Budget Speech
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V. PHYSICAL INFRASTRUCTURE
46. I now come to the second of the ‘panch priorities’ –
physical infrastructure. Demand generated by enhanced public investment in infrastructure
has been a key stimulant underlying our current industrial recovery. In October 1998, the
Prime Minister launched the National Highway Development Project (NHDP), one of the most
ambitious highway projects in the world, providing strong backward linkages for our steel
and cement industries. There is simply no alternative to providing quality roads,
railroads, ports, airports, reliable and reasonably priced power supply, safe drinking
water and sanitation. Without these India can not take full advantage of the opportunities
now offered by technology and competition.
47. In developing infrastructure, there is need to encourage
public-private partnership, so that public funds are leveraged, and the quality of service
delivery improved, thus yielding better value for money.
48. Accordingly, Budget 2003-04 undertakes to provide a major thrust to
infrastructure, principally to roads, railways, airports, and seaports, through innovative
funding mechanisms. This comprehensive initiative will cover the following:
- 48 new road projects at an estimated cost of around Rs.40,000 crore; with a quarter of
them being made of cement concrete;
- National Rail Vikas Yojana projects worth Rs.8,000 crore;
- Renovation/modernisation of two airports, and two seaports at an estimated cost of
Rs.11,000 crore; and
- establishing two global standard international convention centres at an estimated cost
of Rs.1,000 crore.
49. The total estimated cost of the above projects is about Rs.60,000
crore. In addition, the North-South and East-West corridors will be funded through the
additional levy of a cess of 50 paise per liter of diesel and motor spirit. This levy will
contribute a further Rs.2,600 crore for road development.
50. The essence of the new funding mechanism is to leverage public
money through private sector partnership, wherever possible. The three critical components
of the scheme are: release of public funds only when linked to specific and well-defined
milestones in completion of the project, in physical terms; a sharing of the risks with
the private promoters and financiers; and no open-ended Government guarantees at any
stage.
Roads
51. These 48 projects, with a total length of over 10,000 kms., are
over and above the NHDP. They have been identified where the traffic volume justifies
four-laning. These projects will be funded on a build-operate-and-transfer (BOT) basis,
with the Government providing a subsidy in the form of an annuity flow to meet only the
shortfall between anticipated revenue and loan repayment liabilities. In the first year,
2003-04, at least 3,000 kms., of roads, or almost a third of the total of these 48
projects, will be taken up for four-laning.
National Rail Vikas Yojana
52. Ministry of Railways has established a special purpose vehicle
(SPV) to take up projects worth Rs.8,000 crore for the Golden Quadrilateral. Their
projects will be funded through Rs.3,000 crore worth of equity, provided by the
Government, and Rs.5,000 crore worth of loans. This SPV will raise debt from the market.
Repayment of debt will be done by earmarking Railway receipts over the period of
amortisation. Further, safety upgradation programme on the Golden Quadrilateral will be
taken up simultaneously under this mechanism.
Airports
53. In addition to the existing initiatives for leasing of major
airports, as well as of setting up two private airports in Bangalore and Hyderabad, it has
now been decided to take up the Delhi and Mumbai airports, as the principal hubs of
international travel to India, for modernisation to international standards. Two separate
companies will be formed with initial equal equity participation from the Airports
Authority. These two companies could also take joint venture partners. On completion, the
management will be leased out.
Seaports
54. It is proposed to facilitate the implementation of comprehensive
modernisation projects for Jawaharlal Nehru Port Trust (JNPT), Navi Mumbai and Cochin
Port, designed to bring them up to international standards. JNPT and Cochin ports need
dredging and modernisation. These projects are expected to cost over Rs.7,500 crore. The
user charges levied by the two port authorities, and the additional custom flowing in
after dredging and modernisation is completed, are expected to cover the debt service
obligations. Here, too, the Government will provide only the viability gap funding to
bridge any possible shortfall.
Convention Centres
55. To redress the lack of convention centres of international
standards in the country, the Government will enable the establishment of two such centres
through public-private partnership; with the Government covering the viability funding
gaps only.
56. For the 48 road projects, National Rail Vikas Yojana, the two
airports, the two sea-ports, and the two convention centres, a sum of Rs.2,000 crore is
being provided as initial contribution from the Government. On a flow basis, the average
annual commitment for all these projects, under the viability gap funding basis, is
expected to be around Rs.2,000 crore per annum in the medium-term, to be met annually from
the budgets of the Railways and the Government.
Rural roads
57. Encouraged by the success of the scheme of funding rural roads
under the Pradhan Mantri Gram Sadak Yojana by earmarking 50 per cent of the cess on
diesel, it is proposed that the resources for rural roads be augmented. Accordingly, apart
from allocating the anticipated Rs.2,325 crore from the existing cess on diesel for
2003-04, additional funds will be made available for rural roads from the proposed
additional cess on diesel of 50 paise.
