Towards a more participatory and socially responsibe budget. Tweet

NATIONAL ALLIANCE OF PEOPLE'S MOVEMENTS

National Office : A Wing First Floor, Haji Habib Building, Naigaon Cross Road Dadar (E), Mumbai – 400 014. Phone - 9969363065;

Web : www.napm-india.org

January 17, 2011

Shri Pranab Mukherjee,

Minister of Finance

Government of India

Sub: Suggestions towards a more participatory and socially responsible Budget 2012 - 13

Dear Pranab Mukherjee Ji,

Namaskar !

This year we have completed two decades of the declared Economic Reforms in country. Even though there is growing unemployment, declining agricultural and industrial production, rising inflation, economic crisis and inequality as never before even then there is a sense of celebration amongst a minority. That minority is celebrating and playing the fact that India can achieve a double digit economic growth. The obsession with the economic growth has taken over every other social concern and concerns about a declining developmental state. In past twenty years, if a tiny minority has seen an explosion of choices of luxury and consumer goods then there is a vast majority, nearly 80% of the population lives on less than 20 Rs a day.

In order to include this population and the process of Budget making which in turn is related to planning development using natural and human resources and prioritizing in the favour of needy and deprived it is necessary that Artricle 243 is fully followed, making the state's enact laws and planning from community (Gram Sabha and Basti Sabha onwards). This should be based on communities right to resources and planning which can be legitimised through a Development Planning Act. Next Budget, therefore should reflect such bottom up processes and plans. This is particularly important in the context of the fact that malnourishment, hunger to inequitous distribution of income and development benefits continues to infest the country which is showing increasing percentage of GDP and growth but exhibiting growing injustice making it stay at 134^th in the HDI. The Budget can answer these inequities to great extent if the constitutional Article 39 C is strictly followed.

Garibi Rekha Nahi Amiri Rekha

Any attempt at the remaking of a Budget would mean more fundamental changes at policy levels and a different approach to economy which will take us towards a more socially responsive, just and equal society. The expanding inequality forces us to rethink and demand a 'Amiri Rekha' rather than a 'Garibi Rekha'. Based on this also our taxation system need to change, the elite in India corner a large chunk of the benefits of the system provided. The system of direct taxation on income makes middle classes believe that they have a larger claim to the services but the fact remains that indirect taxes paid by everyone contribute the maximum, which has a wider coverage. However, indirect taxes raise prices, all other things being otherwise unchanged. They lower the real value of the earnings of the non-properties. Only the rich benefit since they have to pay much less of direct taxes. By raising the inflationary pressures these taxes have resulted in demands for subsidies in fertilisers, exports and food grains.

Incomes of the top 5% in the urban sector and 1% in the rural sector, who would also be above Amiri Rekha need to be tapped through direct taxes. There is a need to move away from the present structure of a high share of indirect taxes in the tax revenue to a high share of direct taxes. Today the collection from the wealth taxes are meagre and infact has remained stagnant over years now. Property tax needs to be resurrected so as to make income from work more desirable than mere inheritance. Hence, the property of those above the Amiri Rekha should be taxed and the direct and indirect tax burden on everyone else should be removed.

It is a worrisome sign that today 77% of our Ministers (59 out of 77) and more than 300 MPs are crorepatis based on their declarations to Prime Ministers Office (PMO) and to Election Commission. The average asset value of a minister's assets in the current ministry is Rs. 10,63,55,097 (Rs 10.6 crores). In 2009, the average asset value of a minister was Rs 7.3 Cr. This is not a healthy sign for Indian polity and democracy. This means many currents of thought do not find expression in our present political system and therefore in the Parliament. The political process is representing the power structure and reinforcing it; in the Parliament they only have formal representation. Neo-liberal reforms and policies illustrate the face of the non-representativeness of the parliament.

