Narayan Datt Tiwari – 1988 Budget

Finance Minister : ND Tiwari
Budget Year :1988

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ND Tiwari

1  SPEECH OF SHRI NARAYAN DATT TIWARI MINISTER OF FINANCE  INTRODUCING THE BUDGET FOR THE YEAR 1988-89
  PART A  Sir,  I rise to present the Budget for the year 1988-89.
  2. The Economic Survey for 1987-88 was placed before the House a few  days ago and contains a detailed review of trends in the Indian economy over the past  year. Economic performance and management during the year have been dominated  by natural calamities of drought and floods. The drought this year has been one of the  worst in this century, with 21 out of 35 meteorological sub-divisions receiving deficient  or scanty rainfall during the monsoon months. In most of the Eastern states the problem  was not too little but, rather, too much rainfall, leading to devastating floods. What is  worse, this year of drought and floods followed three successive years of poor monsoon.
3. Despite the very severe strains and distress, the economy has demonstrated  remarkable resilience. It has done so for two good reasons. First, sustained development  and diversification of our economy, over the years, has created a capacity to withstand  temporary shocks. Second, Government has responded with timely interventions across  a wide front to contain the economic and social costs of the drought.
4. The buffer stock policy pursued by the Government enabled us to build  large food stocks, which stood at 23 million tonnes on 1st July, 1987. With the help of  these stocks, a massive and sustained effort was launched to ensure adequate supply  of foodgrains throughout the country, particularly in drought affected areas. Other  important Government programmes to combat the drought included massive expansion  of relief and employment generating works, strengthening of the public distribution  system, special efforts to compensate for shortages of drinking water, fodder and  power supply, action plans to grow contingency crops in the kharif season and to  boost rabi production, measures for livestock protection and large scale imports of  essential commodities such as edible oils and pulses. These supply measures were  buttressed by careful fiscal and monetary policies to make available adequate resources  for relief expenditures, without cutting back on the public investment programme.
5. Thanks to these sustained efforts the overall indicators of economic  performance have been better than in any previous year of severe drought. Thus,  despite the decline in agricultural production, GNP growth in 1987-88 is expected to  be in the range of 1 to 2 per cent, in contrast to a decline of 4.7 per cent in 1979-80.    Available data show that industrial production in April-November 1987 rose by 10.2  per cent over the corresponding period of the previous year. In contrast, in the drought  year 1979-80, there was an absolute decline of 1.7 per cent in industrial production.  The overall rate of inflation in the current financial year, as measured by the Wholesale  Price Index, stood at 9.8 per cent as on February 6, 1988 as compared with inflation  in excess of 21 per cent recorded in 1979-80. Price movements in respect of essential  commodities are being monitored closely at Central and State levels and I would like  to thank State Governments for setting up control rooms at the district level also. We  have to keep continuous vigilance on the price front at all levels.
6. The strains imposed by the drought and floods have highlighted some of  the underlying strengths as well as problem areas of our economy. In the face of  successive monsoon failures, our agriculture has demonstrated its basic strength. We  are proud of our farmers. By their hard work and unflinching determination through  the years, they produced enough to enable us to build substantial food stocks. This  helped us to withstand the impact of the current drought without acute food scarcity  and widespread economic dislocation.
7. Industrial production will show an increase of more than 8 per cent for  four successive years since 1984-85. The infrastructure has performed well. Generation  of thermal power has made up the deficiency in generation of hydel power and, overall,  there was a growth of 7.6 per cent in power generation in the first nine months of the  current year. Productivity in the Railways has shown significant improvement. Coal  production has increased by 10.2 per cent in April-December,1987. The improvement  shown by the public sector in these areas is a matter of considerable satisfaction, and  bears testimony to the successful implementation of policies initiated by this  Government. Our workers have worked hard to make this possible, and the nation is  grateful to them. Government attaches the highest importance to building a strong and  vibrant public sector.
8. Exports have recorded strong growth over the last two years. After growing  by over 15 per cent in 1986-87, exports rose by nearly 25 per cent in the first nine  months of the current year as compared to the corresponding period of the previous  year. Over the same period, the growth of imports was less than 14 per cent. The trade  deficit has been declining over the past two years.
9. However, we must not be complacent. As we look ahead, we must move  decisively to overcome some of the problems that have emerged on the economic  scene. The four successive years of poor monsoons have caused considerable hardship  in our rural areas, reduced agricultural output, and affected the momentum of growth.  We, therefore, have to give a major thrust to agriculture in the remaining years of the  Seventh Plan.
10. We have done well in agriculture. But the drought and floods have  highlighted certain areas which require our urgent attention. The Prime Minister has   directed that an Action Plan should be formulated quickly by the Planning Commission,  which would identify the areas where further measures can lead to early gains in  production. In 1987-88, an additional allocation of Rs.236 crores has been made for  completion of irrigation projects in drought affected States. In the coming year, Plan  outlays for Centre and States in respect of agriculture and irrigation are being increased  by 40 per cent. If necessary, the Government will make re-allocations within the  overall Plan outlay for 1988-89 and provide more resources for achieving agricultural  targets.
11. We have seen rapid growth in industry, reflecting the success of  Government policies in stimulating investment and production, and promoting  technological upgradation. We must ensure that this momentum is maintained. Costs  and prices need to be reduced. Indian Industry must be made more competitive. Sickness  in industry has been a major problem. We have to take further steps to combat sickness.  We must also upgrade skills, train workers and improve management. Industrial  development must make the best use of our most abundant resource, namely, the skills  of our people. Rapid growth of industry is essential for generating employment  opportunities.
12. Small, village and khadi industries have a special place in our economic  development. These industries make use of locally available resources and are  instrumental in creating job opportunities in smaller towns and rural areas where the  bulk of our people live. Speaking in this house, thirty five years ago, Pandit Jawahar  Lal Nehru had told the nation, and I quote,  “I have no doubt that we cannot raise the people’s level of existence  without the development of major industries in this country; in fact, I will  go further and say that we cannot even remain a free country without  them. But we must always remember that the development of heavy  industry does not by itself solve the problem of the millions in this country.  We have to develop the village and cottage industry in a big way, at the  same time making sure that in trying to develop industry, big and small,  we do not forget the human factor.”  This overall approach continues to guide us.  . Government has been taking several measures to increase revenue, improve  tax compliance and enforce economic laws. These have yielded dividends and growth  of revenue in the past three years has been quite satisfactory. The faster growth of  expenditure has, however, exerted substantial pressures on the fiscal situation. We  face unavoidable compulsions of higher expenditure, for example, on defence,  development, social services, relief programmes and food and fertilizer subsidies. As  a nation, we must deal earnestly with the problem of mounting expenditure.
14. As anticipated, the balance of payments situation has been under strain  because of several factors. These include higher imports of edible oils and pulses,    increase in imports of crude oil and petroleum products, increasing protectionist  tendencies abroad, and unfavourable climate for official development assistance. The  environment for developing countries has also been badly affected by upheavals in the  international economy, volatility of exchange rates, and slow growth of world trade.  In order to reduce the impact of these unfavourable developments, we took vigorous  measures to increase exports and reduce the growth of imports. These measures would  need to be further strengthened.
  15. India has followed a prudent policy in debt management and has avoided  problems of the kind faced by several other developing countries. We remain committed  to ensuring long-term viability in our balance of payments.
16. The challenges before us are many and it is only through hard work, thrift  and sacrifice that we can build a self-reliant, strong and socialist economy. As a humble  political worker, I am conscious that while we have made tremendous progress, there  is a great deal that remains to be done to improve the condition of our people,  particularly in rural areas.
17. Within the limitation imposed by our overall resource situation, I propose  to take a number of steps to benefit farmers, promote small and village industries,  provide relief to the poor, protect and create more jobs, and generate self employment  opportunities for our people. In addition to augmenting the anti-poverty programmes,  such as IRDP, NREP and RLEGP, Government has decided to initiate a number of  measures to increase the flow of agricultural credit, strengthen the institutional  framework, enhance social security to the weaker and vulnerable sections of the society,  particularly Scheduled Castes and Scheduled Tribes, and promote better housing for  the rural poor. While some of these programmes call for additional outlays, it is proposed  to reorient and redirect several of the existing programmes and institutions to serve  our social objectives better.
18. In working out the package of measures for agriculture, we have kept in  view the guidelines given by the Prime Minister when he addressed the kisans the  other day:    [In the next two-three years we must give a strong thrust to agriculture.  Special attention must be given to small and marginal farmers, landless  labourers and village artisans. It shall also be our endeavour that our  schemes for rual development benefit not only all the regions of the country  but also all the sections of the society. This will strengthen and benefit the  entire community and help us march forward.]
19. The financial condition of our farming community has been affected by  the drought. A number of measures have already been taken such as reschedulement  of loans, conversion of short term loans into term loans and lowering of rate of interest  in some cases. As an important step forward, I am happy to inform the House that  today the Reserve Bank of India is issuing instructions to bring down the cost of  agricultural credit. The rate of interest on crop loans upto Rs.7,500 is being reduced  by one and half per cent to two and half per cent. The interest rate will, henceforth, be  reduced to 10 per cent for loans upto Rs.7,500 from the prevailing levels of 11.5 per  cent and 12.5 per cent. Similarly, for crop loans above Rs.7,500 and upto Rs.15,000,  interest rate will be reduced to 11.5 per cent from 12.5 per cent to 14 per cent. This  reduction in interest rates will benefit crores of agricultural borrowers from cooperative  sector, Regional Rural Banks and commercial banks, and provide much needed relief  to them.
20. In order to increase the flow of credit at reduced cost, it has also been  decided that the target for direct finance to agriculture by public sector banks should  be raised to 17 per cent of their total outstanding advances by the end of 1988-89.  Together with added efforts by regional rural banks and cooperative banks, the target  for availability of direct credit by banks to agriculture will increase by over Rs.3,000  crores in 1988-89.
21. In order to further reduce the cost of inputs, Government is asking the  fertilizer companies, in both public and private sectors, to give a discount of 7.5 per  cent over notified prices for coming Kharif and Rabi sowings. This will reduce the  price of a bag of urea by around eight rupees and eighty paise. The companies should  be able to absorb the cost of this discount through better inventory management. I am  sure our enterprising farmers will take advantage of this discount and increase  agricultural production.
