• Debt waiver: Banks may get cash-bond mix

    BUDGET 2008-09 IMPACT DAY-2 No repayment of interest on outstanding loans. The Rs 60,000 crore farm debt waiver and relief package announced in the Budget may not be just in the form of special securities issued by the government, but involve actual money being reimbursed to them. The banks may have to forgo all interest on the outstanding debt amount. The package is only aimed at recovering the principal amount of the loans extended to nearly 40 million small and marginal farmers across the country. In addition, farmers availing of the loan waiver and relief package may have to agree to some conditions, including committing to not seeking debt relief again for a fixed period of time. The banks will be reimbursed over three years from June 30, 2008. In effect, the Rs 60,000 crore may be given in at least three annual tranches. Similarly, the bond component may also be spread in tranches till 2011. Senior government officials told Business Standard that the impression that public sector banks will lose out due to the debt waiver is misplaced. "Banks will actually get strengthened as they now stand to get back at least their principal amount, which otherwise is currently shown as bad debt on their balance sheet. The additional liquidity will help them', he said. However, officials said that the exact details of the debt waiver programme, the biggest hand-out in India's history, will take some time. "There are several options (to compensate banks without burdening the fiscal). We have four months to work that out. The details will be finalised', they added. The rationale for June 30, 2008 being set as the deadline for implantation of the debt waiver and relief scheme is that the loans had to be cleared by that date. The scheme applies to loans disbursed by scheduled commercial banks, regional rural banks and co-operative credit institutions up to March 31, 2007 and overdue as on December 31, 2007. Also read on Page 2: Sharad Pawar asks farmers not to repay money-lenders

  • Oil firms worried about tax changes

    DAY-2 BUDGET 2008-09 IMPACT/ OIL AND GAS The exclusion of petroleum and natural gas from the broad category of "mineral oil' has put players in the oil and gas sector in a tizzy. Producers of oil and gas and refiners of crude oil were claiming an income tax exemption under Section 80-IB (9). The Budget proposes an amendment to this section, which says "mineral oil does not include petroleum and natural gas'. ONGC, the country's largest oil and gas production company, is estimated to save close to Rs 4,000 crore annually through this window. Companies slated to begin oil and gas production were planning to seek tax exemptions under this provision. "There is just no clarity on the issue. It contradicts commitments made under Nelp agreements. We will be formally seeking a clarification from the finance ministry,' said a senior official with Reliance Industries.

  • Not an election sop: Chidambaram

    P. Chidambaram Finance Minister P. Chidambaram on Saturday conceded that the challenge thrown to Opposition members who were dubbing the Rs. 60,000-crore farm loan waiver programme proposed in the Union Budget for 2008-09 as an election sop "to stand up and be counted and not duck the issue' was, in fact, a political one. "It is

  • With loan waiver, substantial line of credit has opened up: Pawar

    Upbeat after the loan waiver for farmers, Union Agriculture Minister Sharad Pawar on Saturday said there was no hurry to hold general elections. Denying that the loan waiver was meant as a pre-poll move, he told reporters, "Let us stay in power for another 14 to 15 months.'

  • Auto industry sees positive impact

    The Budget has evoked mostly a positive response from the automobile industry. About large cars: The General Motors India President, Mr Karl Slym, has said the company expected duty reductions for all types of cars. "Generally, it is all right. We have heard about national highways programme but we are yet to get the details. Large cars (which attract excise duty) at 24 per cent are left out. That is a bit of disappointment.' Positive for the sector: Mr Baba Kalyani, Chairman and Managing Director of auto-parts company Bharat Forge said input cost reduction and lower project import duties are a positive for the sector. "Scrap duty has been an area of concern for the auto component industry and (the fact) that this has been reduced is also good news,' he said. Not hurting: The Sona's group's Chairman and Managing Director, Mr Surinder Kapur, termed the Budget an election year Budget but one which had not hurt the industry. Using-up stocks: While lauding the proposals, the Kinetic Group's Chairman, Mr Arun Firodia, said dealers have stocks purchased at a higher rate of excise duty. When these stocks are exhausted there would be a reduction in prices, he said. Rekindling interest: Mr Ajit Rai, Managing Director of Suprajit Engineering, which makes auto components, said the duty reductions will rekindle consumer interest to buy cars. He said reduction in customs duty on scrap should moderate price increases in steel and aluminium, which has seen a big run up. Softening effect on input cost: Mr V. Mahadevan, Managing Director of Ennore Foundries, said the duty cuts will have a positive impact on the growth of the manufacturing industries. "Removal of custom duty on scrap import will have a softening effect on the input cost of raw materials,' he said. Demand trigger: The Managing Director of Aditya Auto Products & Engineering Pvt Ltd, Mr C. Jayaraman, said the duty reduction would not help the auto component industry directly, since the savings have to be passed on to the customers immediately. Small car hub: The Managing Director of Liners India Ltd, Mr S. Ganesh, pointed out that the Budget was on the same lines of the Automotive Mission Policy and the country was set to become a major hub for small cars.

