to each NPS account
opened in the year 2010-11. Allocation of Rs.100 crore made for this initiative.
Skill development
National Skill Development Corporation has approved three projects worth about
Rs 45 crore to create 10 lakh skilled manpower at the rate of one lakh per annum.
An extensive skill development programme in the textile and garment sector to
be launched by leveraging the strength of existing institutions and instruments of
the Textile Ministry to train 30 lakh persons over 5 years.
Social Welfare
Plan outlay for Women and Child Development stepped up by almost 50 per cent.
The ICDS platform being expanded for effective implementation of the Rajiv
Gandhi
Scheme for Adolescent Girls.
“Saakshar Bharat” to further improve female literacy rate launched with a target
of 7 crore non-literate adults which includes 6 crore women.
Mahila Kisan Sashaktikaran Pariyojana to meet the specific needs of women
farmers to be launched with a provision of Rs 100 crore as a sub-component of
the National Rural Livelihood Mission.
Plan outlay of the Ministry of Social Justice and Empowerment enhanced by 80
per cent to Rs.4500 crore. With this enhancement, the Ministry will be able to
revise rates of scholarship under its post-matric scholarship schemes for SCs and
OBC students.
Plan allocation for the Ministry of Minority Affairs increased by 50 per cent from
Rs.1,740 crore to Rs.2,600 crore for the year 2010-11.
STRENGTHENING TRANSPARENCY & PUBLIC ACCOUNTABILTY
Financial Sector Legislative Reforms Commission to be set up to rewrite and
clean up the financial sector laws to bring them in line with the requirements
of the sector.
Rs 1,900 crore allocated to the Unique Identification Authority of India (UIDAI)
for 2010-11. UIDAI will be able to meet its commitments of issuing the first set
of UID numbers in the coming year
A Technology Advisory Group for Unique Projects (TAGUP) to be set up to
look into various technological and systemic issues for effective tax
administration and financial governance.
Security and Justice
Allocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore
for capital expenditure.
About 2,000 youth to be recruited as constables in five Central Para Military
Forces from Jammu and Kashmir in the year 2010.
Planning Commission to prepare an integrated action plan for the thirty-three left
wing extremism affected districts. Adequate funds will be made available to
support the action plan.
Government has approved the setting up of the National Mission for Delivery of
Justice and Legal Reforms to help reduce legal backlog in courts from an
average of 15 years at present to 3 years by 2012.
BUDGET ESTIMATES 2010-11
Conscious effort made to avoid issuing bonds to oil and fertilizer companies.
Government would like to continue with this practice of extending Government
subsidy in cash, thereby bringing all subsidy related liabilities into Government’s
fiscal accounting.
PART B TAX PROPOSALS
The Centralized Processing Centre at Bengaluru is now fully functional and is
processing around 20,000 returns daily. This initiative will be taken forward by
setting up two more Centres during the year.
The Income Tax department has introduced “Sevottam”, a pilot project at Pune,
Kochi and Chandigarh through Aayakar Seva Kendras, which provide a single
window system for registration of all applications including those for redressal of
grievances as well as paper returns. The scheme will be extended to four more
cities in the year.
Automation of Central Excise & Service Tax, has already been rolled out
throughout the country this year. Similarly, a Mission Mode Project for
computerization of Commercial Taxes in States has been approved recently.
With an outlay of Rs. 1133 crore of which the Centre’s share is Rs. 800 crore,
the project will lay the foundation for the launch of GST.
The income tax department to notify SARAL-II form for individual salaried
taxpayers for the coming assessment year.
Direct Taxes
Income tax slabs for individual taxpayers to be as follows
Income upto Rs 1.6 lakh Nil
Income above Rs 1.6 lakh and upto Rs. 5 lakh 10 per cent
Income above Rs.5 lakh and upto Rs. 8 lakh 20 per cent
Income above Rs. 8 lakh 30 per cent
Deduction of an additional amount of Rs. 20,000 allowed, over and above the
existing limit of Rs.1 lakh on tax savings, for investment in long-term
infrastructure bonds as notified by the Central Government
Besides contributions to health insurance schemes which is currently allowed as
a deduction under the Income-tax Act, contributions to the Central Government
Health Scheme also allowed as a deduction under the same provision.
Current surcharge of 10 per cent on domestic companies reduced to 7.5 per cent.
Rate of Minimum Alternate Tax (MAT) increased from the current rate of 15
per cent to 18 per cent of book profits.
Indirect Taxes
Rate reduction in Central Excise duties to be partially rolled back and the
standard rate on all non-petroleum products enhanced from 8 per cent to 10
per cent ad valorem.
The specific rates of duty applicable to portland cement and cement clinker also
adjusted upwards proportionately. Similarly, the ad valorem component of
excise duty on large cars, multi-utility vehicles and sports-utility vehicles
increased by 2 percentage points to 22 per cent.
Restore
the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel
and petrol and 10 per cent on other refined products. Central Excise duty on
petrol
and diesel enhanced by Re.1 per litre each.
Some structural changes in the excise duty on cigarettes, cigars and cigarillos to
be made coupled with some increase in rates. Excise duty on all non-smoking
tobacco such as scented tobacco, snuff, chewing tobacco etc to be enhanced.
Compounded levy scheme for chewing tobacco and branded unmanufactured
tobacco based on the capacity of pouch packing machines to be introduced.
