Minister of Finance
February 28, 2007
Mr. Speaker, Sir
It is my privilege to present the Budget for 2007-08.
I. A MID-TERM REPORT CARD ON THE ECONOMY
2. In November 2006, the UPA Government crossed the midpoint of its term of office. A midterm report card can now be presented. There are many pluses and a few minuses, and I shall deal with both candidly. The biggest plus is that the growth rate of GDP has improved from 7.5 per cent in 2004-05 to 9 per cent (Quick Estimate) in 2005-06 and, according to Advance Estimate, to 9.2 per cent in 2006-07. The average growth rate in the three years of the UPA Government is, therefore, 8.6 per cent. Thanks to this impressive performance, despite the poor start in 2002-03, the growth target set for the Tenth Plan of 8 per cent will be nearly achieved.
3. Manufacturing is the main driver of growth, and this augurs well for the future. In the three years of the UPA Government, the growth rate in manufacturing has accelerated from 8.7 per cent to 9.1 per cent and further to 11.3 per cent. The services sector continues to maintain impressive growth and has recorded, in the three years, a growth rate of 9.6 per cent, 9.8 per cent and 11.2 per cent respectively.
4. On the other hand, the agriculture sector has witnessed sharp ups and downs. Average growth during the Tenth Plan period is estimated at 2.3 per cent, which is below the desired level of 4 per cent a year. About 115 million families are classified as farming families. Furthermore, a country with a large population has to be nearly self-sufficient in essential food items; otherwise supply constraints could upset macro economic stability and growth prospects. Hence, agriculture must top the agenda of the policy makers and must hold the first charge on our resources. In a short while, I shall place before this House a number of proposals in this regard.
Income and Savings
5. To continue with the report card, per capita income in 2005-06, in real terms, increased by 7.4 per cent, and the savings rate has been estimated at 32.4 per cent and the investment rate at 33.8 per cent. Intuitively, I believe that these high rates have continued in the current year too.
6. The UPA Government has remained committed to economic reforms, fiscal prudence and monetary stability.
7. Revenues are buoyant for the third year in succession. We have garnered additional revenues and, as Honourable Members will notice presently, I have put these revenues to good use to promote inclusive growth, equity and social justice - goals that are at the core of the National Common Minimum Programme (NCMP) and close to the hearts of the UPA, its Chairperson and the Prime Minister.
Outlook on Inflation
8. Until February 2, 2007, bank credit, year on year, had grown by 29.6 per cent. Money supply (M3) had expanded by 21.3 per cent. Foreign exchange reserves stood at US$ 180 billion. While these are concomitant features of high growth, it cannot be denied that these monetary trends have put pressure on prices. Global commodity prices have also exerted pressure on domestic prices. At the same time, supply constraints have emerged in some essential commodities such as wheat, pulses and edible oils. Consequently, average inflation in
2006-07 is estimated at between 5.2 and 5.4 per cent, which is higher than 4.4 per cent last year. I wish to reiterate Government's concern over inflation. Government has already taken a number of measures on the fiscal, monetary and supply sides to maintain price stability and, if required, will not hesitate to take more measures. When the UPA Government assumed office in 2004, the inflation graph was on the rise; but we succeeded in moderating inflation and we are confident that we can moderate the present inflationary trend too.
II. BHARAT NIRMAN AND THE FLAGSHIP PROGRAMMES
9. Bharat Nirman remains the cornerstone of the Government's policy. I am glad to report that in the current financial year:
• Additional irrigation potential of 2,400,000 hectares, including 900,000 hectares under AIBP, will be created;
• Drinking water has been provided to 55,512 habitations until December 2006 against a target of 73,120 habitations;
• Until December 2006, 12,198 kilometres of rural roads have been completed. The separate window under RIDF will augment funds for the programme by Rs.4,000 crore a year;
• 783,000 rural houses have been constructed up to December 2006 and 914,000 houses are under construction, and the annual target of 1,500,000 houses is likely to be exceeded;
• 19,758 villages have been covered so far under the Rajiv Gandhi Grameen Vidyutikaran Yojana;
• 15,054 villages have been provided with a telephone against the target of 20,000 villages, and the balance will be covered by the end of the year;
Honourable Members will note that Bharat Nirman continues to make impressive progress.
10. The eight flagship programmes of the UPA Government will continue to receive high priority. Presently, I shall refer to these programmes in some detail.