Power
58. As Hon’ble Members know, the Electricity Bill, 2001 was
introduced in the Lok Sabha in August, 2001 and subsequently referred to the Standing
Committee on Energy for examination. The report of this committee has been received. This
Bill seeks to provide a legal framework for our reforms and restructuring of the power
sector, also in simplification of administrative aspects. We should take up this Bill now
for early consideration.
59. Simultaneous to the emphasis on improvement in power distribution,
our attention on capacity addition remains. The Government had earlier, in 1999, notified
18 power projects as mega projects, conferring upon them various duty and licensing
benefits. The Government now proposes to liberalise the mega power project policy further
by extending all these benefits to any power project that fulfills the conditions already
prescribed for mega power projects.
60. Given the importance of transmission in the power sector, it is
proposed to reduce customs duty on specific equipment for high voltage transmission
projects from 25 per cent to 5 per cent.
61. To further research in solar energy, wind turbines, and hydrogen
fuel as alternatives to fossil fuels, the Government is especially allocating Rs.20 crore
to the Council for Scientific and Industrial Research, for launching incentive-driven
research in these three fields.
Drinking Water
62. Supply of safe drinking water is an essential component of
infrastructure development. Orders have been issued to grant depreciation at the rate of
100 per cent on plant and machinery, and buildings that house such plant and machinery,
forming part of a water supply project or a water treatment system. Water supply projects
are now totally exempt in regard to capital goods and machinery, both from customs and
excise duties. In addition, pipes have been exempted from excise duty for bringing raw
water from source to the treatment plant and for conveying treated water to the storage
place. I do hope that this will provide further incentive to new water treatment and
supply projects for augmenting the supply of safe drinking water in the country.
VI. FISCAL CONSOLIDATION AND DEBT RESTRUCTURING
63. Mr. Speaker, Sir, I have already said that for our growth to be
sustained fiscal consolidation is essential. The Government has nurtured macroeconomic
stability – held inflation low, and maintained a strong balance of payments position
– while promoting growth. It has done so not only in the face of an unprecedented
drought, but also in a global economy where growth is ‘tepid’, uncertainty
great, and oil prices high. We have carefully balanced the need for fiscal consolidation
with the need for a contra-cyclical policy stance. Simultaneously, as I said, Government
is committed to totally eliminating budgetary drags, be rid of the self-laid traps; and go
forward with fiscal consolidation through revenue enhancement under a modern tax
administration, and expenditure rationalisation.
Cash Management
64. Appropriate cash management is integral to expenditure management.
There is, at present, no effective cash management in our system as cash is available to
the Ministries up to the budget ceiling as soon as the Appropriation Bill is passed by
Parliament. The Government, therefore, now proposes to initiate cash management, on a
pilot basis, in some major spending ministries, releasing budgetary allocations in a
time-sliced manner to permit convergence with available resources within the year. Monthly
or quarterly cash limits, based on the actual requirements of the Ministries will be
prescribed. This will avoid mis-matches between receipts and expenditure and avoid rush of
expenditure and the associated possible waste of resources in the last quarter.
External debt prepayment
65. At the Central level, interest payments in 2002-03 are estimated at
Rs.115,663 crore, equivalent to 48.8 per cent of the Government’s revenue receipts.
The average interest rate on Government of India’s outstanding debt has come down
from 11 per cent in 1999-2000 to 9.4 per cent in 2001-02. But, Mr. Speaker, because of the
legacy of high cost debt from the past, this reduction in the interest cost is not enough;
it does not keep pace with the decline in the market rates of interest. The Government
has, therefore, already started to act on three fronts.
66. First, taking advantage of our comfortable foreign exchange
reserves and lower domestic interest rates, the Government has effected premature
repayment of ‘high-cost’ currency pool loans of the World Bank, and of the Asian
Development Bank totalling around $ 3 billion. We intend to continue with this policy of
prudently managing the external liabilities and of proactively liquidating relatively
higher cost component of our external debt portfolio.
Domestic debt of the Central Government
67. Second, a large proportion of the banks’ holding of Central
Government domestic debt, contracted under the high interest regime of the past, is thinly
traded. With the softening of interest rates, ordinarily, such loans should command a
premium over their face value. In effect though, banks are often unable to encash this
because of limited liquidity. The Government therefore, now proposes to offer a buy back
of such loans – entirely on a voluntary basis – from banks that are in need of
liquidity, or of encashing the premium for making provisions for their non-performing
assets (NPAs) thereby improving their balance sheets, or otherwise. The premium to be
offered will be set on a transparent basis. If the banks declare the premium received as
business income, for income tax purposes, they will be allowed additional deduction to the
extent such income is used for provisioning of their NPAs.