22. Timely use of pesticides and weedicides has an important role in preventing  crop damage and improving productivity on our farms. In order to lower their cost, I  will be announcing later in my speech, reduction in import duties on selected pesticides/  weedicides as well as intermediates. At the same time, selected pesticide items,  considered important for agriculture, will be allowed to be imported freely by designated  state and cooperative agencies. This will ensure that the existing manufacturers do not  indulge in monopolistic practices. This measure will help our farmers.
23. In consultation with the Reserve Bank of India, NABARD, the State Bank  of India and the Commercial banks, I am happy to announce a new strategy on rural  credit designed to serve every village of the country. The commercial banks and the  Regional Rural banks together have over 40,000 branches in the rural and semi urban  areas of the country. The number of villages exceeds five lakhs and seventy six  thousand. Under the proposed dispensation, each bank branch in the country will have  a designated service area of about 15 to 25 villages, as required, in the neighbourhood  6  of the branch. The branch will be primarily responsible for meeting the appropriate  credit needs of its service area. This country-wide arrangement, supervised by the  District Lead Bank Scheme already operational, and further supplemented by the rural  cooperatives, will go a long way to serve the credit needs of the village community.
24. To help farmers affected by drought, we have given a number of reliefs  and concessions by way of rescheduling of loans, postponement of all recoveries, and  reduction in interest rates. It has been a long standing demand of farmers and the  cooperative movement that a separate National Agricultural Credit Relief Fund should  be established to provide relief on a systematic basis. I am happy to announce that it  has now been decided to set up such a Fund. The corpus of the Fund will be provided  by the Central and State Governments on an agreed basis. The criteria for releasing  money from the Fund will be worked out by the Reserve Bank of India.
  25. Before I turn to other matters, I would like to refer to a subject which has  been close to our hearts. I have a feeling that the cooperative credit system, which  played such a pioneering role in the early years of our Independence, has not grown  as fast as it could have. Cooperatives are the best instruments for reaching our farmers;  they are also a symbol of self-reliance at the village level. I believe that we must now  devote special attention to revitalising the entire cooperative sector. I would invite the  Hon’ble Members to give this matter their personal attention and also request them to  send me suggestions regarding the role that the Reserve Bank of India, NABARD and  the nationalised banking sector, should play in promoting the growth of the cooperative  movement. I shall also be writing to State Governments, who have a major responsibility  in this area.
26. The programme of rural electrification has enabled countrywide utilisation  of ground water for irrigation with the help of electric pump sets. However, some of  the poorer farmers have often been unable to afford the one time cost of pump set  installation. A special programme to be called JALDHARA will be launched to assist  marginal farmers in drought prone areas. This scheme will provide them the benefits  of pump sets for irrigation on nominal rental / lease charges. It is proposed that during  1988-89 the benefits of this scheme will be provided to about fifty thousand farming  families.
27. To improve the quality of life of rural families below the poverty line,  including Harijans and Adivasis families, I propose a massive programme to be called  KUTIRJYOTI for extending single point light connections to households of their  families. The programme will meet the one time cost of internal wiring and service  connection charges. In 1988-89, five lakh households are proposed to be covered by  this programme. The cost of both the JALDHARA and KUTIRJYOTI will be met  through a combination of grants and loans to the State Electricity Boards by the Rural  Electrification Corporation.
28. People living in hill areas have to bear the burden of higher transport  costs in the supply of Kerosene and LPG. Today, freight subsidy is given on Kerosene  to North Eastern States and Jammu & Kashmir. It has now been decided to extend this  concession to all hill areas. Similarly, it has been decided that LPG cylinders would be  supplied to the customers in all hill areas at the same price as for the customers in the  nearest point in the plains. This will also, to a large extent, help in conserving the  forest resources used for purposes of light and fuel.
29. In his budget speech last year, the Prime Minister emphasized the high  priority of the housing sector and had announced the decision to set up a National  Housing Bank with an initial capital of Rs.100 crores. Necessary legislation has been  passed, and the Bank will become operational shortly. In order to give a special thrust  to rural housing, the Reserve Bank of India, along with some financial institutions,  will make a special additional contribution of Rs.100 crores to the National Housing  Bank. This entire additional amount will be used for promotion of rural housing in  several ways, including setting up of specialised rural housing savings and loan  institutions,if necessary.
30. In this context, it is also proposed to extend the role of the Land  Development Banks to cover the field of housing finance for farmers. These banks  exist in most districts, have strong apex bodies and deal directly with the rural  population. They can also mobilise resources for housing finance. The State  Governments will be requested to carry out necessary legislative measures to permit  Land Development Banks to undertake housing finance.
31. A new programme of housing for small and marginal farmers with monthly  income of upto Rs.700, is being launched by Housing and Urban Development  Corporation. Under this programme, HUDCO will provide assistance, upto specified  amounts, at low rate of 7 per cent interest repayable in 22 years for building or  improving a house. Assistance will also be given for improvement of old homes, for  example, change of roof from thatch to tile.
32. A new scheme, called the “Village Abadi Environmental Improvement  Scheme” will be launched by HUDCO this year. Projects involving expenditure upto  Rs.2,000 per family in villages with population not exceeding 5,000, for improving  rural abadi infrastructure like drainage, sanitation etc., will be supported. The equity  base of HUDCO will be suitably strengthened to help finance these programmes.
  33. Commercial Banks have also been providing help for rural housing, both  directly as well as through HUDCO. With their vast branch network in rural areas,  their role should be further enhanced. Hon’ble Members will be happy to know that,  it has been decided that commercial banks will increase their lending for the housing  sector to an annual level of Rs.300 crores by the end of the Seventh Plan.
34. There is great scope for using local low-cost materials in housing. Our  scientists and engineers have also developed considerable expertise in low-cost housing  8  technology. It has been decided to set up a national network of Nirman or Nirmithi  Kendras which will provide easy access to low-cost housing materials and techniques.  It is proposed to set up one Kendra in each district. In the coming year, 100 Kendras  will be set up.
35. Landless labourers, artisans and other very poor families in rural areas  face acute financial distress when their huts and belongings are destroyed by fire. I am  glad to inform the House that it is proposed to launch a new scheme to provide fire  insurance protection to them. The Government of India will bear the entire premium  cost. The scheme will be implemented by the General Insurance Coporation of India  and its four subsidiaries. The GIC will separately announce the details of the scheme.
36. I also propose to take a major new initiative for extending the system of  social security to the weaker sections of our society. The Life Insurance Corporation  of India, which has done so much to spread insurance culture throughout the length  and breadth of our country, will be setting up a separate “Social Security Fund” with  a corpus of Rs.100 crores. Certain changes are being made in the Income tax payable  by the Life Insurance Corporation of India to make this possible. The Fund will be  used for financing life insurance schemes for weaker and vulnerable sections of the  population at subsidised rates. The House will agree with me that the creation of such  a fund will provide a solid foundation for extending insurance cover to the toiling  sections of our society, for example, landless labourers, handloom workers, rickshawpullers,  drivers etc. who work on daily wages or whose employment is casual. In  respect of these group insurance schemes, 50 per cent of the premium will be adjusted  from the newly created Social Security Fund, the balance 50 per cent of the premium  being payable by the beneficiaries concerned.
37. Group insurance schemes will also be introduced for groups with regular  incomes like primary school teachers, cooperative milk producers, and workers in  shops and commercial establishments. Schemes will also be formulated for the benefit  of artisans, tailors, barbers, masons, carpenters and other similar groups.
38. While IRDP extends benefits to the families of the poor, these families  face hardship in the event of sudden death of the head of the family. To give greater  security to the family, a group insurance scheme of the LIC is proposed to be introduced  to cover around 3 to 4 million families under IRDP assistance every year with effect  from 1.4.1988. The insurance cover will be Rs.3,000, with double benefit in case of  accidental death.
39. I would now like to propose some measures specifically for the benefit of  Scheduled Castes and Scheduled Tribes. Many State-level Scheduled Castes and  Scheduled Tribes Finance/Development Corporations are doing a good job in looking  after the special requirements of the Scheduled Castes and Scheduled Tribes. I now  propose setting up a National Scheduled Castes and Scheduled Tribes Finance and  Development Corporation. This corporation will play a catalytic role in developing    schemes for employment generation and financing pilot programmes which can then  be taken up by the State level Corporations and other agencies active in this field. This  Corporation will also work with nationalised banks and NABARD in improving the  flow of financial assistance to the Scheduled Castes and Scheduled Tribes. The objective  would be to innovate, experiment and promote rather than replicate the work of the  existing agencies. I am making a provision of Rs.50 crores in the next year’s budget  for this Corporation.
40. Hon’ble Members will be happy to know that we propose to initiate a  project for one million wells under the National Rural Employment Programme and  Rural Landless Employment Guarantee Programme by raising the percentage of  allocation of funds for the exclusive benefit of Scheduled Castes and Scheduled Tribes  from 10 per cent to 20 per cent. It is fitting that in the year of Fortieth Anniversary of  Independence, we initiate this massive programme of construction of wells which will  benefit millions of small and marginal farmers belonging to Scheduled Castes and  Scheduled Tribes.
  41. I would now like to announce some measures for promotion of employment  opportunities in the decentralised sector. The handloom sector provides employment  to about 10 million weavers and others. This important sector has been affected by  high prices of cotton and other yarns. I propose to increase the subsidy on Janata cloth  from Rs.2 per sq.metre to Rs.2.75 per sq. metre. The impact of this relief will be Rs.40  crores. Later, in my speech, I shall be announcing a package of measures which will  benefit the handloom sector by reducing the cost of certain types of yarns. At present,  a standard rebate of 10 per cent is being provided for Khadi. I propose to extend this  rebate to Kambals and Kambalis.
42. It has been a long standing demand of the tiny and small industries that  there should be a separate apex bank for them. Hon’ble Members will be happy to  know that it has now been decided to establish a Small Industries Development Bank  of India. The new bank will be a subsidiary of the Industrial Development Bank of  India. The equity of the new bank will be Rs.250 crores, and it will have its own  separate Board of Directors, including representatives from the small scale sector.The  new Bank will also administer both the Small Industries Development Fund established  in May, 1986 and the National Equity Fund for providing equity support to projects in  tiny and small scale sector.