III. HERALDING THE ELEVENTH FIVE YEAR PLAN
11. The year 2007-08 will mark the beginning of the Eleventh Plan. The declared objective is "Faster and More Inclusive Growth". I can state with confidence that, on the eve of the Plan, the economy is in a stronger position than ever before. It therefore behoves us to set higher goals. The Approach Paper to the Eleventh Plan states that the Plan "will aim at putting the economy on a sustainable growth trajectory with a growth rate of approximately 10 per cent by the end of its period." Among the other objectives of the Plan are growth of 4 per cent in the agriculture sector, faster employment creation, reducing disparities across regions and ensuring access to basic physical infrastructure as well as health and education services to all. I have kept these objectives in mind while allocating resources to various sectors.
Gross Budgetary Support
12. Notwithstanding some constraints, I propose to increase substantially the Gross Budgetary Support (GBS) for the Plan. In 2006-07, the GBS was fixed at Rs.172,728 crore and, of this, support to the Central Plan was Rs.131,284 crore. GBS for 2007-08 will be increased to Rs.205,100 crore. Out of this, the Central Plan will receive Rs.154,939 crore.
Allocations for Major Sectors
13. For Bharat Nirman, as against Rs.18,696 crore (including the NER component) in 2006-07, I propose to provide Rs.24,603 crore in 2007-08, which marks an increase of 31.6 per cent.
14. The education and health sectors will also receive substantial funds. In 2007-08, I propose to enhance the allocation for education by 34.2 per cent to Rs.32,352 crore and for health and family welfare by 21.9 per cent to Rs.15,291 crore.
Sarva Shiksha Abhiyan and Mid-day Meal Scheme
15. In allocating resources, school education must have primacy. Hence, I propose to increase the allocation for school education by about 35 per cent from Rs.17,133 crore in 2006-07 to Rs.23,142 crore in 2007-08.
16. Out of this amount, Sarva Shiksha Abhiyan (SSA) will be provided Rs.10,671 crore. Further, I propose to increase the provision for strengthening teachers training institutions from Rs.162 crore to Rs.450 crore. Next year, we will appoint 200,000 more teachers and construct 500,000 more class rooms.
17. The Mid-day Meal Scheme will be provided Rs.7,324 crore next year. In addition to covering children in primary classes, beginning 2007-08, we propose to cover children in upper primary classes in 3,427 educationally backward blocks.
18. The transfer to Prarambhik Shiksha Kosh will increase from Rs.8,746 crore to Rs.10,393 crore.
19. As more students complete upper primary classes, it is necessary to increase access to secondary education. Schemes for this purpose are under formulation, and I propose to double the provision for secondary education from Rs.1,837 crore in 2006-07 to Rs.3,794 crore in 2007-08.
Means-Cum-Merit Scholarships
20. While the SSA has improved the enrolment ratio in schools to 96 per cent, the drop out ratio continues to be high. The critical year appears to be transition from class VIII to class IX. In order to arrest the drop out ratio and encourage students to continue their education beyond class VIII, I propose to introduce a National Means-cum-Merit Scholarship Scheme. Selection will be made through a national test from among students who have passed class VIII. Each student will be given Rs.6,000 per year for study in classes IX, X, XI and XII. I propose that 100,000 scholarships may be awarded every year. In order to fund this programme, I intend to create a corpus fund of Rs.750 crore this year, and add a like amount to the fund every year over the next three years. Accordingly, a sum of Rs.750 crore will be placed with the State Bank of India, and the yield from the fund will be used for awarding the scholarships.
Drinking Water and Sanitation
21. 55,512 habitations and 34,000 schools have been provided drinking water supply till December, 2006 under the Rajiv Gandhi Drinking Water Mission. More ambitious targets have been set for 2007-08 to deal with both non-coverage and slippage. I propose to enhance the allocation for the Mission from Rs.4,680 crore in 2006-07 to Rs.5,850 crore in 2007-08.
22. As regards the Total Sanitation Campaign, I propose to increase the provision from Rs.720 crore this year to Rs.954 crore next year.
Health Sector; National Rural Health Mission
23. In the second year of its implementation, the National Rural Health Mission (NRHM) is on schedule to meet its timelines. The institutional integration of all the health schemes at the district and lower levels has been achieved. All districts in the country will complete preparation of District Health Action Plans by March 2007. The major emphasis will be on mother and child care and on the prevention and treatment of communicable diseases such as tuberculosis and malaria. Through Monthly Health Days (MHD) organised at Anganwadi centres, convergence is sought to be achieved among various programmes such as immunization, ante natal care as well as nutrition and sanitation.
