People's Democracy

CITU Inputs For Union Budget 2005-06

Pre Budget Consultation With FM

Following is the text of the memorandum submitted by the Centre of Indian Trade Unions (CITU) to the union finance minister P Chidambaram on January 12 during the pre-budget consultation meeting with trade unions held by the finance ministry.

CITU president M K Pandhe and general secretary Chittabrata Majumdar attended the meeting on behalf of the CITU.

WHILE welcoming re-initiation of pre-budget consultation process last year, we expressed a hope that the practice of holding a post-budget discussion with the Central Trade Union Organisations (CTUOs) would also be resumed. Then, the finance minister also responded positively, but unfortunately it was not held. We sincerely hope this practice will be resumed at least this year.

We also urge that the finance minister, as part of budget presentation, should also bring out a compendium of the suggestions made during the pre-budget consultations last year, indicating the manner in which the ministry had responded thereto. This will help establish the purposefulness of the pre-budget consultation process itself and revitalise the same.

The first budget of the present UPA government highlighted the following seven clear economic objectives spelt out in the National Common Minimum Programme (NCMP):

1. Maintaining a growth rate of 7-8 per cent per year for a sustained period

2. Providing universal access to quality basic education and health

3. Generating gainful employment in agriculture, manufacturing and services, and promoting investment

4. Assuring 100 days’ employment to the breadwinner in each family at the minimum wage

5. Focusing on agriculture and infrastructure

6. Accelerating fiscal consolidation and reform

7. Ensuring higher and more efficient fiscal devolution.

For a good measure, the last budget emphasised: ‘The government has to shift gears.’

Unfortunately, we have not witnessed any ‘shifting of gear’ in respect of macro economic and financial policies, which would have served as necessary tools for achieving the first five of the above noted objectives. Here, it is necessary to bear in mind that the CMP promised “to ensure that the economy grows at least 7-8 per cent per year in a sustained manner over a decade and more and in a manner that generates employment so that each family is assured a safe and viable livelihood.” Disappointingly what we have witnessed is only a pursuit of the very same anti-poor fiscal policies of the previous NDA regime, which led to its downfall. We urge that it is imperative that at least the union budget 2005-06 should be marked by a clear ‘shifting of gear’ that can give credibility to the solemn commitments made in the CMP and win people’s confidence.

During the consultation last year, we had dealt with in detail the issue of resource mobilisation, giving ample suggestions. The fact that those had not been taken into account is testified by the candid admission in the Mid-Year Review presented by the Ministry of Finance in December 2004 as follows:

“Asian countries in general have low tax-GDP ratios compared to OECD countries. India’s tax-GDP ratio is even lower than that in many Asian countries … that requires to be addressed to correct the persistent stress in central government finances.”

In this backdrop, it is beyond comprehension how the much needed fiscal correction can be brought in by continued conferring of largesses on private, domestic and international, corporates in the name of tax rationalisation and by way of duty exemptions, which has marked the approach of the government so far.

On the expenditure side, the only head under which there had been a decrease, in non-plan expenditure to the tune of Rs 4,444 crore, is ‘food and petroleum subsidy’. Needless to point out, both of these affect the common public. Similarly, widening the tax net downwards affecting the common people, leading to further compression of demand, instead of targeting the rich and the affluent for raising the tax-GDP ratio is also not desirable.

While the CMP stated the UPA government commitment ‘to a strong and effective public sector’ and that ‘profit making companies will not be privatised’, the finance ministry is seeking to redefine the ‘public sector companies’ from the present definition of ‘wholly-owned undertakings of the Government of India’ to those where the ‘government holding will be restricted to 51 per cent’. In the name of encouraging the public sector companies and nationalised banks to ‘enter the capital market to raise resources’, the government is diluting its stake in these companies, by putting their shares on sale, instead of taking recourse to the ‘debt market’ route, even where there is excess liquidity in the financial system. We are opposed to such redefining of the public sector concept and indiscriminate disinvestments, riding piggyback on IPOs, which is contrary to the commitment made in the CMP. We demand measures to strengthen the public sector in order to equip them to effectively discharge their social objectives.

Here, we also record our resentment over the unilateral move towards ‘mega-merger’ of the nationalised banks, without even having a dialogue with the unions of bank employees and officers, despite the CMP having promised ‘tripartite consultations with trade unions and industry on all proposals concerning them.’ Similarly, the recent policy pronouncements, intended to permit foreign investment in private sector banks up to 74 per cent paving the way for they being gobbled up by foreign banks, are also deeply flawed and detrimental to the interests of the financial sector of the country.

We had raised several issues arising out of the proposals mooted in the budget for the last year. We deplore that the finance ministry had chosen to persist with those proposals, ignoring the sensitivities of the trade union movement. They relate to increasing the Foreign Direct Investment ceiling in civil aviation, telecommunication and insurance sectors, lowering of the interest rate on the EPF, GPF and small savings, refusal to raise the income tax exemption limit and instead resorting to a clever manoeouvre that failed to respond to the expectations of the salaried class, continuing the recourse to subject the welfare- related perquisites of employees to taxation, continuing with the removal of quantitative restrictions on imports to the detriment of indigenous producers, de-reservation of 85 items from the list reserved for small-scale sector, giving a final shape to the switchover to defined contribution pension system for the new recruits in government service and the like. Most of these are the legacies of the previous NDA government, which the present government has chosen to carry on its shoulders. We urge that the next budget should make due amends in these areas.