Comparing the situation then there is greater hunger, poverty, agrarian crisis of unprecedented dimensions causing number of farmers committing suicides and a financial crisis hinged on volatile multinational capital. It is now universally accepted that the 'benefits' of growth have been appropriated by an infinitely small privileged sections of the Indian society. However, instead of learning any worthwhile lessons from the imminent collapse of the neo-liberal 'reformist' programme (in the sense of moving further away from the declared and desired outcomes), this very failure is being used to push for more policies favouring big capital – both national and international (favouring both big capitalist conglomerates and highly capital intensive technologies).

One of the principle goals of the policies need to be universal employment in a short time frame, which can't and need not be limited to manual labour through NREGS. This would mean changes not only in economic policies but changes in many other policies and shifting our priorities as a nation. We will need to increase expenditure on social sectors, rural infrastructure, small scale sector, improved purchasing power of the poor etc. We also need to force the elite to move away from speculative activities and futures trading to productive activities and contribute to the all round development of the nation. The elite should prosper through the prosperity of the nation and not at its expense so as it does today through the black money and inflation.

With the reductions in indirect taxes on basic goods, the cost of inputs into agriculture will decline and farmers will have a greater quality of life. Increased expenditure in social sectors will help enhance the living conditions of the populace. Reduced speculative activities in real estate and lower land prices in rural and semi urban areas would lead to enhanced access to housing for the bottom 80% of the population in these areas. They would not have to be in squatters, living in various shades of illegality.

Reduction in waste by the top 3% of the population would release a vast quantity of resources for the other 97%. this would go a long way in improving the conditions by preserving forests, bio mass, rivers, and mineral resources, by reducing displacement etc.

But more importantly, the whole focus on planning need to be bottom up from the Gram Sabha in villages and Basti Sabha in urban centres and our Budget has to reflect this reality.

External Debts

We are also concerned about the fact that India has a huge loans and liabilities from multilateral donors like World Bank, ADB and other IFIs and an equally huge amount is paid towards payment of interests and commitment charges, see as under. If the government that has no money for a universal PDS or even an enhanced one and is moving towards a dangerous course of cash coupons, then the huge external debt and waiver of corporate taxes is a serious cause of concern. By governments own admission the daily average net per capita availability of foodgrain for the five year period 2005-09 is actually lower than it was in 1955-59 — half-a-century ago, this has to be addressed.

External debt (as per MoF, in reply to RTI questions, Aug 2011)

(INR Crore)

Institution	2009-10	2010-11
World Bank	17979	23757
ADB	4036	5584
JICA[1]	11151	2557

Details of interest payable for such loans contracted from 2009-11 are:

(INR crore)

Institution	2009-10	2010-11
World bank,	25.03	78.10
ADB	0.31	5.23
JICA	0.00	0.00

External outstanding Debt (to all bilateral and multilaters) as on 31^st March 2011 on Government Account was USD 69,990.324 Million (Rs. 3,49,950 crores).

Rs. 27.28 crore and Rs. 18.63 crore has been paid to World Bank (IBRD) towards commitment charges (for not utilizing the sanctioned loan) for the year 2009-2010 and 2010-11

We urge you to bring a parliamentary oversight on these financial transactions. The parliament has a right to know about these transactions and so is its citizens.

Corporate Tax Waivers

We would also like to reproduce below an excerpt from an essay of P Sainath, on the waiver of corporate tax. This is something which we feel government urgently need to address. Since, increased spending on the social sector schemes is not undertaken due to lack of funds but corporates are being given such huge waivers

Parts of an article by Sainath on 2011-12 budget, as appeared in The Hindu, dt March 7, 2011

A staggering Rs. 88,263 crore tax waiver was given to the CEOs of the country in the 2011-12 Union budget. an increase of 155 per cent from 2005-2006, when the tax waiver was for Rs.34,618 crore.

In six years from 2005-06, the Government of India wrote off corporate income tax worth Rs.3,74,937 crore — more than twice the 2G fraud — in successive Union budgets.