24. I am happy to report that 320,000 Associated Social Health Activists (ASHAs) have been recruited and over 200,000 have received orientation training. Besides, 90,000 link workers have been selected by the States. With trained ASHAs in place, I am confident there will be significant improvement in health care in rural areas. The Ayurveda, Yoga & Naturopathy, Unani, Sidha and Homeopathy (AYUSH) systems are also being mainstreamed into the health delivery system at all levels. I propose to increase the allocation for NRHM from Rs.8,207 crore in 2006-07 to Rs.9,947 crore in 2007-08.
HIV/AIDS
25. Government has brought HIV/AIDS out of the closet and promised bold and determined efforts to achieve zero-level growth of the disease. The epidemic will be deemed 'stabilised' if the prevalence rate is less than one per cent of the population. National Aids Control Programme (NACP)-III, starting in 2007-08 and building on NACP-I and NACP-II, will target the high risk groups in all the States. We will expand access to condoms and ensure universal access to blood screening and safe blood. More hospitals will provide treatment to prevent transmission of HIV/AIDS from mother to child. Support will be given to the protocol on paediatric dosage developed by Indian doctors and launched in November 2006. For the year 2007-08, I propose to step up the provision for the AIDS control programme to Rs.969 crore.
Polio
26. Last year, I had expressed the hope that polio will be eliminated from the country by December 2007. However, there was an outbreak in western Uttar Pradesh in early 2006. The strategy for polio eradication has been revised. The number of polio rounds will be increased, monovalent vaccine will be introduced, and there will be intensive coverage in the 20 high risk districts of Uttar Pradesh and 10 districts of Bihar. The programme has been integrated into the NRHM. The ASHAs and the Anganwadi workers will visit every household and track every child for the immunization programme. To achieve the goal of eliminating polio, I propose to provide Rs.1,290 crore in 2007-08.
Integrated Child Development Services
27. In the second phase of expansion of the Integrated Child Development Services (ICDS), Government has sanctioned 173 ICDS projects, 107,274 Anganwadi centres and 25,961 mini-Anganwadi centres. Government is committed to expand the scheme in order to cover all habitations and settlements during the Eleventh Plan and to reach out to pregnant women, lactating mothers and all children below the age of six. I propose to increase the allocation for ICDS from Rs.4,087 crore in 2006-07 to Rs.4,761 crore in 2007-08.
National Rural Employment Guarantee Scheme
28. The National Rural Employment Guarantee Scheme (NREGS) was launched on February 2, 2006. The pace of implementation varies from State to State. Since NREGS is a demand-driven scheme carrying a legal guarantee of employment, the budget allocation would have to be supplemented according to need. I therefore propose to make an initial allocation of Rs.12,000 crore (including NER component) for NREGS. I am also happy to announce that NREGS will be expanded from the current level of 200 districts to 330 districts. In addition, I have provided Rs.2,800 crore for Sampoorna Gramin Rozgar Yojana (SGRY) for rural employment in the districts not covered by NREGS.
29. Swaranjayanti Gram Swarozgar Yojana (SGSY) is intended to promote self-employment among the rural poor through Self Help Groups (SHG). I propose to strengthen this programme by increasing the allocation from Rs.1,200 crore in the current year to Rs.1,800 crore (including NER component) next year.
Urban Unemployment
30. The issue of urban unemployment and poverty alleviation is equally critical. Hence, I propose to increase the allocation for Swarna Jayanti Shahari Rojgar Yojana from Rs.250 crore in 2006-07 to Rs.344 crore next year.
Jawaharlal Nehru National Urban Renewal Mission
31. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has evoked a positive response from State Governments. As on date, 538 projects with a total cost of Rs.23,950 crore have been sanctioned in sectors such as water supply, sanitation, transport, road and housing in many cities spread over several States. I propose to enhance the allocation from Rs.4,595 crore in
2006-07 to Rs.4,987 crore 2007-08.
Targeted Public Distribution System and Antyodaya Anna Yojana
32. The issue prices of food grains under the Public Distribution System (PDS) and for the beneficiaries of the Antyodaya Anna Yojana have been retained. A Plan scheme for evaluation, monitoring, management and strengthening of the targeted PDS will be implemented in 2007-08, and this will include computerisation of the PDS and an integrated information system in the Food Corporation of India.