  43. New small scale units often experience problems and delays in securing  working capital finance. In order to overcome this difficulty, it has been decided that  requirements of working capital upto Rs.2.5 lakhs for new tiny and small scale units,  whose project cost does not exceed Rs.5 lakhs, will be provided through a single  window. Thus, both term loans and working capital will be made available by the  same bank or institution. The details of this scheme will be announced by Industrial  Development Bank of India shortly.
  44. A healthy capital goods sector is a pre-requisite for self-reliance. Last  year, while presenting the Budget, the Prime Minister announced a package of measures  to revitalise the machine building industries. Later in my speech, I shall be announcing  certain measures which will carry this process further for revitalising industries such  as paper, cement, and textiles. These measures will help to stimulate demand, lower  costs and improve efficiency.
45. The Capital market is an important source for mobilisation of savings for  industry and Government has taken several steps to strengthen it. Last year, the Prime  Minister announced the decision to set up a separate Board for the regulation and  development of the Stock Exchanges. Necessary legislation in this regard is under  preparation and the Board is expected to become operational soon. Measures have  also been taken to set up Mutual Funds, lay down ground rules for orderly operations  of the Stock Exchanges, improve their infrastructure, facilitate share transfers and  enforce better discipline on companies entering the market. Later in my speech, I shall  be announcing certain further measures which will help to boost investment in new  industries and generate more employment and economic activity.
46. We have one of the largest pools of scientific and technical manpower.  Yet, many of our young and new entrepreneurs find it difficult to raise equity capital  because of the risk involved. This problem can be solved by allowing Venture Capital  Companies or Funds to invest in new companies in anticipation of future capital  gains. However, such companies at present are not eligible for the concessional  treatment of capital gains available to non-corporate entities. In order to overcome  this problem, it has been decided to formulate a scheme under which approved Venture  Capital Companies/Funds will be enabled to invest in new companies and be eligible  for the concessional treatment of capital gains available to non-corporate entities.  Necessary legislative measures will be taken to bring this into effect.
47. At present, a tax concession is available for investment in the equity shares  of new industrial undertakings. Small investors generally find it difficult to take  advantage of these concessions because of absence of sufficient information about the  prospects of new companies. It has been decided that concession now available for  direct investment in equity shares of new industrial undertakings will also be available  for investment in special units of mutual funds where the resources are earmarked for  investment in new projects. This will help new companies to raise capital more easily.
48. I also propose to provide a seperate exemption upto Rs.3,000 for income  from dividends under Section 80L of the Income tax Act. This will be in addition to  the existing concessions available for certain types of incomes, including dividends  upto Rs.7,000 and a further Rs.3,000 for income from investments in Unit Trust of  India and certain other specified investments which I am including in the Finance Bill.
49. Sharp fluctuations in international exchange rates have posed problems  for exporters as well as for Indian industry. In order to provide some protection to  11  individual projects from exchange rate fluctuations, financial institutions will introduce  a new scheme whereby promoters of such projects can have their foreign currency  loans designated in rupees. The interest rate on such loans will be variable and will  include an exchange premium. The details of the scheme will be announced by the  Industrial Development Bank of India separately.
50. It has been the policy of this Government to encourage workers’  participation in management in industry. It is only through interaction and involvement  of workers in management that we can improve the overall performance, increase  productivity, and prevent sickness. Government has already announced a scheme to  facilitate such participation. I am happy to inform the House that complete exemption  from Income tax will be given in respect of all expenditure incurred by companies in  connection with introducing schemes for workers’ participation. Government has also  introduced a scheme whereby 5 per cent of the capital issues are reserved for employees.  In order to facilitate purchase of shares by workers in their own companies, banks are  being asked to provide loans liberally for this purpose. Reserve Bank of India will be  issuing necessary instructions shortly.
51. Working journalists have contributed a lot to the country by their  intellectual toil, and suggestions have been received that a Bill should be considered  by the Parliament to provide a reasonable pension scheme for them. Government will  be taking appropriate steps in this direction after consulting all concerned.
52. Government attaches considerable importance to strengthening economic  and cultural ties with Indian nationals settled abroad. A number of facilities, including  fiscal concessions, have been extended to Non-Resident Indians for facilitating  investments. In response to representations received, Government have now decided  to introduce a new scheme of Foreign Currency denominated Bonds/Deposit Certificates  for Non-Resident Indians on a non-repatriable basis. The maturity period of these  Bonds/Deposit Certificates will be 7 years and these will carry an interest rate higher  than that applicable to the repatriable foreign currency non-Resident deposits. These  Bonds/Deposits will be free from Income tax, Wealth tax and Gift tax.
53. The fiscal regime for investments and deposits by Non-Resident Indians  in our country has been made quite liberal. It is the Government’s intention to maintain  fiscal stability. No changes willl be made in the tax treatment which might adversely  affect investments already made by Non-Resident Indians.
54. The success of Non-Resident Indians in many fields of scientific, economic  and cultural endeavour has been a matter of great satisfaction to us. We cherish our  continued association with them.
55. I also propose to introduce certain measures for boosting small savings  collections. I am particularly keen to mobilise untapped rural savings. A new scheme  without tax concession, but with flexibility of encashment after two and half years of  12  deposit, is being introduced. The rate of interest will progressively increase for longer  durations. The deposit will double in value after five and half years. This instrument  will attract new investments as it can be encashed as and when funds are needed. The  instrument will be called KISAN VIKAS PATRA.
56. Last year a new savings scheme based on the net savings principle, was  announced by the Prime Minister. Under this scheme, 50 per cent of deposits upto a  maximum of Rs.20,000 are eligible for deduction under Section 80CCA of Income tax  Act. However, in the year of withdrawal, 50 per cent of the amount withdrawn is  added to the taxable income. The interest rate on deposits was 9 per cent. It has been  decided to raise the interest rate to 11 per cent. The new rate will be applicable to  existing deposits also with effect from 1st April of last year. Further, the rate of  deduction at the time of deposit will be raised from 50 per cent to 100 per cent with  corresponding increase in the amount subject to tax at the time of withdrawal. The  amount eligible for deposit is also being increased to Rs.30,000 per annum with effect  from next financial year.
57. The doubling period for Indira Vikas Patra sold from 1st March, 1988  will be reduced to five years.
58. It is also proposed to continue the sale of Rahat Patra beyond 29th February,  1988. With the continuance of Rahat Patra, sale of Capital Investment Bonds is proposed  to be discontinued from 1st April, 1988.
59. Sir, I have taken this opportunity to announce certain measures for the  welfare of the weaker and vulnerable sections of our society, for generating greater  employment opportunities, particularly in the rural areas and for strengthening our  productive base. I am sure these measures will contribute to fulfilling the aspirations  of our people.
60. Let me now turn to the Revised Estimates for 1987-88 and Budget  Estimates for 1988-89.  Revised Estimates 1987-88
61. The Revised Estimates of total expenditure in the Budget for 1987-88 are  placed at Rs.66161 crores against Rs.62942 crores in the Budget Estimates. As the  gravity of the drought became clear, the first task of the Government was to ensure  that sufficient resources were available with State Governments in order to start relief  works and take other measures for alleviating the distress caused by the drought.  Central Teams were despatched to States and decisions announced in record time in  respect of ceilings of expenditure for States affected by drought and floods. Expenditure  from the Central Budget on account of drought, floods and other natural calamities is  now estimated at nearly Rs.2,000 crores. This includes Centre’s share of margin money,  advance Plan assistance for drought, non-Plan assistance for floods and hailstorm,  supply of subsidised foodgrains in drought affected areas, subsidised supply of seeds,   provision of rigs for drinking water and assistance for Accelerated Rural Water Supply  Programme.
62. There have been certain other inevitable increases in expenditure. The  subsidy on indigenous fertilizers will go up by Rs.300 crores. Food subsidy will also  be Rs.200 crores higher. I am sure Hon’ble Members will agree with me that, under  the circumstances prevailing in the current year, the increases are fully justified. The  liberalisation of pensionary benefits of Government employees, particularly the Defence  Services personnel, is expected to add Rs.374 crores to the pension bill in the current  year. Financial relief granted to certain public sector enterprises are expected to cost  additional Rs.417 crores by way of subsidy, write off of loans etc. Interest charges are  likely to be Rs.800 crores higher than the original Budget provision. Taking into  account the other variations, the total non-Plan expenditure during the current year is  estimated to be Rs.1,971 crores higher than the original Budget provision of Rs.39,265  crores.
  63. Central assistance for State and U.T.Plans is expected to be Rs.1,127 crores  higher mainly due to larger advance Plan assistance to States affected by drought.  Budgetary support for Central Plan is estimated to be Rs.121 crores higher – this being  the net effect of increases in sectors like agriculture, rural development, fertilizers,  agricultural financial institutions, subsidy for setting up industries in backward areas,  etc. offset by savings in certain other sectors.
64. Taking the Plan and non-Plan together, there is an increase of Rs.3,219  crores. As a result of a series of measures undertaken by Government during the year,  economy consciousness has been created and expenditure contained particularly in  low priority areas.
65. Gross Tax Revenue is estimated to yield Rs. 1,028 crores more than the  Budget Estimates mainly under Income and Corporation taxes and Customs duties.  The share of States in taxes will be higher by Rs.392 crores. Non-tax Receipts will be  higher by Rs.2,201 crores. Of this, non-tax revenue receipts are expected to fetch  Rs.765 crores more and capital receipts Rs.1,436 crores more. Rs.700 crores of the  increase in capital receipts will be from market loans.
66. Taking the variations in expenditure and receipts into account, the current  year is expected to end with an overall deficit of Rs.6080 crores. Notwithstanding the  severe strain the events of the year have cast on the Budget, this is close to the original  estimate of Rs.5,688 crores.  Budget Estimates for 1988-89
67. The Hon’ble Members will agree that Budget Estimates for the year 1988-  89 are being presented in a rather difficult environment. We have to ensure that,  despite pressures on the Budget, there is no cut-back in public investments, as that  would have an adverse effect on economic activity and employment. Accordingly, in  14  framing the Budget for next year, highest priority has been given to maintaining the  tempo of Plan investment.