In 2011-12 budget: while writing off this gigantic sum for corporates, slashes thousands of crores from agriculture. As R. Ramakumar of the Tata Institute of Social Sciences (TISS) points out, the revenue expenditure on that sector “is to fall in absolute terms by Rs.5,568 crore. Within agriculture, the largest fall is to be in crop husbandry, with an absolute cut of Rs.4,477 crore.”

If we add to this corporate karza maafi, revenue foregone in customs and excise duty — also very largely benefiting the corporate world and better off sections of society — the amounts are stunning. Try diamonds and gold. This accounts for the largest chunk of all customs revenue foregone in the current budget. That is, for Rs.48,798 crore. Or well over half of what it takes to run a universal PDS system each year. In three years preceding this one, the customs write-off on gold, diamonds and jewellery totalled Rs.95,675 crore.

Total revenue foregone on customs duty in the 2011-12 budget: Rs.1,74,418 crore.

Revenue foregone on account of excise duty in 2011-12 budget: Rs.1,98,291 crore. Clearly more than the highest estimate of the 2G scam losses. (The preceding year: Rs.1,69,121 crore).

How much does revenue foregone under corporate income tax, excise and customs duty add up to across the years? Budget figures for six years starting 2005-06, when the total was Rs.2,29,108 crore. budget where it is more than double that sum at Rs.4,60,972 crore. Add up the figures since 2005-06 and the grand total is Rs.21,25,023 crore. Or close to half a trillion U.S. dollars. That is not merely 12 times the 2G scam losses. It is equal to or bigger than the Rs.21 lakh crore sum that Global Financial Integrity tells us has been siphoned out of this country and illegally stashed away in foreign banks since 1948 ($ 462 billion). Only, this loot has happened in six years starting 2005-06. The current budget figure for these three heads is 101 per cent higher than it was in 2005-06.

(P. Sainath : http://www.thehindu.com/opinion/columns/sainath/article1514987.ece)

Education

Every school in the country should be a model school in the lines of common school system. Free Education should be given to all up to 18 years of age. At least 6% of the GDP should be allocated for the School Education.

In year 2010-11, allocation for model School Scheme had increased from Rs. 350 crore in 2009-10 to Rs. 425 crore in 2010-11.Then the allocation was increased by 16.1% in year 2011-12 based on revised estimates. But allocations for Sarva Siksha Abhiyan was Rs. 21,000 Crores based on the revised estimates which was 10.1% higher than earlier. But still the long-overdue promise of raising government spending on education to 6 percent of Gross Domestic Product (GDP) is yet to be fulfilled. At present, the country's total government spending on education is about 3.4 percent of GDP (as of 2008-09), which is way below the benchmark that had been recommended more than 40 years ago by the Kothari Commission Report.

Hence, the Union Government needs to take adequate measures towards increasing the country's total budgetary spending on education significantly. It needs to be ensured that the Right to Education (RTE) Act actually delivers on its promise of providing free, compulsory and quality education to all children. In 2011-12 the total budget allocation for education was increased to Rs. 52,000 cr but the more was increased in the higher education sector and even the government invited foreign universities to establish their India Campus. Hence, there is need for straightening our priorities.

Health

The United Progressive Alliance government had made a commitment in 2004 to raise the country's total budgetary spending on health to 2 - 3 percent of GDP. However, even in 2009-10, India's total budgetary spending on health was only 1.06 percent of GDP. Hence, the Union Government needs to take adequate measures towards increasing the country's total budgetary spending on health significantly but with a aim to provide Universal Health Care (UHC) and not only provide incentives to promote the business of health and support medical tourism.

Our investments in the future generation depends on the adequate support to every child under six, who need be provided with adequate health, nutrition and pre-school education facilities. Schools and Health Care centres must have adequate number and variety of teachers and doctors, respectively. It is ironical that on one hand we have a huge unemployment problem and on the other shortage of teachers, doctors and other employees like the Village Development Officers, BDOs, etc., so crucial for development.