Scheduled Castes and Scheduled Tribes
33. Continuing the practice that was started in 2005-06, a separate statement on the schemes for the welfare of Scheduled Castes (SCs) and Scheduled Tribes (STs) is placed in the Budget documents. The allocation in 2007-08 for SCs and STs has been substantially enhanced. In respect of schemes benefiting only SCs and STs, I have increased the allocation to Rs.3,271 crore. In respect of schemes with at least 20 per cent of the benefits earmarked for SCs and STs, I have increased the allocation to Rs.17,691 crore.
34. SC and ST students studying in M.Phil and PhD courses are supported by the Rajiv Gandhi National Fellowship Programme. I propose to enhance the allocation from Rs.35 crore in 2006-07 to Rs.88 crore in 2007-08.
Post-Matric Scholarships
35. There is a post-matric scholarship programme for SC and ST students. I propose to increase the provision for these scholarships from Rs.440 crore in 2006-07 to Rs.611 crore in 2007-08. I also propose to make a separate provision of Rs.91 crore for similar scholarships to be awarded to students belonging to socially and educationally backward classes.
Minorities
36. Last year, I made a modest contribution of Rs.16.47 crore to the equity of the National Minorities Development and Finance Corporation (NMDFC). Following the Sachar Committee report, NMDFC would be required to expand its reach and intensify its efforts. Hence, I propose to provide a further sum of Rs.63 crore to the share capital of NMDFC.
37. There are a number of districts with a concentration of minorities. I propose to make a provision of Rs.108 crore for a multi-sector development programme in these districts.
38. Three scholarship programmes are being implemented for students belonging to minority communities. I propose to make the following allocations:
Pre-matric scholarships Rs.72 crore
Post-matric scholarships Rs.90 crore
Merit-cum-Means scholarships at
graduate and post-graduate levels Rs.48.60 crore
Women
39. There is growing awareness of gender sensitivities of budgetary allocations. 50 ministries/departments have set up gender budgeting cells. For 2007-08, 27 ministries/departments and 5 Union Territories covering 33 demands for grants have contributed to a statement placed in the budget papers. The outlay for 100 per cent women specific programmes is Rs.8,795 crore and for schemes where at least 30 per cent is for women specific programmes is Rs.22,382 crore. We have made a sincere effort to remove the errors that were pointed out in last year's statement.
North Eastern Region (NER)
40. The total budget allocation in 2007-08 for the North Eastern Region, culled out from allocations under different ministries/ departments, has increased from Rs.12,041 crore in 2006-07 to Rs.14,365 crore in 2007-08. This includes Rs.1,380 crore provided to the Ministry of Development of North Eastern Region (DONER). The new industrial policy for NER, with suitable fiscal incentives, will be in place before March 31, 2007.
Supplement to the GBS
41. I have, so far, outlined the allocations under what may be called Plan 'A' which has a resource basket of Rs.205,100 crore. In consultation with the
Planning Commission, I have also drawn up Plan 'B'. Since the Eleventh Plan will begin on April 1, 2007, we recognize that there will be a need to take new initiatives in critical areas. Additional resources will be needed once the proposals are finalised and the pace of expenditure builds up. Therefore, I shall endeavour to find additional resources through better tax administration to the extent of Rs.7,000 crore during the course of the year. I have been advised by the Planning Commission that these additional funds, once voted by this House, will be allocated among sectors such as agriculture, rural development, health, women and child development, urban infrastructure, water resources, etc.
42. I also have Plan 'C'. Under Plan 'C', I propose to tap into resources available outside the Budget and leverage them for the purpose of investment, especially in the infrastructure sector. I shall deal with this subject a little later.
IV. AGRICULTURE
43. I shall now take up our main challenge: agriculture. I may recall the words of Jawaharlal Nehru, who said "Everything else can wait, but not agriculture".
44. The draft National Policy for Farmers submitted by the National Commission on Farmers is under consideration. Meanwhile, I have a number of proposals to improve the economic viability of farming and ensure that farmers earn a minimum net income.
Farm Credit
45. Farm credit continues to grow at a satisfactory pace. The goal of doubling farm credit in three years was achieved in two years. The target of Rs.175,000 crore set for 2006-07 will be exceeded comfortably and is likely to reach Rs.190,000 crore. This year, until December 2006, 53.37 lakh new farmers were brought into the institutional credit system. For 2007-08, I propose to fix a target of Rs.225,000 crore as farm credit and an addition of 50 lakh new farmers to the banking system.