  • AIDWA hails focus on agrarian crisis

    The All-India Democratic Women's Association (AIDWA) has hailed Union Finance Minister P. Chidambaram's initiative of taking cognisance of the huge agrarian crisis and taking steps to bring relief to farmers, who include a large number of women also. In a statement, Subhashini Ali, president, and Sudha Sundararaman, general secretary of the AIDWA, said the measures for debt waiver and debt relief did not, however, address the critical issue of loans taken from private moneylenders. Secondly, many regions in the grip of crisis such as Vidharbha and Rayalaseema were dry land, where individual holdings were usually more than two hectares, eligible for relief. The crucial question of reduction in the rate of interest to 4 per cent on agricultural loans was ignored. Finally, it was not just debt relief but rejuvenation of the entire agricultural sector through a massive increase in public spending that would alleviate this crisis, the statement said. After four years, the United Progressive Alliance (UPA) government heeded to the voice of lakhs of anganwadi employees but their demand for an increase in wages was met only partially. Secondly, the budget did not reflect the allocations for universalisation of the Integrated Child Development Services and make 14 lakh anganwadi centres functional by the end of 2008 as per a Supreme Court directive, especially at a time when child malnourishment and infant mortality continued to remain high. Given the huge increase in the prices of essential commodities, especially wheat, rice, pulses, it was expected that the budget would suggest measures to curb inflation, which was exacerbated by the recent increase in fuel prices. Food security The statement said the UPA gave an undertaking in the Common Minimum Programme (CMP) to strengthen the public distribution system and move towards universalising it. However, the meagre increase in the food subsidy allocation from Rs. 31,456 crore last year to Rs. 32,667 crore was hardly adequate to ensure basic food security for more than 70 per cent of the population that lived below poverty line. "This cannot meet the needs of food-deficit States such as Kerala, as well as States that were adversely affected by the recent cuts in allocations of foodgrains,' it said. The allocations for health and education remained far below the targets set in the CMP and the decision to shift the burden of the Sarva Shiksha Abhiyan to the States showed the lack of commitment of the Centre to implement the constitutional guarantee of right to education. "As far as gender budgeting is concerned, we welcome the fact that more Ministries had provided a gender budget analysis of their expenditure,' the statement added.

  • "Root cause not addressed'

    The Union budget's proposal for clearing the indebtedness of small and marginal farmers is ad hoc. It does not aim at removing the root cause of farmers' deprivation, which is lack of remunerative price for their produce, Subramanian Swamy, Janata Party president said. Describing the budget as "hotch-potch retrograde,' Dr. Swamy said it lacked vision, strategy of reforms or direction. The claims of the Finance Minister on accelerating growth in gross domestic product, output of food grains, institutional credit for agriculture and performance under the Bharat Nirman were misleading as the Economic Survey 2007-2008 revealed the contrary. Besides, "there is no long-term scheme for desperate farmers committing suicide, salaried persons "suffering from inflation,' small and medium industries "suffocated' by globalisation and for stabilising the "volatile' stock market.

  • No relief for farmers in informal sector

    They are indebted to moneylenders and middlemen, and pay huge interest Finance Minister P. Chidambaram on Friday unveiled a Rs.60,000-crore debt waiver and debt relief scheme for four crore small, marginal farmers and other institutional loanee farmers. But his proposals did not indicate any provision in the Agriculture Ministry's budgetary allocation, nor was there any explanation on resource mobilisation for the one-time waiver. The Minister later said the government would provide the banking sector liquidity, equivalent to the amount being written off, over three years. The budget ignored 42.3 per cent farmers in the informal sector who are indebted to moneylenders and middlemen and pay phenomenal rates of interest. Their debt stood at Rs. 48,000 crore in 2003 and a majority of farmers who committed suicide borrowed from the informal sector after becoming defaulters in the banking system. No new scheme Nor has any new scheme been announced in this year's agriculture budget. In fact, there have been cuts in the allocations for the National Crop Insurance Scheme and the pilot weather-based crop insurance scheme. At the same time, the Minister did not give in to the wide-scale demand for reduction in the institutional interest rate on farm loans from seven to four per cent. Announcing the never-before debt waiver scheme, Mr. Chidambaram said it was a measure of expressing the nation's gratitude to the farming community. All agricultural loans disbursed by scheduled commercial banks, regional rural banks and cooperative credit institutions up to March 31, 2007 and overdue as on December 31, 2007 will be covered under the scheme. For small and marginal farmers with a holding of up to two hectares, there will be a complete waiver of all loans that were overdue on December 31, 2007 and which remained unpaid till February 29, 2008. OTS for others In respect of other farmers, there will be a one-time settlement (OTS) scheme for all loans that were overdue on December 31, 2007 and which remained unpaid till February 29, 2008. Under the OTS, a 25 per cent rebate will be given against payment of the balance of 75 per cent. The agricultural loans restructured and rescheduled by banks in 2004 and 2006 through special packages and other loans rescheduled in the normal course as per the reserve Bank of India guidelines will also be eligible for either waiver or the OTS on the same pattern. The total value of the overdue loans being waived is estimated at Rs. 50,000 crore and the OTS relief, at Rs. 10,000 crore. Over three crore small and marginal farmers and about one crore other farmers will benefit from the scheme. The farmers, after being granted debt waiver or on signing an agreement for OTS relief, will be entitled to fresh loans from banks in accordance with normal rules