We urge that union Budget must try and achieve UHC with an aim to ensure equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services.

Housing and Employment and Social Security in Rural and urban Areas

Every year the Budgetary provisions to programmes under Bharat Nirman, which includes Pradhan Mantri Gram Sadak Yojna (PMGSY), Accelerated Irrigation Benefit Programme, Rajiv Gandhi Grameen Vidyutikaran Yojna, Indira Awas Yojana, National Rural Drinking Water Programme and Rural telephony. However, even then the total amount is not enough. The top down plan allocation continues to remain the problem, since the plan allocations are made at the level of Parliament and Legislative Assemblies but the actual implementation of these services and facilities are done at the local level by the lowest levels of bureaucracy and government institutions like Gram Sabha, Gram Panchayats and others who have no role in the overall plan development. They are at the end of this chain who are given a limited amount of plan money to implement the already sanctioned amounts from top.

The fact that affordable urban and rural housing still remains a dream for many the Union Budget must make higher allocations for these and more so under the Indira and Rajiv Awas Yojana. It is needed to meet the shortage in rural housing as per the estimates provided by the Working Group on Rural Housing, which is 474.3 lakh (estimated for the plan period of 2007-12). Also, housing provided should be compliant with environmental and health standards.

The allocations under the NREGS continue to increase over last five years but to keep the wages lower than the minimum wages makes no sense. We demand that let there be a Optimum Wages for each sector which is linked to the calorie intake and be comparable with the income of the organised sector employees in the related class category. Minimum 315 Rs. Per person per day in urban and Rs 250 in rural areas could be the starting point. Agricultural labour wages, for small farmers, should be paid through NREGS, till an equity is achieved between agricultural and industrial sector is achieved. The guarantee of wages should be to individuals and not to the entire family and should extend to all round the year.

The Parliamentary Standing Committee on Labour Introduced the following schemes for the Un-organised sector workers-

Social Security Schemes for the Unorganised Sector Workers

1. National Old Age Pension Scheme.

2. National Family Benefit Scheme.

3. National Maternity Benefit Scheme .

4. Mahatma Gandhi Bunkar Bima Yojana.

5. Health Insurance Scheme for Handloom Weaver.

6. Scheme for pension to Master Crafts persons.

7. Group Accident Insurance Scheme for Active fishermen.

8. Saving-cum-Relief for the fishermen.

9. Janshree Bima Yojana.

10. Aam Admi Bima Yojana.

11. Swasthya Bima Yojana.

But instead of implementing these schemes government of India in its budget in 2010-11 introduced the scheme of Swavalamban for the Unorganised sector workers which means to generate and save money for the future. But it was got relaxation in the next budget of 2011-12. National Social Security Fund for unorganised sector workers proposed to be set up with an initial allocation of Rs. 1000 crore in 2010-11 is nothing given the fact that they nearly contribute 65% to the total GDP. It should be atleast 30,000 Crore to start with as per the recommendations of the Parliamentary Standing Committee.

It is estimated by the Parliamentary Standing Committee that the workers in the unorganised sector constitute more than ninety-four per cent. of the total employment in the country. On account of their unorganised nature, these workers do not get adequate social security. Some welfare schemes are being implemented by the Central Government for specific groups of unorganised sector workers such as beedi workers, non-coal mine workers, cine workers, handloom weavers, fishermen, etc. State Governments are implementing welfare programmes for certain categories of unorganised sector workers and some Non-Government Organisations also provide social security to certain categories of workers. Despite all these efforts, there is a huge deficit in the coverage of the unorganised sector.

