Mid-yr review warns of stress on expenditure

The review has also called for a look at completion of the ongoing projects before releasing more funds and has called for prevention of parking or diversion of funds or indiscriminate advance payments.

However, stating that there is no necessity at present to take any recourse to reduction of budgeted outlays, the review has categorically stated that remedial measures will be considered and taken after the receipt of the report of the Twelfth Finance Commission.

The review, tabled in Parliament, has stated that the slippages in achieving the FRBM target of revenue deficit was due to sluggish growth in overall tax revenue in the first half, which has been 20 per cent against 25 per cent assumed in the budget.

This in turn was largely attributable to normal lower collection in the first half of the financial year, delay in passage of Finance Act and to some extent due to post-budget duty concession.

The government had announced duty cuts in petro-products, steel, polymers and edible oils to rein in inflation, which had touched a four-year high of 8.33 per cent in August in view of surging global crude prices.

Even Finance Minister P. Chidambaram agreed that there has been shortfalls in revenue collections. Chidambaram said income tax, corporation tax and customs duty collections were on target, but excise duty collections were ‘‘slightly behind’’ because of the duty cuts undertaken twice to contain petro prices in the face of surging global crude oil prices.

Stressing the need to carry forward tax reforms, the review said the commitment to lower customs duties to Asean level remained and implementation of VAT from April 1, 2005 would remove several distortions in the existing indirect system.

Further measures, aimed at streamlining taxes and broaden the tax base, which are in the pipeline, need to be implemented, the review said.

It also called for a relook into the laws and procedures that underpin tax policy.