State Governments’ debt
68. Third, is the restructuring of State Governments’ debt. Mr.
Speaker, Sir, the XII Finance Commission will also be making an assessment of the debt
position of the States and suggest such corrective measures as are necessary. Meanwhile,
the Central Government and the State governments have mutually agreed to introduce a
debt-swap scheme. Out of the total stock of debt of Rs 2,44,000 crore owed by the States
to the Government of India, a little over Rs1,00,000 crore bear coupon rates in excess of
13 per cent per annum, a rate that is far in excess of the current market rates. In
consequence the interest burden of the States now constitutes a major item of expenditure
for them; leaving little for even routine purposes.
69. The debt swap scheme introduced by the Government of India will
enable States to prepay high cost debt and substitute them by current, low-coupon-bearing
small savings and Open Market Loans. Twenty-six of the twenty-eight States have consented
to participate in the scheme from the current year itself, while the remaining two States
will join from 2003-04.
70. Over a three-year period ending in 2004-05, all State loans to the
Government of India bearing coupons in excess of 13 per cent will have been swapped. In
consequence, the States will save, at the very minimum, an estimated Rs 81,000 crore in
interest, and deferred loan repayments, over the residual maturity period of the loans.
Furthermore, and equally importantly, this scheme will restrain the debt build-up in
States through the small savings scheme.
VII. AGRICULTURE
71. Agriculture, the life-blood of our economy, after giving the
country adequate food security, is now again at the cross roads, as it prepares to
diversify and move up the value chain. It also needs to respond robustly to second
generation issues such as land degradation and water logging. Diversification, resonance
with market-forces, and a swift adoption of sunrise technologies are the other needs.
72. Mr. Speaker, Sir, India has the largest irrigated, arable landmass
in the world; our gross arable land being second only to the United States of America. We
must acknowledge the vital import of these facts: they are both an unrecognized, and an
unused asset; it is our great reserve. We now need to give it full encouragement.
Diversification into horticulture, floriculture, etc.
73. Promising gains from remunerative agricultural diversification into
horticulture, this significant contributor to both GDP, and food and nutritional security,
will have to be sustained. With this in view, during the current year, it is proposed to
introduce a new Central Sector Scheme on Hi-tech Horticulture and Precision Farming. Major
components of the scheme will be use of hi-tech interventions like fertigation, use of
biotechnological tools, green food production, and hi-tech green houses. Deployment of
precision farming technology aimed at judicious utilisation of resources like land, water,
sunlight as well as time, including demonstration of these technologies will also be part
of the scheme. I propose to provide, initially, a sum of Rs.50 crore under this scheme.
Sugar
74. The state of the sugar industry is a matter of serious concern for
the government. There is accumulation of stocks in factories, simultaneously with growing
arrears of payment for cane supplied by farmers, partly in consequence of soft market
conditions. This has both economic and social consequences. In order to provide relief to
both the farmers and industry, the Reserve Bank of India has already issued instructions
to Cooperative Banks for the conversion of shortfall in margins into medium-term working
capital loans, subject of course, to their furnishing adequate security or State
Government guarantees. The Reserve Bank of India has also issued instructions to extend
the repayment period of medium-term loans to 9 years. In addition, the Ministry of Food
and the Ministry of Finance will jointly address the problems of the sugar industry and
propose a comprehensive scheme for this important agro-industry soon.
Plantations
75. Our plantation sector, a hundred and fifty year old agro-industry,
is passing through a rough patch, because of price instability in international markets.
The Government has already introduced a series of measures to provide relief to small and
marginal farmers of plantation crops like tea, coffee and rubber, and help these sectors
negotiate the difficult period.
76. With a view to providing stability in terms of income for the small
growers, from 2003-04 onwards, Government has announced a Price Stabilisation Fund of
Rs.500 crore for the benefit of tea, coffee, and natural rubber growers. The Fund will
become operational in 2003-04.
77. In addition, I propose to abolish the excise duty of Re. 1 per kg.
on tea and replace it by a cess of Re.1 per kg., for creating a separate fund for
development, modernisation and rehabilitation of the tea plantation sector. This measure,
Mr. Speaker, will not impose any additional burden on the tea industry, but it will
redesign the duty to help the industry. Further, coffee plantations will henceforth be
eligible for income tax deduction of sums deposited in a development account, as in the
case of tea.