Agriculture

Agriculture should be given highest priority with preferably a separate budget. The difference between crop and non-crop agricultural loan should be abolished. The loan should be interest free. In no case the interest should be more than 4% and it should be simple interest. Compound interest should not be applied in the case of farmers. The approval of wife should be necessary if a man is applying for loan. In fact wife should be treated as head of the family, as is being proposed in the Food Security Act, for all schemes where family is the beneficiary. Minimum support price should be replaced by profitable price which should be more than the investment by the farmer. The prices of fertilisers, seeds and diesel should be under control or subsidised. Farmers should be encouraged to shift to organic farming so that their dependence on market reduces. Adequate storage capacity in the form of godowns, preferably in every Gram Sabha, should be created so that food grains are not wasted and the farmer can sell it when he/she feels appropriate. Agriculture based cottage industry should be encouraged to strengthen rural economy.

Allocations for National Agricultural Insurance Scheme was reduced to Rs. 950 crores in 2010-11 from Rs.1219 crores in 2009-10. In the year 2011-12 government allocation for Rashtriya Krishi Vikas Yojana was increased from Rs. 6755 crore to Rs. 7860 crore. On one hand government expects the agriculture sector to grow 5.4% in 2011 and on the other hand it acquires agricultural land for non agricultural purposes. Green Revolution to Eastern Region for Rs. 400 crore has been made. Allocation of Rs. 300 crore was made to promote pulses in villages in rain fed areas in 2011-12. Allocation of Rs. 300 crore was made for implementation of vegetable initiative to provide quality vegetable at competitive prices. Government has planned to promote organic farming methods combining modern technology with traditional farming practices. In 2010-11 Rs. 5.02 lakh crore was given as tax exemption to the industries and provided another Rs 1,38,921 crore as corporate and personal tax exemptions in 2011-12 but in agriculture sector it only extended six months for loan repayment and interest rate to 4% who repays the tax in time. Since 2005-06, the total subsidy being showered on the industry and business sector amounts to a whopping Rs 16.45 lakh crore and the farmers in Vidarbha in Maharashtra and in many parts of Andhra Pradesh are committing suicide failing to repay the loan. Budget allocation should be made towards the dry land and rain fed agriculture lands.

For small and marginalised farmers simple and affordable loan system should be in place. Farmers should get compensation in cases of defective seeds. Traditional seeds should be encouraged rather than the seeds being sold by the MNCs. Government should buy the products from the farmers in adequate market rate. (See for details attached submission from our allied network ASHA)

Food Security

Universalised PDS should be enacted to secure food security for all.

In 2010-11 food subsidy reduced to Rs. 55,578cr from Rs. 56,000 cr. But in 2011-12 government had launched National Mission for Protein Supplements with outlays of Rs. 300cr. The Food Security Bill is still pending with the Government of India to be tabled. A provision of Rs. 300 crore was being made to promote higher production of nutri- cereals like Ragi, bajra to upgrade their processing technologies and create awareness regarding their health benefits. In 2009, the government had promised for National food security act and Universal ICDS by 2012 and 25 kgs of Rice and wheat at Rs. 3 per kg for the BPL families.

No food coupons, cash transfer should be implemented in any form since that will encourage betrayal of the poor by the Market.

Community kitchens, on the line of 'langars' in Gurudwaras, should be encouraged especially from religious and public places to take care of problem of malnutrition as a supplement to the government's Food Security Act. Food subsidy in the union budget should be increased significantly which has been reduced. Budgetary allocation for the village grain bank scheme should be increased. (See for details attached submission from our allied network ASHA)

Energy

The total budget allocation for Energy sector was Rs. 1, 26,225cr. in 2010-11 and Rs. 1,55,495 in 2011-12, where the allocation for Atomic energy was Rs.7628 cr. and Rs. 1,0012 cr. Respectively and for new and renewable energy the allocation was Rs.2492 cr. and Rs. 2150cr respectively in year 2010-11 and 2011-12. National Clean energy fund was still to be established. Instead of Atomic energy Solar energy and other renewable energy forms should be strengthened through maximum allocation. Performance by the energy sector in terms of electricity generation has been very poor in the years 2005-06. Total utility capacity of the sector is high but has serious regional imbalances. The government has been abdicating its responsibility to adequately invest in power sector and relying more and more on private sector initiatives. The government should ensure adequate power supply at affordable prices to the consumers all over the country.