68. The Central Plan for 1988-89 has been fixed at Rs.28,715 crores against  the approved outlay of Rs.24,622 crores in the crurrent year, a step up of 16.6 per  cent. Even compared to the revised Central Plan outlay of Rs.25,701 crores, the next  year’s outlay represents a step up of 11.7 per cent. Central Plan for the next year will  be financed to the extent of Rs.16,000 crores from budgetary resources and Rs.12,715  crores from Internal and Extra Budgetary Resources of public enterprises. With the  proposed outlay for 1988-89, we would have achieved in four years more than 86 per  cent of the Seventh Plan outlay in real terms.
69. In addition, Central Budget for the next year provides Rs.9,714 crores for  assitance for State and UT Plans. The total Plan expenditure in the Budget for the next  year is thus, Rs.25,714 crores compared to Rs.24,925 crores in the Revised Estimates  for the current year.
70. I am glad to inform the House that the total transfers from Centre to  States in 1987-88, including their share in taxes, were Rs.24,870 crores. In 1988-89  such transfers are estimated at Rs.26,348 crores, an increase of Rs.1478 crores.
71. Several States have represented that their liquidity position has been  affected by the drought and have requested for some relaxation in the Ways and  Means limits. The Hon’ble Members will be happy to know that Reserve Bank of  India is raising from tomorrow the Ways and Means limits by 40 per cent over the  limits prevailing prior to October, 1986. These were stepped up by 30 per cent and 20  per cent for different periods of the year in October,1986.
72. As mentioned earlier, it has been decided to increase the outlays of the  Departments of Agriculture and Cooperation and Water Resources by 40 per cent  above the current year’s outlay. I also propose to provide Rs.671 crores for fertilizer  projects in 1988-89. During the current year, four new fertilizer plants, two each in  public and private sectors, are likely to go into poduction. Fertilizer production is  expected to attain a level of 7.1 million tonnes this year, an increase of nearly 40 per  cent over the output at the commencement of the Seventh Plan.
73. The major anti-poverty programmes, namely, Integrated Rural  Development Programme (IRDP), National Rural Employment Programme (NREP)  and Rural Landless Employment Guarantee Programme (RLEGP) will continue to be  the main instruments for generating employment and increasing the earning  opportunities for those below the poverty-line. Thus far, about 254 lakh families have  been assisted with a total investment of Rs.8,413 crores under IRDP. Forty per cent of  these beneficiaries belong to Scheduled Castes and Scheduled Tribes. Under NREP  and RLEGP, 7,006 lakh man-days were generated in 1986-87 which was substantially  higher than the target of 5,115 lakh man-days. The target is likely to be exceeded this  year also.
  74. These programmes have proved highly successful in generating  employment in our rural areas. Suggestions have been received for expansion of these  programmes as well as for their reorganisation. The merger of some important  programmes, like the National Rural Employment Programme, Accelerated Rural Water  Supply Programme, Rural Landless Employment Guarantee Programme and Desert  Development Programme, and various other Anti Poverty Programmes has also been  suggested so that available resources can be more effectively deployed to meet the  twin objectives of employment and creation of assets to meet village needs. There is  also need to provide flexibility at the operational level. In the light of these suggestions,  it is proposed to undertake a thorough review of the employment programmes in the  coming year to examine the possibility of having a comprehensive programme.
75. Rural water supply continues to receive high priority. The technology  mission for drinking water in villages and related water management is being pursued  vigorously. In 1988-89, I propose to provide Rs.2,200 crores for the Department of  Rural Development, inclusive of Rs.430 crores for rural water supply and sanitation.  As Hon’ble Members are aware, the outlay on water supply is in addition to the  Minimum Needs Programme outlay in the State Sector.
76. Welfare programmes for the tribal people have to be based on respect and  understanding of their culture and tradition, and appreciation of their social,  psychological and economic problems. The main instrument for the development of  tribal people and tribal areas is the Tribal sub-Plan. As the Hon’ble Members know,  the Tribal sub-Plans are financed by the State Governments, Special Central Assistance,  Centrally Sponsored Programmes and financial institutions. The Special Central  Assistance for Tribal sub-Plan for 1988-89 is Rs.185 crores. For Scheduled Castes,  Special Component Plans are being formulated with the primary objective of providing  occupational mobility and economic strength. In the current year, over 20 lakh  Scheduled Caste families are likely to be benifited by these programmes. An amount  of Rs.180 crores has been provided as Special Central Additive to Special Component  Plans for 1988-89.
77. Our human resources are the most important resource of all. The quality  of manpower developed today will be decisive in determining the pace and direction  of economic and social progress in the future. In 1986, a new Education Policy was  introduced after extensive discussion in Parliament and outside. In order to give a  good start to the new Policy, last year, while presenting the Budget, the Prime Minister  raised the allocation for education sharply to Rs.800 crores from Rs.352 crores in  1986-87. The actual expenditure is likely to be of the order of Rs.700 crores. Next  year’s Plan makes an allocation of Rs.800 crores. Together with the non-Plan provision,  the total allocation for the Department of Education in 1988-89 will be Rs.1,550  crores against the Revised Estimate of Rs.1,185 crores for 1987-88.
78. Improvement in the health status of the population is an essential  component of the human resource development. To achieve this, special emphasis is  16  being laid on establishing primary health facilities, particularly in rural areas, launching  control programmes for major communicable and non-communicable diseases,  augmenting facilities for medical and para-medical education and training and providing  family welfare, maternity and child health, immunization and related services. Under  the National Leprosy Eradication Programme, multi-drug treatment has been extended  to nearly 2.2 million cases out of the estimated 4 million cases. The Universal  Immunization Programme is being extended to 120 districts, besides 182 districts  already covered. Health Contingency Plans have been prepared for drought affected  States. I propose an outlay of Rs.228 crores for medical and public health programmes  and Rs.600 crores for family welfare programmes for 1988-89.
79. Government have initiated a number of measures to ameliorate the  conditions of working women. These include programmes for raising skills and  economic development, supportive services for working women and shelter and  rehabilitation for women in adverse circumstances. For children, a nation-wide  programme of Integrated Child Development Services has been in operation. An  important objective of these ICDS Programmes is to reduce childhood mortality,  morbidity and malnutrition. I am happy to inform the Hon’ble Members that 1,738  Integrated Child Development Services Projects have been sanctioned for the most  backward rural areas, tribal areas and urban slums in the country. During the remaining  period of the Seventh Five Year Plan, we will be covering most of the tribal blocks  with more than 30 per cent Scheduled Tribe population and also the slums in big  cities. For the next year, I propose an outlay of Rs.235 crores for the Department of  Women and Child Development.
80. Energy, Transport and Communications constitute the basic infrastructure  of the economy. A total allocation of Rs.16,588 crores is being provided for these  sectors. This outlay represents an increase of about 25 per cent over the current year’s  level, and accounts for about 58 per cent of the total Plan outlay for 1988-89.
81. Electricity generation has been increasing at an annual rate of 9 to 10 per  cent during the Seventh Plan. Though hydro-generation was adversely affected by  drought this year, thermal generation registered an improvement of 16 per cent during  the first nine months of the current year compared to the corresponding period of last  year. The plant load factor of the thermal plants has improved further and is expected  to touch 55 per cent, the highest in the last 10 years. I am providing for an outlay of  Rs.3,963 crores for the Power sector, that is, an increase of over 32 per cent over the  current year’s outlay.
82. Coal is the primary and the most abundant source of conventional energy  in our country. I am stepping up the provision for this sector by 30 per cent, to a level  of Rs.1,733 crores for 1988-89. The production of coal during the current year is  expected to reach 182 million tonnes as against the last year’s level of 166 million  tonnes.
83. As Hon’ble Members are aware, our Petroleum and Natural Gas sector  has taken great strides during this decade. The rebound in international oil prices has  underlined the urgency for finding and exploiting hydro-carbon resources. Significant  discoveries during the year in Krishna-Godavari Off-shore Region and the Bhuvanagiri  area of the Cauvery Basin constitute promising rewards to our heavy investments in  oil exploration. The year also saw the completion of the first section from Hazira to  Bijaipur of the HBJ Pipeline covering 642 kilometres. To maintain the tempo of  exploration and production of crude oil and natural gas, I propose an outlay of Rs.3,395  crores for the Petroleum sector.
84. In the field of communications I must share with the House a sense of  pride in the work of the Centre for Development of Telematics.By developing a stateof-  art electronic switching system, C-DoT has demonstrated what we can achieve  through proper organisation and marshalling of our scientific talents. I am allocating  Rs.1,873 crores for 1988-89 for the Department of Telecommunications – an increase  of 44 per cent over the outlay for the current year.
85. Government recognises the development of our scientific and technological  capabilities as a necessary pre-requisite for the economic development of the nation.  With this in view, I propose to increase the outlay of the Scientific Departments by  about 20 per cent over the current year’s level. We can take justifiable pride in the  many achievements of our scientists and technologists. While there have been many  notable developments during the year, I would like to make a special mention of one  of these. On August 26, 1987, the Prime Minister had informed the Hon’ble Members  that India was the first applicant to be allotted a mine site in the Central Indian Ocean  by the Preparatory Commission for the International Sea-bed Authority. This is a  significant step forward in development of our scientific potential. The mine site of  1,50,000 sq.kms. contains a rich deposit of polymetallic nodules.
86. Many other initiatives are envisaged in the different sectors of the economy.  However, I do not propose to take the valuable time of the House with a detailed  review of all the Plan programmes. The full details are available in the Budget  documents.