Animal husbandry and veterinary medicine
78. India has the world’s largest cattle wealth; it produces more
milk than any other country in the world, it has the second largest number of goats and
third largest number of sheep in the world. These are great assets. In addition, animal
husbandry provides employment to about 20 million, directly and indirectly. But our
live-stock quality has deteriorated. Therefore to promote the health of our livestock and
give a fillip to animal husbandry and dairying, I propose to reduce the basic customs duty
on specified veterinary drugs from 15 per cent to 10 per cent. To promote marine food
industry, I propose to reduce the customs duty on shrimp larvae feed from 15 per cent to 5
per cent, and exempt it from CVD.
Credit availability
79. Timely availability of adequate credit is of utmost importance for
the development of the rural economy and agriculture. At present Regional Rural Banks,
commercial banks and credit cooperatives, encouraged mainly by the Government, undertake
this function. I am not satisfied with this arrangement. We can not have a system wherein
credit for motor cars is on easier terms than for farm equipment or tractors. Therefore,
subject to the Reserve Bank of India’s prudential norms and approvals, private banks
will hereafter be encouraged to open branches in rural areas, to service both farm and
non-farm sectors there. I will also examine afresh this whole question of franchising
agricultural credit, including through Post Offices.
80. The full benefits of the declining rates of interest have not
percolated to critical sectors such as agriculture and small-scale industry. This has to
be rectified. Therefore, in order to pass on the benefits of lower rates of interest to
agriculture and the SSI sector, the State Bank of India has announced an interest rate
band of 2 per cent above and below its prime lending rate (PLR) for secured advances. The
Indian Bank Association (IBA) is now advising all its member banks to adopt a similar
interest rate band. This is a welcome move. Agriculture and SSI will hereafter have to pay
no more than an extra 2 percentage points than the best bank customers.
81. The Self-Help Group (SHG)-Bank Linkage Programme being propagated
by NABARD, for the last ten years, has been recognized as the largest and fastest growing
micro-finance programme in the world. Our expectations of providing bank credit to 1.25
lakh SHGs during the current year have been surpassed once again, and by January 2003,
bank credit of Rs.598 crore has already been provided to about 25 lakh poor families
through 1.50 lakh new SHGs. The programme has also set in motion the process of women
empowerment. However, the spread of the programme across the country has been uneven and
has largely remained confined to a few States. I urge all States to vigorously join in our
endeavour to make the SHG-Bank Linkage Programme a widespread success.
Fertiliser subsidy
82. Hon’ble Members no doubt appreciate that despite the grave
uncertainties on the oil front, the Government has by and large absorbed the crude price
rise. Now, in view of the likely increase in naptha and gas feed-stock, at least the
fertilizer subsidy has to be contained. Therefore, the issue price of fertilizers will be
raised by a modest amount of Rs.12 for urea, and Rs.10 for DAP and MOP, per 50 kg bag. The
price of complex fertilizers will also be suitably modified.
Water management and irrigation
Drip irrigation
83. The recent drought again brings into sharp focus the need for
conserving our water resources. A number of initiatives have already been taken to
conserve land and water resources. States are also encouraged to promote drip and
sprinkler irrigation through supply of equipment at subsidized rates. But these efforts
have to be intensified. Therefore, a bipartisan Task Force, headed by the Chief Minister
of Andhra Pradesh, and with a Minister of Agriculture from another State, as one of the
members, will be constituted to recommend measures needed to be adopted firstly, to expand
the coverage of such irrigation, thereafter to also suggest safeguards so that the
intended benefits actually reach the target groups.
River-interlinking
84. Despite major developments in the water resource sector since
Independence, the country has not really come out of the flood-drought-flood syndrome.
This is principally on account of, among other reasons, three major factors: faulty water
management practices, unbalanced development of irrigation sources in the country, and a
highly uneven distribution of water resources.
85. To expedite the proposal for inter-linking of rivers, the Prime
Minister has appointed a Task Force, which will suggest modalities for arriving at a
consensus amongst the States on transfer of water to deficit areas and for identifying the
priority links which could be implemented early, as well as a mechanism for their
clearance and funding. Adequate outlay is being provided to support this Task Force.
Desert pasturage development
86. A special programme, Maru Gochar Yojana, is proposed to be taken up
for the desert districts of Rajasthan. This programme will provide for rehabilitation of
traditional pastures – ‘Oran’ or ‘Gauchar’ – by developing
at least one large pasturage nursery in each of the identified districts, as a Central
scheme, for restoration of traditional water courses, and other measures so as to provide
effective drought proofing. A Task Force will be established for working out modalities
for its implementation. Rupees 100 crore will be provided for this purpose, over a period
of three years, with only a quarter of the contribution coming from the State Government.
Provision for 2003-04 for this purpose will be Rs.50 crore.
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