Even while we do realise the need to provide energy sources to the whole country but the Integrated Energy Policy has miscalculated and exaggerated the energy requirements and as a result sanctions have been given to nearly 7,00,000 MW of electricity generation by now itself, whereas the total target projected by IEP is to have a capacity of 8,00,000 MW by 2032. This is taking away large chunk of financial allocation and putting a serious constraint on the natural resources of the country and is already causing environmental havoc and assault on the livelihood of millions of the farmers, dalits, adivasis, women and other nature resource based communities.

Water

It is internationally known and concluded by research that ground water and decentralised water harnessing and management gives best results through efficiency and need based distribution. However, India has continued to follow centralised (large dams and water projects), which is wasting financial resources and degrading catchments to land in the command. This should be given priority in the Budget allocation. Planning Commission should be reviewing post facto, projects and schemes like AIBP as basis for further financial allocation in the water sector.

Defence and Internal Security

Every year the government spends around Rs. 90,000 crores of money on defence services which is nearly 2.5% of the GDP. But the fact remains that the money spent on the internal security remains even less than 1% of its GDP. If the responsibility of the government is to protect its citizens, then it simply needs to spend more on equipping, training, and undertake adequate reforms to achieve greater efficacy and ensure that worst policing has a more humane face.

These are some of the brief suggestions to some of the sectors. In short :

Most people live outside the budget and hence more than the Growth percentage social indicators, hunger index etc. should be the basis for planning the Budget. GDP was expected to grow by 9% but the actual growth is more in the 7% range. India escaped the worst effects of economic crisis of 2008 to the extent that it wasn't integrated into the world financial system

If RBI can intervene to contain currency volatility why can't the Govt. Intervene when basic food prices become volatile ?

No hiking of indirect taxes (that affect the poor) while giving direct tax concessions that benefit the better off. We need to start taxing the property and over a period of time do away with the indirect taxes. Export-dependent growth is not sustainable and self-reliance in food and other social sectors should be the target.

Budgetary deficits need to be addressed but can't be sustained if government continues to give tax waivers & incentives to corporate sector and continues to undervalue the natural resources and mines and minerals of the country.

Given the fact that Place of agriculture in GDP is falling there need to be a separate Agriculture Budget which preserves traditional seeds and knowledge, supports farmers with credit, prices of their labour provides promotion of organic farming and industrial policy which doesn't promote land acquisitions of farm land.

Our aim has to be Universal PDS as against direct cash subsidy combined with exemplary punitive action against hoarding, speculation & corruption in the PDS system; universal Employment, Education and Health.

No FDI in retail

Public transport need to be supported and incentives to auto industry should stop, it is not going to help us meet the challnge of climate change in years to come unless we start planning from now on. An economy based on the oil imports will have serious consequence on the social indicators and marginalised sections of the society will be the worst victims of this process.

No tourism incentives – especially in tribal areas for the havoc they wreak (it is a State subject)

Indiscriminate disinvestment in profit-making PSUs must not be allowed as it is like deficit financing. In the name of industrial and infrastructural development we are pursuing a policy of privatisation and Public Private Partnership which is only benefiting the corporations who are making huge profits. The 2G scam and many other scams are a result of these policies of indiscriminate privatisation and policy corrections need to be made.

We do hope that the new Budget will take in account our suggestions since the failing social indicators will have a bearing on the economic policies too. The writing is clear that the 'economic reforms' are not working for everyone and a tiny elite is largely benefiting from this. A serious policy course correction is the need of the hour and we hope Finance Minister will not let the country down.

Yours Sincerely,

Medha Patkar Sandeep Pandey Swami Agnivesh Prof. Arun Kumar

Roshan Lal Agarwal Madhuresh Anand Mazgaonkar

Geetha Ramakrishnan Sunilam

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