46. The two per cent interest subvention scheme for short-term crop loans will continue in 2007-08, and I am making a provision of Rs.1,677 crore for that purpose.
47. A special plan is being implemented over a period of three years in 31 especially distressed districts in four States of the country involving a total amount of Rs.16,979 crore. Of this, about Rs.12,400 crore will be on water related schemes. In order to provide subsidiary income to the farmer, the special plan includes a scheme for induction of high yielding milch animals and related activities. I propose to provide Rs.153 crore for this scheme.
Agricultural Indebtedness
48. Government had appointed a Committee under Dr. R. Radhakrishna to examine all aspects of agricultural indebtedness. The Committee has held wide ranging consultations across the country and is in the process of finalising its recommendations. Government will act on the report as soon as it is received.
A Mission for Pulses
49. Government is concerned about the stagnation in the production and productivity of pulses. A critical deficiency is the availability and quality of certified seeds. I therefore propose to expand the Integrated Oilseeds, Oil palm, Pulses and Maize Development programme. There will be a sharper focus on scaling up the production of breeder, foundation and certified seeds. The Indian Institute of Pulses Research (IIPR), Kanpur, the National and State level seeds corporations, agricultural universities, ICAR centres, KRIBHCO, IFFCO and NAFED as well as large private sector companies will be invited to submit plans to scale up the production of seeds. Government will fund the expansion of IIPR, Kanpur, and offer the other producers a capital grant or concessional financing in order to double the production of certified seeds within a period of three years.
Plantation Sector
50. A Special Purpose Tea Fund has been launched for re-plantation and rejuvenation of tea. Government will soon put in place similar financial mechanisms for coffee, rubber, spices, cashew and coconut.
Accelerated Irrigation Benefit Programme
51. The Accelerated Irrigation Benefit Programme (AIBP) has been revamped in order to complete more irrigation projects in the quickest possible time. 35 projects are likely to be completed in 2006-07 and additional irrigation potential of 900,000 hectares will be created. As against an outlay of Rs.7,121 crore in 2006-07, the outlay for 2007-08 will be increased to Rs.11,000 crore. Of this, the grant component to State Governments will be Rs.3,580 crore, an increase from Rs.2,350 crore.
Rainfed Area Development Programme
52. The National Rainfed Area Authority was established a few months ago to coordinate all schemes relating to watershed development and other aspects of land use. I propose to allocate Rs.100 crore for the new Rainfed Area Development Programme.
Water Resources Management: Restoring Water Bodies
53. Honourable Members will recall that, in March 2005, a pilot project to repair, renovate and restore water bodies was launched in 13 States. I am happy to inform the House that the World Bank has signed a loan agreement with Tamil Nadu for Rs.2,182 crore to restore 5,763 water bodies having a command area of 400,000 hectares. An agreement for Andhra Pradesh is expected to be concluded in March 2007 and will cover 3,000 water bodies with a command area of 250,000 hectares. Preparation of similar projects for Karnataka, Orissa and West Bengal are at different stages and at least two more agreements are likely to be concluded before June 2007. I would urge other State Governments to come forward with proposals so that the whole country can be covered within the next two years.
Ground Water Recharge
54. Depletion of ground water has assumed grave proportions. The Central Ground Water Board has identified 1,065 assessment blocks in the country as 'over-exploited' or 'critical'. Over 80 per cent of these blocks are in 100 districts in seven States. The strategy for ground water recharge is to divert rain water into 'dug wells'. Each structure will cost about Rs.4,000. The requirement is seven million structures, including about two million structures on land belonging to small and marginal farmers. I propose to provide 100 per cent subsidy to small and marginal farmers and 50 per cent subsidy to other farmers. Ministry of Water Resources will finalise the scheme shortly. In anticipation, I intend to transfer a sum of Rs.1,800 crore to NABARD. The amount will be held in escrow and will be disbursed through the lead bank of the district concerned to the beneficiaries.
Training of Farmers
55. With minimum instruction and training, our farmers will easily absorb good water management practices. I therefore propose that the Indian Council of Agricultural Research (ICAR) may set up one teaching-cum-demonstration model of water harvesting in each of 32 selected State Agricultural Universities and ICAR institutes. Each institution will train 100 trainers and 1,000 farmers every year in two-week and one-week programmes respectively. Based on estimates of recurring costs, I intend to provide an interest free loan of Rs.3 crore to each institution to create a corpus fund. The yield from the fund will be used for implementing the training programme. The total cost is estimated at Rs.100 crore.