Our specific demands in these areas are:

• Rescind/drop the move to enhance the FDI ceiling in civil aviation, telecommunications and insurance sectors.

• Enhancement of the interest rate on EPF, small savings, GPF, PPF, etc to 12 per cent

• Raise the exemption limit of Income Tax to Rs 1 lakh (with standard deduction) or Rs 1.5 lakh without standard deduction.

• Withdraw the taxation on welfare related perquisites of workers like medical benefits, leave travel concession, education, housing loans at concessional interest rates, transport, canteen facility, availing quarters and related amenities etc.

• Extend the benefit of standard deduction to pensioners, retirees and self-employed.

• Withdraw the Ordinance on the Pension Fund Regulatory and Development Authority and hold discussions with the trade unions on their pension and other social security related matters.

• Review the list of items reserved for small-scale sector with a view to restore the items dereserved in the past.

• Re-impose quantitative restrictions on import of goods, particularly those produced by small scale and rural sectors.

We had, during consultations last year, urged speedy enactment of the Employment Guarantee legislation as per the promise contained in the CMP. We are dismayed at the complete dilution of the CMP commitment in the related Bill that had been introduced in the winter session of the parliament. We demand a drastic restructuring of the legislation, covering all rural and urban households, with appropriate financial allocations from the central budget.

While the CMP had committed to undertake a review of the Electricity Act, 2003, the government had done practically nothing in that direction except extending the deadline of June 10, 2004 for unbundling and replacing the state electricity boards. We take exception to the steps that are presently under way, as noted in the Mid-Year Review, for preparation of a National Electricity Policy under the provisions of the same Electricity Act, 2003, without undertaking the promised review. We urge immediate steps to honour the CMP commitment for review in this regard.

Citing the continuous increase in international oil prices, the government had hiked the prices of petro-products, which is a direct attack on the common people, attendant with high inflationary potential. We demand a roll back of these hikes. We also demand drastic measures to check the rising prices of essential commodities and the run away inflation.  

We had urged steps for speedy enactment of Agricultural Workers' Bill, providing employment regulation, minimum wages and social safety, and Unorganised Sector Workers’ Bill in line with the unanimous conclusions drawn from a tripartite workshop thereon. The first one has not even been taken up for consideration, while on the second one this government seeks to traverse the same path of the NDA regime, which resorted to an election-eve gimmick with a bogus scheme of social security for unorganised sector workers. We demand speedy steps be taken on both these legislative measures, in line with the CMP commitment to ‘ensuring the welfare and well being’ of these totally unprotected and destitute sections of the working population.

Besides the above, we reiterate the following suggestions, which we raised during last year consultation:

•  Land reforms and bringing rich farmer/farmhouse owners under tax net.

• Strengthening of Public Distribution System; augmenting supply of kerosene through the PDS.

• The government should set up a separate department for Industrial Reconstruction to monitor sickness at incipient stage and take preventive and predictive measures.  It should also look into re-utilisation of assets of closed units for industrial purposes, wherever possible.

• Creation of an appropriate mechanism for protection of small scale industries against unfair competition with large units of MNCs, along with concessional credit facilities.

• Import duty on coal should be restored to 1998 level.

• Evolving of a national social security policy to provide a comprehensive scheme covering all sections of workers and extending relief to those who are involuntarily unemployed for early implementation.

• Appointment of new review committee, with due representation to the CTUOs, to devise a transparent mechanism of compiling the cost of living indices.

We are conscious that implementation of suggestions like the above need a substantial resource mobilisation effort. For this again we had suggested steps like ensuring better tax compliance, curbing tax default, realising the outstanding bank loans and tax arrears, augmenting direct tax revenues by broadening the tax base and incidence on the vastly affluent and rich landlord sections, mobilising domestic resources by launching long term development bonds etc.

In this regard as well, we note that the amount of outstanding dues on income tax, corporate tax, custom duty and excise duty continues to record unabated increase. The amount of tax arrears, which was Rs 47,000 crores in 1997-98 and Rs 87,000 crores in 2001-2002, has gone up to Rs 99,183 crore as on September 1, 2004, as per the above cited Mid-Year Review. The defaulters, who mainly comprise the corporates, industrialists and super rich, have been taking recourse to raising of disputes on assessment as an easy route for deferment of tax dues for years together. We had suggested and reiterate again that as in the case of common man using electricity, telephone, etc., the disputants in such cases should also be compelled, through appropriate legislation, to pre-pay the tax amounts as assessed as a condition precedent to consideration of their disputes. Similarly, stringent measures should be taken for recovery of unpaid loan from defaulters in nationalised banks, with specified target set out in the budget. We also urge taking up a rigourous and coercive drive towards tapping of black money.

We also wish to record our strong resentment at the attempts to target the subsidies that have been providing at least some relief to the poor and common people as a sole arena for resource mobilisation effort. We urge for a change in the mindset that the poor and middle class have themselves to make ‘sacrifices’ and shell out moneys for even such welfare measures that are direly needed.

The defeat of the NDA regime and assumption of office by the UPA government at the centre after the last general elections is a mandate for a pro-people change in the economic and fiscal policies, besides rejection of the politics of hate and communal frenzy pursued by the previous ruling dispensation. We only wish that this government correctly imbibe the meaning of the mandate of the people and take steps to meet their genuine aspirations. Viewed from this angle, the last budget and subsequent steps had been a total disappointment. We hope that the ensuring budget will mark a departure from this path and urge the same.  

(January 12, 2005)

(INN)