  • Focus on SSA alone akin to 'fooling ourselves': FM's adviser

    As the UPA government grapples to step up spending on education to 6 per cent of GDP, a commitment made in its governance agenda, a key Finance Ministry official has said accent on primary education will not yield results if not complemented by focus on secondary schooling. Sarva Shiksha Abhiyan (SSA) tantamounts to "fooling ourselves... It (focus) should go to secondary education as well,' Adviser to Finance Minister Shubhashis Gangopadhyay said at a discussion on Budget 2008-09 organised by the Centre for Budget and Governance Accountability here yesterday. SSA is the government's flagship programme for universalisation of primary education implemented in partnership with states. The UPA, in its National Common Minimum Programme, had pledged to raise spending on education to 6 per cent of GDP and at least spend half this amount on primary and secondary sectors. "Whether it is 6 per cent or 8 per cent or 10 per cent. These are just talking points,' Gangopadhyay said, adding that unless the spending gives the desired results it made no sense to talk about percentage alone. He was responding to a query whether the government should revisit its commitment to spend 6 per cent on education, considering the fact that the country's Gross Domestic Product has grown by a robust 8.8 per cent in the last four years. According to the Economic Survey for 2007-08, the government has made a provision of Rs 10,671 crore for SSA. Raising expenditure on education to 6 per cent of GDP was a goal set in 1948 by the Kothari Commission, and reiterated over and again by the National Policy on Education, but successive governments are yet to fulfil it. "You need to spend a minimum of 8 per cent of GDP for education (considering the GDP expansion),' Economist Jayati Ghosh, who was part of an official committee that looked at spending requirement for education, said. "It is very very clear you need very significant expansion. Forget the percentages,' she said, adding that if any government has to really look at meeting the minimum goal on education sector, it has to double the spending. Panelists at the discussion said spending on education has been declining. During the NDA regime, it was 3.6 per cent of GDP and has fallen to 3 per cent now. According to the Economic Survey 2007-08, the achievements under SSA up to September 30, 2007, include construction of 170,320 school buildings, 713,179 additional classrooms, 172,381 drinking water facilities, construction of 218,075 toilets, supply of free text books to 6.64 crore children and appointment of 810,000 teachers, besides opening of 186,985 (till March 31, 2007) new schools. Finance Minister P Chidambaram, in his Budget speech, too had said the focus of SSA will shift from access and infrastructure at the primary level to enhancing retention; improving quality of learning; and ensuring access to upper primary classes. He proposed to increase the total allocation to education sector by 20 per cent from Rs 28,674 crore in 2007-08 to Rs 34,400 crore in 2008-09. Of this, SSA will be provided Rs 13,100 crore.

  • FM raises a toast to women, minorities

    The Union Budget 2008-09 has seen funds for women, minorities and Scheduled Tribes go up substantially. One of the beneficiaries of a 24 per cent rise in allocations for the Ministry of Women and Child Development is a plan to prevent trafficking of girls for which the ministry has chalked out a scheme called Ujjwala. The Budget has kept a provision of Rs 9 crore for the scheme, following sustained campaign by NGOs and international bodies. The ministry's allocation of Rs 7,200 crore for 2008-09 is up from Rs 5,793 crore, the revised estimate for the 2007-08 Budget. A major part of the enhanced allocations would go to Integrated Child Development Services (ICDS) that caters to the nutritional and healthcare needs of pre-school children and mothers in rural areas. The ICDS allocation is mainly meant for the hiked emolument for workers and helpers of some 6,284 Anganwadi centres across the country. Another Rs 200 crore has been allocated for a new scheme

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