Extension System
56. The green revolution of the 1960s was brought about by thousands of agricultural extension workers who worked side by side with our farmers under a programme called Training and Visit (T&V). Sadly, the extension system seems to have collapsed. In order to revive extension work, the Ministry of Agriculture will, in consultation with State Governments, draw up a new programme that will replicate T&V with suitable changes.
57. The Agriculture Technology Management Agency (ATMA) that is now in place in 262 districts will be extended to another 300 districts in 2007-08. I propose to enhance the provision for ATMA from Rs.50 crore to Rs.230 crore next year.
Fertiliser subsidies
58. I had budgeted Rs.17,253 crore for fertiliser subsidies in 2006-07. According to Revised Estimates, this will rise to Rs.22,452 crore, and there is a demand for more money. While fertilisers should indeed be subsidised, we must find an alternative method of delivering the subsidy directly to the farmer. The fertiliser industry has agreed to work with the Department of Fertilisers to conduct a study and find a solution. Based on the report, Government intends to implement a pilot programme in at least one district in each State in 2007-08.
Agricultural Insurance
59. The National Agricultural Insurance Scheme (NAIS) will be continued in its present form for Kharif and Rabi 2007-08. I propose to make a provision of Rs.500 crore for the scheme.
60. Agricultural Insurance Corporation (AIC) has been running a pilot weather insurance scheme since Kharif 2004 and it appears to be a more promising risk mitigation scheme. Hence, Government will ask AIC to start a weather based crop insurance scheme on a pilot basis in two or three States, in consultation with the State Governments concerned, as an alternative to the NAIS. The scheme will be operated on an actuarial basis with an element of subsidy. I intend to allocate Rs.100 crore for this purpose in 2007-08.
National Bank for Agriculture and Rural Development (NABARD)
61. NABARD provides refinance to cooperative institutions. As the volume of farm credit increases and the Vaidyanathan Committee recommendations for reform of rural credit cooperatives are implemented, the demand for refinance will increase. In order to augment its resources, I propose to allow NABARD to issue rural bonds to the extent of Rs.5,000 crore. These bonds will be guaranteed by the Government and will be eligible for suitable tax exemption.
Rural Infrastructure Development Fund
62. The Rural Infrastructure Development Fund (RIDF) continues to sanction and disburse funds to State Governments. In 2006-07, out of a corpus of Rs.10,000 crore, NABARD has so far issued sanctions for Rs.8,440 crore and will achieve its target. Keeping in view the growing demand for these funds, I propose to raise the corpus of RIDF-XIII in 2007-08 to Rs.12,000 crore. I would urge State Governments to use these funds primarily in the distressed districts of the State.
63. A separate window for rural roads under RIDF was opened with Rs.4,000 crore. Against this, projects for Rs.2,311 crore have been sanctioned in 2006-07. I propose to continue the separate window under RIDF-XIII in 2007-08 with a corpus of Rs.4,000 crore.
Social Security
64. One of the commitments made in the NCMP is that Government will introduce a social security scheme for unorganised workers. A committee chaired by Dr. Arjun Sengupta has given its report which is under consideration. Pending a decision, in order to signal the UPA Government's concern for the welfare of unorganised workers, I propose to make a beginning. I propose to extend death and disability insurance cover through Life Insurance Corporation of India (LIC) to rural landless households under a new scheme called 'Aam Admi Bima Yojana' (AABY). According to NSS Report No. 491, the estimate of such households is about 1.5 crore. By end March 2007, 70 lakh households will be covered through existing schemes of the LIC with the support of some State Governments and the social security fund with the LIC. Under AABY, I propose to cover the rural landless households which enjoy no cover at all today, and the number may be actually more than what is indicated in the NSS report. The head of the family or one earning member in the family will be insured. The Central Government will bear 50 per cent of the premium of Rs.200 per year per person and I would urge the State Governments to come forward to bear the other 50 per cent on behalf of the beneficiaries. Taking into account the annual cost to the Central Government, I intend to place a sum of Rs.1,000 crore in a fund that will be maintained by LIC. I propose to finalise the scheme in consultation with State Governments and begin to implement it in 2007-08.