87. The allocation for Defence is Rs.13,000 crores against Rs.12,000 crores  in the current year. Our armed forces, in the face of unwarranted provocations, have  done a tremendous job of protecting our borders. Our jawans are the nation’s strength.  We shall continue to provide them the requisite support in their efforts. Food and  fertilizer subsidies are placed at Rs.5,300 crores against Rs.4,410 crores in the current  year. Interest charges next year are estimated at Rs.14,100 crores agianst Rs.11,450  crores in the current year. The allocation for export promotion and market development  is Rs.1,091 crores. The other increases relate to grants payable to States for revision  of pay scales of university and college teachers, grants and loans to foreign  Governments, strengthening of police forces and payment of Rs.100 crores to Oil   Industry Development Board. A lump sum provision of Rs.800 crores has been made for  additional D.A. instalments that may become payable to Government employees next  year. I would like to assure the Hon’ble Members that I have kept the non-Plan expenditure  to the barest minimum. Non-Plan expenditure in 1988-89 will thus be Rs.47,896 crores  against Rs.41,236 crores in the Revised Estimates for the current year.  88. Coming to receipts, Gross Tax Revenue at existing rates of taxation is  estimated at Rs.41985 crores. After payment of Rs.10682crores to States and local  bodies as their share of taxes, the net revenue to the Centre next year is estimated at  Rs.31303 crores. Receipts from market loans are placed at Rs.7,000 crores, that is, the  same level as in the current year. External assistance, net of repayments, is placed at  Rs.3,734 crores, against Rs.3,184 crores in the current year. Taking into account the  variations in other receipts and expenditure, Budget deficit for the next year at existing  rates of taxation is estimated at Rs.8120 crores.
PART B
89. I shall now turn to my revenue proposals. Every Budget has to raise some  resources for financing expenditure, and I shall not be failing in my duty to do so.  However, I do believe that it is equally, if not more, important to use fiscal policy for  achieving our wider economic and social goals while, at the same time, providing  relief where it is due. I am sure, the Hon’ble Members will find a strong link between  the proposals that I am about to make, and some of the people-oriented initiatives that  I have referred to in Part A of my speech.
90. This House is aware of the fact that in view of the exigencies of the  situation, in order to meet the formidable after-effects of the drought of 1987-88,  Government took a decision to levy a surcharge of 5% on income-tax for persons  with taxable income above Rs.50,000, a surcharge of 10% on wealth tax for the  assessment year 1988-89 and a 5% surcharge by way of auxiliary duty of customs on  imported goods excluding essential commodities like fertilizers, power equipment,  life-saving drugs and medical equipment, etc. This timely action helped the country  and the Central and State Governments to meet the requirements of a very difficult  situation created by the drought. This surcharge did not touch essential commodities.
  91. In view of the continuing pernicious effects of the drought and the natural  calamities, I propose to continue with these surcharges for one more year. In addition,  it is now proposed to levy a surcharge by way of Special Excise Duty at the rate of  1/20th of the Basic Duty of Excise. The incidence of this surcharge will generally be  small; for example, it will be only one quarter of one percent i.e. 0.25%, where the  basic duty is 5% ad valorem and one percentage point where the basic duty is 20%.
92. Essential commodities and other priority items which are presently exempt  from excise duty will continue to remain exempt. I am also exempting from this    surcharge, certain other essential goods of common consumption, namely, sugar,  matches, cotton fabrics, vanaspati, refined vegetable oil, tea, coffee and kerosene.  Direct Taxes
93. Hon’ble Members will recall that, in August, 1986, a Discussion Paper on  Direct Tax Laws was presented in Parliament. After further discussions and  consultations among experts and the public, the Government had introduced the Direct  Tax Laws (Amendment) Bill, 1987, which was passed during the last Session. Since  then, many representations have been received from experts, concerned Associations,  Chambers of Commerce and other tax-payers regarding some provisions in the Act.  The following, inter alia, are the main points made in these representations:-  (1) The proposed system of assessment of partnership firms is too harsh  particularly on partnership firms with small income, as such firms, subject  to certain deductions, will henceforth be taxed at the maximum marginal  rate. Certain other clarifications have also been sought in regard to some  other provisions relating to taxation of firms.  (2) The levy of additional tax at a flat rate of 30 per cent would be very unfair  in cases of genuine doubt regarding taxability of certain receipts and that  the levy of additional tax should itself be appealable.  (3) The provisions relating to charitable trusts, voluntary agencies and  institutions carrying on scientific research, etc. may result in unintended  hardship, particularly as regards the treatment of contributions to the corpus  of such institutions.  (4) The new Act provides for unfettered discretion regarding re-opening of  assessments merely on a change of opinion.
94. There are many positive features in the Act, which will help the taxpayers  by simplifying the law, but there is also scope for reconsideration keeping in  view the representations against some of its provisions. In a democracy, Government  should always keep itself abreast of public opinion and be flexible enough to respond  to reasonable suggestions. Government will bring a further amendment bill in the  Budget Session which will take care of genuine grievances. After the Bill is introduced,  Government will be happy to consider any further suggestions that the Hon’ble  Members may have to offer.
95. A reasonable degree of stability in the Direct Tax regime is desirable for  inspiring confidence and encouraging savings and investment. I do not, therefore,  propose any change in the rate structure for personal and corporate taxes.
96. There is, however, a case for reducing, to some extent, the brunt of the  burden borne by the fixed income groups. I, therefore, propose to raise the rate of  standard deduction from 30 per cent to 33-1/3rd per cent of salary income and the  20  ceiling from Rs.10,000/- to Rs.12,000/-. This measure will benefit about a million  tax-payers.
97. Hon’ble Members will recall that Estate Duty was abolished from March,  1985. This was done mainly because the Estate Duty law was complicated and led to  procedural harassment to large numbers of tax-payers at a time of great distress, with  negligible gain in terms of revenue. However, there is a strong case on grounds of  social justice for taxing the transfer of wealth through inheritance especially where  the volume of wealth involved is large. This matter has been under consideration of  Government for some time. Government have decided to levy a tax on the transfer of  wealth which will be applicable to all wealth-tax assessees. The tax will be levied in  respect of assets subject to wealth tax. The method for valuation of assets would be  the same as for the wealth tax. It will also be administered by the wealth tax officer.  The rate of the wealth transfer tax would be 5 times the applicable wealth tax rates.  This new tax will avoid the rigidities and procedural delays which characterised the  operation of the old Estate Duty Act. As I have mentioned, it will be applicable only  to wealth tax assessees and will not affect ordinary tax-payers. Separate legislation  in this regard will be introduced in this Session.
  98. The thrust of my other proposals in regard to Direct Taxes is to strengthen  incentives for export promotion and foreign exchange earnings, to encourage savings  and to stimulate the capital market.
99. To encourage exports, I propose to enhance the existing tax concession  under Section 80 HHC for export profits so as to exempt 100 per cent of export profits  from income-tax. It is also proposed to extend the benefit to supporting manufacturers  exporting through Trading or Export Houses. A five-year tax holiday presently available  for units in Free Trade Zones is also being extended to 100 per cent Export Oriented  Units. Replantation and rejuvenation subsidies for rubber, coffee and cardamom  plantations are also proposed to be exempted from income-tax.
  100. To promote long-term financing available for construction and purchase  of houses, I propose to enhance the existing concession available under Section 80L  in respect of interest and dividend income received from companies providing such  finance. At present, such income is included under the general exemption limit of  Rs.7,000. It is proposed to make such income also eligible under the separate limit of  Rs.3,000 for UTI under Section 80L.
101. As an anti-evasion measure, I propose to provide for assessment of income  of persons engaged in certain trades, like liquor and forest contracts, at a reasonably  fixed percentage of the amount payable by them while purchasing the goods. The tax  will be collected at source.
102. I also propose to tax under the head “capital gains”, income from transfer  of a capital asset by a holding company to its wholly-owned subsidiary company or  21  vice versa, in every case where the capital asset is taken over as stock-in-trade at the  time of transfer.
103. Hon’ble Members will recall that in Part A of my speech, I have already  referred to certain changes being made in the income-tax payable by LIC as well as  certain fiscal measures to promote the equity market. There are certain other minor  proposals regarding Direct Taxes in the Finance Bill.
104. The total effect of these proposals will be a revenue loss of Rs.201 crores,  which will be off-set by my proposal to continue with the levy of surcharge on incometax  and wealth-tax which will mean a gain of Rs.270 crores. Thus, the net increase in  revenue will be Rs.69 crores.  Indirect Taxes
105. Sir, I will now move on to the proposals relating to indirect taxes. It has  been my endeavour to see that the basic thrust provided in the field of indirect taxes  in the Budget last year is carried forward. I have proposals for providing stimuli to  cover agriculture and farming sectors, rural employment, exports, health and medical  care, housing and construction activities, technology upgradation and selected industries  such as cement, textiles, electronics, paper and plastics. There are also some important  reliefs for the common man .  Agricultural and other allied sectors
106. In Part A of my speech, I have announced several measures for the benefit  of the farmers, including reduction in interest rates and reduction in cost of inputs,  such as fertilizers. I now propose a number of fiscal reliefs for promotion of agriculture  and agro-based activities.
107. Monobloc pumpsets and submersible pumpsets are important for irrigation.  I am exempting electric motors used in these pumpsets from excise duty.
108. To bring down the cost for farmers, I propose to fully exempt from excise  duty a large number of pesticide intermediates. I am also proposing to reduce customs  duty in respect of a number of pesticides and pesticide intermediates from the existing  levels of 105 per cent and 147 per cent to 70 per cent and 60 per cent ad valorem.  These measures will reduce the cost of indigenous production and the end-prices.
109. With a view to promoting modernisation in the agricultural, horticultural,  poultry and bee-keeping sectors, I am providing for full exemption from excise duty  in respect of machinery for these sectors such as sprinkler systems, fodder mixers,  germination appliances, egg candlers, etc.
  110. Cold storages are of great importance for the marketing of agricultural  produce. I propose to reduce the excise duty on parts and accessories going into the  installation of cold storage plants from 40 per cent to 15 per cent ad valorem.