Agriculture & Related Sectors
Provide project import status with a concessional import duty of 5 per cent for
the setting up of mechanised handling systems and pallet racking systems in
‘mandis’ or warehouses for food grains and sugar as well as full exemption from
service tax for the installation and commissioning of such equipment.
Provide project import status at a concessional customs duty of 5 per cent with
full exemption from service tax to the initial setting up and expansion of
♦ Cold storage, cold room including farm pre-coolers for preservation or
storage of agriculture and related sectors produce ; and
♦ Processing units for such produce.
Provide full exemption from customs duty to refrigeration units required for the
manufacture of refrigerated vans or trucks.
Provide concessional customs duty of 5 per cent to specified agricultural
machinery not manufactured in India;
Provide central excise exemption to specified equipment for preservation,
storage and processing of agriculture and related sectors and exemption from
service tax to the storage and warehousing of their produce; and
Provide full exemption from excise duty to trailers and semi-trailers used in
agriculture.
To ease the cash flow position for small-scale manufacturers, they would be
permitted to take full credit of Central Excise duty paid on capital goods in a
single installment in the year of their receipt. Secondly, they would be permitted
to pay Central Excise duty on a quarterly, rather than monthly, basis.
Environment
To build the corpus of the National Clean Energy Fund, clean energy cess on
coal produced in India at a nominal rate of Rs.50 per tonne to be levied. This
cess will also apply on imported coal.
Provide a concessional customs duty of 5 per cent to machinery, instruments,
equipment and appliances etc. required for the initial setting up of photovoltaic
and solar thermal power generating units and also exempt them from Central
Excise duty. Ground source heat pumps used to tap geo-thermal energy to be
exempted from basic customs duty and special additional duty.
Exempt a few more specified inputs required for the manufacture of rotor blades
for wind energy generators from Central Excise duty.
Central Excise duty on LED lights reduced from 8 per cent to 4 per cent at par
with
Compact Fluorescent Lamps.
To remedy the difficulty faced by manufacturers of electric cars and vehicles in
neutralising the duty paid on their inputs and components, a nominal duty of 4
per cent on such vehicles imposed. Some critical parts or sub-assemblies of
such vehicles exempted from basic customs duty and special additional duty
subject to actual user condition. These parts would also enjoy a concessional
CVD of 4 per cent.
A concessional excise duty of 4 per cent provided to “soleckshaw”, a product
developed by CSIR to replace manually-operated rickshaws. Its key parts and
components to be exempted from customs duty.
Import of compostable polymer exempted from basic customs duty.
Infrastructure
Project import status to ‘Monorail projects for urban transport’ at a concessional
basic duty of 5 per cent granted.
To allow resale of specified machinery for road construction projects on payment
of import duty at depreciated value.
Medical Sector
Uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full
exemption from special additional duty prescribed on all medical equipments. A
concessional basic duty of 5 per cent is being prescribed on parts and accessories
for the manufacture of such equipment while they would be exempt from CVD
and special additional duty.
Full exemption currently available to medical equipment and devices such as
assistive devices, rehabilitation aids etc. retained. The concession available to
Government hospitals or hospitals set up under a statute also retained.
Specified inputs for the manufacture of orthopaedic implants exempted from
import duty.
Infotainment
To address the difficulties experienced by film industry in importing digital
masters of films for duplication or distribution loaded on electronic medium vis-
a-vis those imported on cinematographic film, owing to a differential customs
duty structure, customs duty to be charged only on the value of the carrier
medium. The same dispensation would apply to music and gaming software
imported for duplication. In all such cases the value representing the transfer of
intellectual property rights would be subjected to service tax.
Provide project import status at a concessional customs duty of 5 per cent with
full exemption from special additional duty to the initial setting up “Digital Head
End” equipment by multi-service operators.
Precious Metals
Rates on precious metals indexed as follows:
♦ On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams
♦ On silver from Rs.1,000 per kg to Rs.1,500 per kg.
Basic customs on Rhodium – a precious metal used for polishing jewellery
reduced to 2 per cent.
Basic customs duty on gold ore and concentrates reduced from 2 per cent ad
valorem to a specific duty of Rs.140 per 10 grams of gold content with full
exemption from special additional duty. Further, the excise duty on refined gold
made from such ore or concentrate reduced from 8 per cent to a specific duty
of Rs.280 per 10 grams.
Other Proposals
Full exemption from import duty available to specified inputs or raw materials
required for the manufacture of sports goods expanded to cover a few more
items.
Basic customs duty on one of key components in production of micro-wave
ovens, namely magnetrons, reduced from 10 per cent to 5 per cent.
Value limit of Rs. 1 lakh per annum on duty-free import of commercial samples
as personal baggage enhanced to Rs. 3 lakh per annum.
Outright exemption from special additional duty provided to goods imported in a
pre-packaged form for retail sale. This would also cover mobile phones, watches
and ready-made garments even when they are not imported in pre-packaged
form. The refund-based exemption is also being retained for cases not covered
by the new dispensation.
Service Tax
Rate of tax on services retained at 10 per cent to pave the way forward for GST.
Certain services, hitherto untaxed, to be brought within the purview of the
service tax levy. These to be notified separately.
Proposals relating to service tax are estimated to result in a net revenue gain of
Rs
3,000 crore for the year.
Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore
for the year. Proposals relating to Indirect Taxes estimated to result in a net
revenue gain of Rs.46,500 crore for the year. Taking into account the
concessions being given in the tax proposals and measures taken to mobilise
additional resources, the net revenue gain is estimated to be Rs. 20,500 crore for
the year.