65. Mr. Speaker, Sir, I have devoted the last 15 minutes or so to agriculture. There is no dearth of schemes; there is no dearth of funds. What needs to be done is to deliver the intended outcomes. Saint Tiruvalluvar watches over us and warns:-
"Uzhavinar Kai Madangin Illai Vizhaivathoom
[ If ploughmen keep their hands folded Even sages claiming renunciation cannot find salvation]
Vittame Enbarkum Nilai"
V. INVESTMENT
66. All indicators point to an accelerating rate of investment in the economy. For example, gross domestic capital formation (GDCF) in 2005-06 grew by 23.7 per cent over the previous year to Rs.11,47,254 crore. I believe that this trend continues in 2006-07. In April-January, 2006-07, foreign direct investment amounted to US$12.5 billion and outpaced portfolio investment which was US$6.8 billion.
67. Central Public Sector Enterprises (CPSEs) will, through internal and extra budgetary resources, invest Rs.165,053 crore in 2007-08. Government will provide equity support of Rs.16,361 crore and loans of Rs.2,970 crore to CPSEs.
68. Further, in the current year, we have restructured eight CPSEs with a cash infusion of Rs.1,590 crore and non-cash sacrifices of Rs.1,612 crore.
VI. INFRASTRUCTURE
Power
69. Electricity generation has recorded a growth rate of 7.5 per cent in April-December this year. However, as we complete the Tenth Plan, we would have added only 23,163 MW of additional capacity in the five year period including 16,339 MW added in the three years beginning 2004-05. Hence, it is imperative that we take new initiatives.
70. The Ministry of Power has awarded two Ultra Mega Power Projects (UMPP) in Sasan and Mundra. Seven more UMPPs are under process and we are confident that at least two more will be awarded by July, 2007. Other initiatives taken by the Ministry of Power include facilitating setting up of merchant power plants by private developers and private participation in transmission projects.
71. Besides, the Accelerated Power Development and Reforms Project (APDRP) has reduced significantly Aggregate Technical and Commercial (ATC) losses in 213 towns. APDRP is being restructured to cover all district headquarters and towns with a population of more than 50,000. I propose to increase the budgetary support for APDRP from Rs.650 crore in 2006-07 to Rs.800 crore next year.
Rajiv Gandhi Grameen Vidyutikaran Yojana
72. Having regard to the pace of implementation under the Rajiv Gandhi Grameen Vidyutikaran Yojana and the annual target, I propose to increase the allocation from Rs.3,000 crore in 2006-07 to Rs.3,983 crore in 2007-08.
Coal
73. Following the announcement last year, 26 coal blocks with reserves of 8,581 million tonnes and four lignite blocks with reserves of 755 million tonnes have been allotted, up to December 2006, to Government companies and approved end users. The definition of specified end use will be enlarged to include underground coal gasification and coal liquefaction.
National Highways
74. Work on the golden quadrilateral is nearly complete and there is considerable progress in the North-South, East-West corridor project which is expected to be completed by 2009. NHDP-III, NHDP-V and NHDP-VI are in advanced stages of planning or implementation. So far, National Highways Authority of India (NHAI) has given Rs.2,072 crore as viability gap funding but has also received Rs.1,900 crore as negative grant. The private sector investment leveraged under NHDP is Rs.25,366 crore. Under the programme for the North Eastern Region (SARDP-NE), 450 kilometres have been awarded in 2006-07 and the balance will be awarded in 2007-08. I propose to increase the provision for the National Highway Development Programme (NHDP) from Rs.9,945 crore in 2006-07 to Rs.10,667 crore next year.
75. The road-cum-rail bridge at Munger, Bihar, over the Ganga, has been taken up as a national project. Likewise, the road-cum-rail bridge at Bogibeel, Assam, over the Brahmaputra, will be taken up as a national project.
Public Private Partnership and Viability Gap Funding
76. The Public Private Partnership (PPP) model has enabled greater private sector participation in the creation and maintenance of infrastructure. So far, under the viability gap funding scheme, 37 proposals have been received of which 21 proposals have been granted 'in-principle' approval with a total project cost of Rs.9,842 crore and an estimated viability gap funding of Rs.2,521 crore. The pace is slow, and there is a need to adopt a more aggressive approach for preparing a shelf of bankable projects that can be offered for competitive bidding. Apart from the steps already taken for capacity building and engaging consultants, I intend to set up a revolving fund with a corpus of Rs.100 crore to quicken project preparation. The fund will contribute up to 75 per cent of the preparatory expenditure in the form of interest free loan that will be eventually recovered from the successful bidder. Guidelines for operating the fund will be announced in due course.