111. As the House is aware, the Government has taken up an ambitious  programme of increasing milk production through genetic improvement of cattle and  buffaloes. Certain critical equipments, hormones and drugs required for this programme  are accordingly being exempted from customs duty in excess of 25 per cent ad valorem.  Food Processing and Packaging
112. Growth of food processing and packaging industry can be of immense  help in increasing the value-added of agricultural produce and raising incomes of  farmers. In continuation of certain measures for growth of this industry, announced  by the Prime Minister last year, it is proposed to further reduce the customs duty in  respect of 34 specified items of food processing and packaging machinery from 55 per  cent to 35 per cent ad valorem. I also propose to reduce the excise duty on preparations  from vegetables, fruits, nuts or other parts of plants like jams, fruit juices, etc. from 10  per cent to 5 per cent ad valorem. Such preparations from vegetables and fruits like  jams, jellies, fruit juices, sauces, ketchups and pickles, if manufactured in rural areas  by registered cooperative societies, Khadi & Village Industries Commission and State  Khadi & Village Industries Boards are proposed to be exempted from excise duty  altogether.
113. I also propose to reduce the excise duty on aluminium foil from 25 per  cent to 15 per cent ad valorem. This will help in hygienic and scientific packaging of  processed food, drugs, condiments, etc.  Rural Employment
114. Off-farm self-employment provides a major route for enhancing income  and earnings in the rural areas. Individually, a micro-entrepreneur with low staying  power is vulnerable to adverse market forces. His success lies in cooperative ventures.  Hence, I am providing for a special scheme for generation of self- employment in the  rural areas. Under the proposed scheme, specified products, namely, radios, cassette  players and recorders in combination with radios, tape recorders, voltage stabilizers,  footwear of a value not exceeding Rs.75 per pair and a few other items will be fully  exempt from excise duty, if they are manufactured in rural areas by registered  cooperative societies, including self-employed women’s cooperatives or cooperative  societies under the Scheme of Development of Women and Children in Rural Areas or  the Khadi and Village Industries Commission or the State Khadi and Village Industries  Boards.
115. As Hon’ble Members are aware, there are a large number of self-employed  persons working as carpenters, fitters, electricians, plumbers, etc. To lend further  strength to their toiling hands and with the twin objectives of increasing their  productivity and earnings, I propose to reduce the excise duty in respect of some hand  tools like files, screwdrivers, pliers, etc. from 20% to 10% ad valorem.
116. To promote better accounting and to relieve the traders, city-based shop  keepers, small businessmen, wholesalers and small factory owners from the drudgery  23  of book-keeping at the end of the day, I propose to reduce excise duty from 20% to  10% on small electronic cash registers of assessable value of Rs.10,000 or below.  Consumer Articles
117. I am conscious of the fact that common consumers have been affected by  some price increase. I am anxious to give them some relief within the constraints in  which I am operating.
118. I propose to increase the upper value limit from Rs.25,000/- to Rs.30,000/-  for the purpose of extending the concessional rate of excise duty of 15 per cent ad  valorem in respect of a wide variety of commonly used toilet soaps. I am also proposing  to fully exempt from excise duty laundry and carbolic soaps manufactured in rural  areas by cooperatives and khadi and village industries sector.
119. So far, electric bulbs upto 60 watts have been exempted from excise duty.  With a view to facilitating a brighter luminance in houses, streets, work places, etc.,  I propose to reduce the excise duty in respect of electric bulbs exceeding 60 watts  from Rs. 1.50 per bulb to Re.1.00 per bulb.
120. As a measure of providing a little more happiness and education among  children, I propose to completely exempt from excise duty toys, like toy scooters, toy  pedal cars, dolls, toy musical instruments, scale models, recreational models, etc. and  inexpensive pencil sharpeners.
121. With a view to reducing domestic drudgery, I propose to fully exempt  from excise duty certain domestic electrical appliances from frying pans to saucepans.  I am also similarly exempting electric kettles, water-boilers, toasters and automatic  irons. I am also totally exempting stainless steel utensils from excise duty.
122. As a further component of anti-smuggling measures and to cultivate a  greater sense of time-consciousness and to instil a spirit of greater punctuality among  the school-going children, college students, office-goers, the public generally and, if I  may venture to say so, politicians like us also, I propose to reduce the excise duty on  wall clocks and quartz clocks and parts thereof from 15 per cent to 5 per cent ad  valorem. I shall be announcing some relief for indigenous watch industry later in my  speech.
123. In respect of glassware, I propose to reduce the excise duty in respect of  a number of items of tableware of common use like jugs, cups, plates, bowls, etc.  manufactured by automatic process from 40 per cent to 25 per cent ad valorem and  those manufactured by the semi-automatic or mouth-blown processes, to 20 per cent  ad valorem.
124. I also propose to exempt from excise duty all children’s films and all  films selected for the Indian panorama section for International Film Festivals.
125. There can be no better auspicious occasion than the Government’s Annual  Budget to exempt sindoor, kajal, alta and mahavar — the age-old symbols of glorious  and devout womanhood — from taxation and, accordingly, I hereby do so by proposing  to fully exempt these from excise duty.  Health and Medicare
126. Our goal is to provide cheap and efficient medicare to all our people.  Towards achieving this objective, availability of essential drugs at lower prices has to  be ensured. I, therefore, intend to align the excise tariff, as far as possible, with the  new Drug (Prices Control) Order, 1987. I propose to provide total exemption from  excise duties in respect of formulations and bulk drugs which are specified in Category  I of the Drug (Prices Control) Order. Intermediates for these drugs will also be fully  exempt from excise duty. The House would recall that the drugs specified in Category  I are required for the National Health Programmes like T.B., Leprosy, Malaria, Filaria  Eradication programmes and programmes for the control of blindness and trachoma  and prevention of dehydration.
127. A concessional excise duty of 10% ad valorem is being prescribed for  single ingredient formulations based on drugs specified in Category II of the Drug  (Prices Control) Order. I also propose to continue the existing excise duty exemptions  in respect of specified cardiac drugs and anti-TB, anti-malaria, anti-leprosy and antidiabetic  drugs. Two anti-cancer drugs and an important life-saving drug, are proposed  to be added to the list of exempted drugs. However, I propose to withdraw the existing  exemption from customs duty in respect of specified formulations for which adequate  indigenous capacity has been built up. It is hoped that these fiscal reliefs will encourage  domestic production and help better availability of these vital drugs.
128. I propose to prescribe a nominal excise levy of 5% on bulk drugs except  those covered by Category I of Drugs (Prices Control) Order . This will enable the  manufacturers to avail of MODVAT credit in respect of all dutiable inputs including  drug intermediates. I also propose to reduce the import duty on 235 specified drug  intermediates from 115% to 90% ad valorem.
129. In the related field of medical equipment, the procedure for customs dutyfree  import of hospital equipments, apparatus, appliances including spare parts and  accessories by Government and Government-controlled hospitals is being simplified.  Similarly, the procedure for import of specified sophisticated medical equipment at a  concessional duty of 40% ad valorem is also being streamlined. In respect of such  imports by Non- Resident Indians, financed out of their own foreign exchange  resources, the duty will be even lower at 20%. Import of such equipment when  financed by Government to Government assistance will be exempt from customs duty.
130. I propose to extend the concessional duty to spare parts of such specified  equipments also at 40% ad valorem. The list of medical equipments attracting  concessional customs duty at 40% ad valorem is being enlarged by addition of 83  25  dental, ophthalmological, cardiological, gynaecological, general surgical and other  medical equipments. Components of these equipments will also be charged duty at  40% as against the existing levels ranging from 80% to 130% ad valorem in order to  encourage domestic manufacture of these equipments.
131. I also propose to reduce the excise duty on these indigenously manufactured  equipments from 15% to 5% ad valorem. The excise duty on X-ray films is also  proposed to be reduced from 15% to 5% ad valorem. Excise duty on aluminium  extrusions and square and round tubes used in the manufacture of artificial limbs is  being exempted altogether.  132. I hope that our dedicated doctors throughout the country will now be able  to modernise their hospitals and clinics a little faster and patients will get better care  and treatment thereby.  Housing
133. As I mentioned earlier, in order to encourage growth of housing it is  necessary to reduce the cost of house building material. Hence, I propose to provide  a general reduction in excise duty on cement from Rs. 225 to Rs. 205 per tonne. The  existing differential in excise duty rates for certain categories of cement units will  also continue. The levy ratios for certain categories of cement units are also being  reduced.
134. In order to protect the environment and help divert demand from wood to  metals, excise duty on doors, windows and their frames and thresholds for doors,  made of aluminium is proposed to be reduced from 20% to 15% ad valorem. Similarly,  excise duty on corrugated sheets of aluminium is being reduced from 25% to 15% ad  valorem. I also propose to reduce the excise duty on steel doors, windows and their  frames and thresholds for doors from 15% to 5% ad valorem.
135. It is time that we think innovatively and use unconventional materials for  housing which would be cheap and functional. The excise duty on blocks, slabs,  lintels, etc. constituting structural intermediates and components of pre-fabricated  buildings is being reduced from 12% to 5% ad valorem. Similarly, fly ash bricks will  pay a lower duty of 5% ad valorem, and lympo, a cement substitute, will bear a zero  rate of duty.
136. To reduce fire hazards, we should promote the use of fire extinguishers.  With this end in view, I propose to exempt fire-extinguishers from excise duty.  Exports
137. To thrive in the highly competitive international market, our natural  advantages and production efforts have to be supplemented by adequate fiscal and  other measures. In this context, I propose to take some further measures to promote  exports.
138. Concessional rates of customs duty have been provided in the past in  respect of specified items of machinery for identified export thrust sectors. Eight  more machines for the garments and hosiery sector, twenty-three machines for the  leather industry, four more machines for the gem and jewellery industry and three  more items of textile machinery will now attract a concessional rate of 35% ad  valorem. Specified items of machinery for the tea, bicycle, silk and woollen industries  are being provided with a concessional customs duty of 35% ad valorem.
139. Ivory and Ivory powder are being totally exempted from customs duty.  This will help reduce poaching in our jungles as well as provide adequate raw  material for ivory handicraft industry, which is export-oriented.
140. The value-limit of duty-free import of commercial samples is being  enhanced from Rs.1000 to Rs.5000 in a year; and for duty-free import of prototypes  of engineering goods, from Rs.1000 to Rs.10,000.
