Inflation not to cross 5 pc next year — Govt

The impact of fiscal deficit would be kept to a minimum due to additional resource mobilisation, reduction in subsidy and expenditure control measures.

On the increase in the prices of PDS items meant for below poverty line (BPL) people, Mankad said this would be more than offset by the doubling of the quantity being supplied to them. Each family stood to gain at least by Rs 30 per month despite paying higher prices as earlier they were buying commodities from the open market as well to supplement the ration supplies.

As a result of larger supplies, the subsidy component for the BPL sections would in fact rise by Rs 2,200 crore, he said. BPL families would now pay Rs 4.20 per kg of wheat, against Rs 2.50 at present, and Rs 5.89 per kg of rice, against Rs 3.50 at present.

For above poverty line (APL) people, wheat would be sold at the economic price of Rs 8.40 per kg and rice at Rs 11.78 per kg. By removing their subsidy component for the APL families, the government would be saving Rs 2,260 crore.

Even after the hike, the BPL families would be paying only 50 per cent of the economic cost. The decision in this regard was taken much earlier by the cabinet.

The finance ministry officials also allayed fears that the cut in the fertiliser subsidy would affect agricultural production. Still each metric tonne of urea has a subsidy of Rs 4,029 as the cut amounted to only Rs 783 per metric tonne, they said.

Asked whether small and marginal farmers who did not have marketable surplus would lose, they said the government had no dual pricing of urea. A paper was being prepared by the chemicals and fertilisers ministry for the retention price scheme.

The officials said they would be able to garner more than Rs 10,000 crore through disinvestment and the target had deliberately been kept low as during the current financial year they could only collect Rs 2,000 crore. Several public sector undertakings have been lined up for disinvestment and the disinvestment ministry would decide when to offload taking into account the market conditions.

As regards banking, the disinvestment would be up to 33 per cent and widely held by the public. The government would retain management control. The portfolio would go to small shareholders and there would be a built-in provision where no one can control more than what the government fixed.

As in the case of non-strategic PSUs, the procedure would not be of strategic sale in banks. What the government intended to do was to enable weak banks to meet the capital adequacy norms and raise funds for expansion by removing the 51 per cent barrier.

The gross domestic product (GDP) has been projected at 12 per cent in nominal terms and seven per cent in real terms.

Giving details of the basis of customs duties, the officials said the total import bill has been put at $ 53.47 billion, of which non-oil imports accounted for $ 35.8 billion and oil imports for $ 13.6 billion and gold for $ 4.35 billion.

The exchange rate was assumed at Rs 45 to a dollar and non-oil imports was to grow at 10 per cent.

On macro-economic imbalances, they said the government had tried at fiscal consolidation without affecting economic growth. The incentives for the knowledge-based industry was aimed at this.

The special excise duty was applicable to only 14 per cent of consumer goods, mainly luxury items such as airconditioners and tyres, while 86 per cent was covered by a single duty excise of 16 per cent, which would now be called central value-added tax (Cenvat).

The changes marked a major restructuring of indirect taxes, they said. Further, the manufacturer would now be paying excise every fortnight, instead of daily, and without maintaining a separate statutory record. The documents produced by the assessee would be the basis for the evaluation.

Securitisation of state electricity boards would be Rs 20,000 crore which would be raised through tax free five-year bonds to be guaranteed by the state governments and counter-guaranteed by the Centre. Up to 15 per cent would be central assistance to states.