141. Full rebate of excise duty will now be available for tea exported directly  from factories. The procedure for claiming rebate of excise duty on export of unblended  tea by merchant-exporters is being simplified. Green tea is being exempted from  excise duty altogether.  Capital Goods
142. In the modern industrial world, obsolescence takes place at a fast rate.  Unless one upgrades the technology continuously, one is apt to be left out in the race.  Following Prime Minister’s guideline given in last year’s Budget speech, I had  announced in August 1987, a technology upgradation scheme, under which fiscal  relief was provided in respect of import of specified items of capital equipments  required for manufacture of machinery covered by the scheme at 35% ad valorem. To  promote domestic production of such machinery, the customs duty on selected raw  materials needed for their production is being reduced to 55% from the existing level  ranging from around 100% to 180%. These include specified insulation materials,  copper conductors and special electrical steel sheets for power generation and electrical  equipment and clad steel plates for manufacture of selected industrial machinery  specified in the technology upgradation scheme. The customs duty on boiler and  presssure vessel quality steel plates, turbine blade flats and stainless steel plates  required for manufacture of machinery is also being reduced from 90% to 55%.  Scientific equipment and spares
143. There have been persistent demands from the scientific community for  further fiscal concessions in regard to consumables required for research and spares  of imported equipment. Keeping in view the importance of scientific research, the  existing duty concession schemes are being liberalised. The certification procedures,  which have been acting as hurdles in the clearance of these goods, are being simplified.
144. Some specified scientific instruments and apparatus would bear excise  duty of 5% ad valorem instead of the current rate of 15%.  27  Textiles
  145. The textile industry has a unique place in the industrial map of India. It  provides jobs to millions of our people. It is a major export earner, and is directly  linked to agriculture. Of late, the industry has suffered from widespread sickness and  haphazard growth. Availability and prices of raw cotton and cotton yarn have been  subject to considerable instability. Handloom weavers are suffering because of yarn  prices. Powerlooms have their problems too. While production of synthetic yarn,  which is used for blended fabrics preferred for their durability by the common man,  has expanded, prices of such yarn have been very high. Smuggling has been another  problem which, despite Government’s strong action, has had some adverse effects on  the economy.
146. In order to overcome these problems, in 1985, Government had announced  a new Textile Policy. Its primary objective was to increase production of cloth of  acceptable quality at reasonable prices. In line with this policy, a number of measures  have already been taken by the Government. These have yielded results as reflected  in the increase in production and availability of cloth. I now propose to provide some  fiscal support to the endeavours of the Ministry of Textiles in reviving this industry  so that, once again, it can regain its rightful place in our economy. My proposals,  which follow are based on a comprehensive review of the duty structure relating to  the various segments of the industry with a view to lowering prices, increasing the  demand for fabrics and increasing the base of production.
147. In 1985, a scheme was evolved for making available duty-free polyester  staple fibre to the handloom sector for manufacture of designated fabrics under a  scheme approved by the Government. I now propose to reduce the excise duty on  polyester filament yarn for manufacturing handloom fabrics under a scheme for supply  management and distribution of fabrics, to be announced by the Ministry of Textiles.  Similarly, viscose filament yarn will bear a concessional rate of 50 per cent of the  existing duty, when the yarn is supplied to registered handloom cooperative societies  or any approved organisation for the development of handlooms.
148. I also propose to exempt handloom woollen fabrics processed by approved  independent processors from excise duty. Raw wool imported by certain specified  handloom agencies is being exempted from customs duty. The import duty on acetate  filament yarn is being reduced from 60 per cent to 45 per cent.
  149. In order to reduce prices of cotton yarn, it is proposed to reduce the excise  duty on cotton yarn of counts not exceeding 35 by 10 per cent of the existing rates.  The excise duty on cotton yarn above 35 counts is being reduced by 3 paise per count.  This will mean a reduction of upto a maximum of 28.5 per cent, depending on the  count of yarn.
150. Considering the fact that viscose staple fibre would help substituting for  cotton, I propose to reduce the excise duty on viscose staple fibre cleared for blending  28  with cotton from the existing level of Rs. 7 per kg. to Rs. 5 per kg. Simultaneously,  I propose to increase the duty on viscose staple fibre used for other purposes to Rs. 8  per kg. to divert more VSF for cotton blending.
151. The National Textile Corporation is already manufacturing cheap fabrics  under a special scheme, for which polyester staple fibre is being supplied free of  excise duty. I propose to provide that polyester filament yarn will be available at a  concessional duty rate of Rs.10 per kg. to the National Textile Corporation for  manufacturing fabrics under a duty credit scheme. The details will be announced  separately.
  152. In line with the Textile Policy, in order to facilitate absorption of increased  domestic production, I propose to reduce fiscal levies on man-made fibres and yarn.  This would also help revitalise the powerloom sector which is facing problems of  under-utilisation of capacity and consequent problems of unemployment. The duty on  polyester staple fibre is being reduced from Rs.25 to Rs.15 per kg., and on polyester  filament yarn from Rs.83.75 to Rs.53.75 per kg. At the same time, in order to ensure  greater availability and to put pressure on the domestic producers to pass on the  reduction in excise duties fully to the consumers, import duties on these items are also  being reduced by about 25 percentage points.
153. The excise duty on nylon filament yarn is being reduced from Rs.70 to  Rs.40 per kg. and that on acrylic fibre from Rs.10 to Rs. 8 per kg. Customs duty on  these items is also being suitably reduced.
154. It is also proposed to reduce the excise duty on nylon filament yarn for  industrial purposes such as for manufacture of tyres for cycles and industrial filter  fabrics, from Rs. 70 to Rs.8.13 per kg. Nylon filament yarn of specified deniers used  for fishing nets will pay an even lower concessional duty of Rs.4.55 per kg.
155. I also propose to reduce the excise duty on certain specified textile  machinery required for modernisation of the mills from 15 per cent to 5 per cent ad  valorem. The customs duty on certain specified machinery for the garment, hosiery  and woollen industries is being reduced to 35 per cent, as indicated earlier.
156. Hon’ble Members will agree that these comprehensive fiscal measures,  supported by other measures taken by the Ministry of Textiles, should give a boost to  the textile industry and help protect jobs of lakhs of workers. These should also  improve the working of the mills of the National Textile Corporation. I fully expect  and shall insist upon the entire relief being passed on in the form of lower prices.
157. At this point, I would also like to ask manufacturers in all industries,  where I have granted excise concessions, to pass on the excise relief to consumers in  the form of lower prices. Administrative Ministries concerned are being requested to  keep a close watch on the price behaviour of these commodities. I shall not hesitate  29  to withdraw the concessions, wherever there is evidence of manufacturers taking undue  advantage of these concessions.
Electronics
158. We have been using the fiscal mechanism for some time to give a boost to  the entire electronics sector. As a result of Government policy, substantial growth has  taken place in this sector, giving employment to lakhs of young men and women. At  present, concessional rates of customs duty of 60% or 70% ad valorem are available  in respect of specified items of machinery for the electronics industry. These  concessions have been reviewed. With a view to providing a stimulus and keeping in  view the latest advances in technology, I propose to extend a uniform concessional  duty of 60% ad valorem in respect of 280 items of machinery for the electronics  sector.
159. Customs duty on moulds, tools and dies required by the electronics industry  is being reduced further from 60% to 30% ad valorem. The coverage of the graded  structure of duties for raw materials, piece parts and components for the industry is  being enlarged. Polycrystalline silicon will now bear a lower duty of 35% instead of  the existing 80%.
160. Machinery and instruments required for the manufacture of Rural  Automatic Exchanges based on indigenous technology will attract a lower rate of duty  of 30%. A uniform rate of 100% is being provided in respect of a large number of  equipments for telecommunication transmission, satellite communication, switching,  data communication terminals, television transmission, studio and sound broadcasting.  Non-electronic components of these equipments will bear a lower duty of 80%. With  a view to encouraging production of high-tech items like Large-Scale Integrated circuits,  micro-processors and other micro-electronics items, import of 22 items of machinery  will be allowed at 15% ad valorem.
161. At present, computers, computer systems and peripherals attract varying  rates of duty ranging from zero to 147.5%. As a rationalisation measure, a uniform  rate of duty of 80% ad valorem plus countervailing duty is being provided in respect  of all computers, computer systems, computer peripherals and spare parts thereof.  Software will continue to attract the existing rates of customs duty at 60% ad valorem.  As an export incentive, accompanying computer software and start-up spares imported  under the policy on computer software export, software development and training will  be allowed at the rate applicable to the hardware. Computerized Numerically Controlled  systems and their parts at present attract a customs duty of 80%. This is being lowered  to 55% ad valorem. Excise duty on Computerised Numerically Controlled systems is  being reduced to 5% ad valorem.
162. Colour TV sets of screen size exceeding 36 cms and of assessable value  exceeding Rs. 5,000 per set will now attract an excise duty of Rs.2,000 instead of  Rs.1,750. However, such sets of value not exceeding Rs.5000 will continue to attract  30  a duty of Rs.1500 per set as at present. Excise duty on audio magnetic tapes is being  enhanced to Rs. 4 per square metre. Blank audio cassettes are being exempted from  duty. Excise duty on computer software is being reduced from 25% to 10% ad valorem.
163. Certain other industries also require a boost for their further development.  My proposals now cover a number of such industries.
Plastics
164. The House would recall that the customs duties on various plastic materials,  such as LDPE, HDPE, PVC and polypropylene were lowered in September, 1987,  in the wake of the steep hike in the international prices of these materials. International  prices have since gone up even higher and there is need for further reduction in  customs duties. I, therefore, propose to reduce the basic customs duty on LDPE from  Rs.3,000 to Rs.2,000 per tonne and on HDPE from 30 per cent to 20 per cent ad  valorem.  165. The auxiliary duty of customs on PVC is proposed to be converted from  ad valorem to specific, and in the case of suspension grade PVC is being reduced to  Rs.2000 per tonne and in the case of paste grade to Rs.4000 per tonne. In the case  of polypropylene, auxiliary duty is being reduced from 45 per cent to 30 per cent ad  valorem.
Automotive Sector
166. In the automotive sector, I propose to extend the concessional rate of 55  per cent customs duty in respect of parts for certain additional components to be  manufactured by auto ancillaries for supply to fuel-efficient motor vehicles. Parts of  specified as well as additional components of fuel-efficient two-wheelers and light  commercial vehicles will now attract a lower rate of customs duty of 40 per cent ad  valorem as against the current rate of 55 per cent ad valorem. Concessional rate of  customs duty of 55 per cent ad valorem in respect of components required for the  manufacture of fuel-efficient cars upto 1000 cc under phased manufacturing programme  is proposed to be made available for a further period from 1.3.1988 to 31.3.1990.  Fuel-efficient motor cars of engine capacity exceeding 1000 cc manufactured under  approved phased manufacturing programme will, however, now attract excise duty at  the rate of 30 per cent ad valorem instead of the existing 25 per cent.
  167. I propose to reduce the excise duty from Rs. 1000 to Rs.500 per body in  respect of bodies of such three-wheeler auto-rickshaws, which are used by the general  public in major cities.  Vegetable oils
168. In order to cut down on imports of vegetable oils, the Government had  taken fiscal measures in the previous years so as to encourage domestic production of  edible oils. These measures have had encouraging results. As a follow-up of the  measures taken in the last two years, I propose to provide total exemption from excise   duty in respect of refined safflower oil. Rebate for the use of solvent-extracted cotton  seed oil in the manufacture of vanaspati is being increased from Rs.3250 to Rs.4000  per tonne. Rebate for the use of indigenous palm oil in the manufacture of vanaspati  is also being made available at the rate of Rs.3250 per tonne. Solvent-extracted  sunflower and safflower oils will, henceforth, qualify for rebate at the rate of Rs.3250  per tonne, if used in the manufacture of vanaspati. I am also proposing an increase in  the rate of rebate from Rs.320 to Rs.640 per tonne for the use of rice bran oil in the  manufacture of soaps.  Paper and Paper Board  169. I propose to reduce the excise duty on paper and paper board manufactured  by small paper mills by Rs.100 per tonne in each of the existing slabs. Paper and  paper board manufactured by mills using agricultural residues such as cereal straw,  bagasse, grasses and jute waste, etc. already attract a lower rate of excise duty of 10  per cent ad valorem plus Rs.800 per tonne. I propose to reduce this duty further by  Rs.300 per tonne. Concession of 50 per cent of the excise duty available to certain  new paper mills upto 31.3.1988 is being continued till 31.3.1990.
170. Specified items of machinery for manufacture of newsprint are being  provided with a concessional rate of customs duty of 25 per cent ad valorem.
171. I also propose to provide for import of machinery for binding and multicolour  sheet-fed off-set printing machine by registered newspaper establishments at  concessional rates of customs duty.  Rolling Bearing Industry
172. In respect of 21 items of machinery for the rolling bearing industry, a  concessional duty of customs at 35 per cent ad valorem is being provided.
Watches
173. With a view to giving a further boost to domestic watch industry, I intend  to reduce customs duty from 55 per cent to 35 per cent ad valorem in respect of  certain horological machinery and testing instruments. The list of horological raw  materials attracting concessional customs duty of 25 per cent ad valorem is being  enlarged. In addition, my detailed proposals provide for a sound package for certain  specified parts.
Glass and glassware
174. I propose to restore the concessional rate of excise duty of 30 per cent ad  valorem in respect of glass and glassware manufactured by the semi-automatic sector.  Energy conservation
175. In our industrial processes, many of us have remained rather unresponsive  to the need for energy conservation and energy recycling. The concept of energy  conservation is still in its infancy in the country and we have to provide some incentive    in that direction. Accordingly, 15 specified energy-saving equipments are being  exempted from customs duty in excess of 40 per cent ad valorem.
Hotels
176. To promote tourism in the country, certain additional equipments required  by hotels are being extended a concessional rate of customs duty of 90 per cent .
Rationalisation Measures
177. My proposals on the indirect taxes include certain rationalisation measures.  (a) Industry has found the MODVAT system beneficial. The procedural  problems faced in the initial stages have, by and large, been sorted out. I  propose to rationalize rates of excise duty in respect of a few commodities,  including paints based on synthetic polymers, trailers, furniture, phthalic  anhydride and coated textiles as a part of MODVAT corrections.  (b) The scheme of excise duty concessions applicable to small scale industry  relating to air-conditioning and refrigerating appliances and parts thereof  is being slightly modified to enable full utilisation of the MODVAT credit.  (c) I propose to align the excise tariff relating to ferrous and non-ferrous  metals and articles thereof with the corresponding chapters of the  Harmonised System which would help reduce classification disputes. Tariff  rates of excise duty in respect of items relating to iron and steel and  copper are being revised. The effective rates of excise duty would by and  large be maintained. A uniform rate of excise duty of Rs.550 per tonne is  being prescribed in respect of unmachined forgings and forged products  of steel. The basic customs duty on ships, vessels and other floating  structures imported for breaking up is being reduced from Rs.1035 to  Rs.750 per Light Displacement Tonnage.  (d) Certain proposals for rationalising and rounding off of rates of excise  duty in respect of Petroleum products are being made. These proposals  have no significant revenue implications.  (e) The scheme of excise duty concession to manufacturers of tread rubber in  the small scale sector is being revised as an anti-evasion measure.  (f) As an anti-evasion measure, I am also proposing to enhance the basic  customs duty in respect of certain compound alcoholic preparations of a  kind used for the manufacture of beverages to Rs.80 per litre or 270%,  whichever is higher.  (g) There have been some reports regarding under-invoicing in respect of  imports of galvanised steel sheets, tin plates and cold rolled steel sheets.  In order to deal with this problem, the basic customs duty in respect of  33  these goods is being converted from ad valorem-cum-specific rates into  specific rates.  (h) Specific rates of excise duty in respect of air-conditioners upto 7.5 tonnes  capacity are being revised. Specific rates are also being prescribed in  respect of air-conditioners exceeding 7.5 tonnes but not exceeding 15  tonnes.  (i) As an anti-evasion measure, excise duty on paste grade PVC is proposed  to be increased from 40% to 60% ad valorem. The duty paid on the resin  would be available as MODVAT credit. Effective rates of duty on coated  textiles are being suitably revised.  (j) In order to provide protection to the indigenous industry, I am proposing  to enhance the basic customs duty in respect of Sodium Formaldehyde  Sulphoxylate from 70% to 110% and Sodium Ferrocyanide from 70% to  100% and iron powder from 40% to 70%. The basic customs duty in  respect of palm nuts and kernels is also proposed to be raised from 60%  to 200% ad valorem.
178. Legislative changes and other changes of minor significance: Apart  from the above proposals, certain amendments have also been proposed in the Finance  Bill effecting changes in the excise and customs tariffs. These amendments are basically  enabling provisions without any major revenue significance. Besides, there are a few  minor proposals for continuing, amending or rescinding existing notifications including  one for giving retrospective effect to an amending notification. To save the precious  time of the House, I do not wish to dwell on them. I am also providing for amendment  of some of the provisions of the Customs Act, 1962, details of which are in the  Finance bill. A few amendments to the Central Sales Tax Act, 1956, are also proposed,  so as to align the definitions of certain goods of special importance with reference to  the Central Excise Tariff Act, 1985.
179. Copies of notifications giving effect to the changes in the customs and  excise duties effective from 1st March, 1988 will be laid on the Table of the House in  due course.
180. Anti-smuggling drive: Our anti-smuggling efforts yielded a seizure of  Rs.250 crores of contraband goods in 1987 which is the highest ever. I have instructed  the concerned authorities to relentlessly continue the drive against smuggling, tax  evasion and black money. I also seek the active cooperation of the State Governments,  as it is with their assistance that we can succeed in this task. I hope and trust that the  State Governments will also mount active steps against hoarding, black-marketing,  smuggling and sale of smuggled goods.
181. Revenue effect: Details of all the pluses and minuses in respect of  individual items covered in my proposals are in the Explanatory Memorandum to the  34  Finance Bill. In the aggregate, my proposals in respect of Customs and Central Excise  duties outlined above are likely to yield additional revenue of Rs.515.75 crores from  Customs duties and Rs.749.17 crores from Excise duties. The concessions and reliefs  aggregate to Rs.209.44 crores on the Customs side and Rs.509.79 crores on the Excise  side. The net additional revenue from Customs duties would, thus, be Rs.306.31 crores  and that from Excise duties Rs.239.38 crores. In Excise duties, the Centre’s share  would be Rs.117.23 crores and that of States, Rs.122.15 crores. Out of the total net  additional yield of Rs.545.69 crores, the Centre’s share would be Rs.423.54 crores  and that of the States, Rs.122.15 crores.
182. Taking into account the additional yield from the modifications proposed  in direct and indirect taxes and the revision announced a few days ago in postal tariffs,  the year end deficit for the next year is estimated at Rs.7484 crores. Government  reiterates its determination to closely monitor expenditure, maximise collection of  revenues and contain the budgetary deficit.
183. Mr. Speaker, Sir, in framing the Budget proposals, my guiding principle  has been the need to boost agriculture, help the poor and generate more employment,  investment and growth. India’s achievements since Independence are the result of the  untiring efforts of all our people. Every section of our people has contributed to build  the country’s economy. No single section or region or group can claim exclusive  credit for it. The nation’s Parliament as the supreme forum of our democracy has also  made an invaluable contribution. In all humility, may I take this opportunity to request  through you, Sir, all the Hon’ble Members of Parliament, to make this year’s debate  on the budget a participatory and constructive endeavour to evolve a nationally accepted  strategy to achieve our goals.
184. Let us be proud of what all of us together have been able to do and if  there are inadequacies or deficiencies, let us overcome them collectively. Let us all  join in the exciting task of India’s economic development and do so by making it a  common fraternal partnership of the entire Indian people. As our Prime Minister Shri  Rajiv Gandhi said a couple of months ago:  “Our socialism is our own. It is not a foreign transplant. It is not cast in  someone else’s ideological mould. It is rooted in our own history, our  culture, our realities. Gandhiji enjoined us to work for the Daridra Narayan,  to wipe every tear from every eye. This constitutes the moral imperative  of our socialism.”
185. This is also the message that this Budget seeks to convey. Sir, I now  commend this budget to the House.  [29th February, 1988]
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