VII. INDUSTRY
Petroleum and Natural Gas
77. Energy security is high on the Government's agenda. In the six rounds of New Exploration Licensing Policy (NELP) so far, 162 production sharing contracts have been awarded. Indian and foreign companies have already made an investment of Rs.97,000 crore in exploration. Similarly, after three rounds of bidding, 23 coal bed methane blocks have been awarded for exploration.
Textiles
78. A rejuvenated textile industry is geared to meet the global challenge. 26 parks have been approved so far out of 30 sanctioned under the Scheme for Integrated Textiles Parks (SITP). I propose to increase the provision for these parks from Rs.189 crore in 2006-07 to Rs.425 crore in 2007-08.
79. I am also glad to announce that the Technology Upgradation Fund (TUF) scheme will be continued during the Eleventh Plan. Against a provision of Rs.535 crore in 2006-07, I propose to provide Rs.911 crore in 2007-08. As before, handlooms will be covered under the TUF scheme.
Handlooms
80. A cluster approach for the development of the handloom sector was introduced in 2005-06 and 120 clusters have been selected. 273 new yarn depots have been opened in the current year and the Handloom Mark was launched. Government proposes to take up an additional 100-150 clusters in 2007-08. The 12 schemes that are now implemented will be grouped into five schemes in the Eleventh Plan period. The health insurance scheme has so far covered 300,000 weavers and will be extended to more weavers. The scheme will also be enlarged to include ancillary workers. I propose to enhance the allocation for the sector from Rs.241 crore in 2006-07 to Rs.321 crore next year.
Small and Medium Enterprises
81. Following the credit policy for small and medium enterprises (SME) announced in August 2005, outstanding credit to the SME sector increased from Rs.135,200 crore at end December 2005 to Rs.173,460 crore at end December 2006. While encouraging banks to lend more to the SME sector, I propose to ask banks to have regard to the credit rating acquired by an SME while fixing the interest rate.
Coir Industry
82. Coir is an eco-friendly fibre. The coir industry provides employment to a large number as well as earns valuable foreign exchange. I am happy to announce a scheme for the modernisation and technology upgradation of the coir industry with special emphasis to major coir producing States such as Kerala, Karnataka, Tamil Nadu, Andhra Pradesh and Orissa. I propose to make a provision of Rs.22.50 crore.
VIII. SERVICES SECTOR
Foreign Trade
83. Our merchandise exports crossed the milestone of US$100 billion in 2005-06 and are expected to cross another milestone of US$125 billion by the end of the current fiscal. Foreign trade is growing at a rate more than twice the growth rate of GDP. Government will continue to follow export friendly policies.
Tourism
84. I propose to increase the provision for building tourist infrastructure from Rs.423 crore in 2006-07 to Rs.520 crore in 2007-08.
IX. FINANCIAL SECTOR
Banking
85. In addition to the important legislative measures now before Parliament, Government proposes to take a number of initiatives in banking and insurance.
86. Government proposes to acquire RBI's equity holding in State Bank of India. I have provided a sum of Rs.40,000 crore for this purpose, but the transaction will be deficit neutral to the Government.
87. The Differential Rate of Interest (DRI) scheme provides finance at a rate of 4 per cent to the weaker sections of the community engaged in gainful occupations. I propose to raise the limit of the loan from Rs.6,500 to Rs.15,000 and the limit of the housing loan from Rs.5,000 to Rs.20,000 per beneficiary.
Regional Rural Banks
88. Regional Rural Banks (RRBs) have emerged as the third arm for delivering rural credit, and the sponsor banks have assured me that RRBs are willing to take on greater responsibilities. The Committee on Financial Inclusion, chaired by Dr. C. Rangarajan, has also made certain recommendations concerning RRBs. I, therefore, propose to:
• ask RRBs to undertake an aggressive branch expansion programme and, in 2007-08, open at least one branch in the 80 uncovered districts of the country;
• extend the Securitisation and Reconstruction of Financial Assets and Enforcement of Securitisation of Interest (SARFAESI) Act to loans advanced by RRBs;
• permit RRBs to accept NRE/FCNR deposits; and
• recapitalize, in a phased programme, the RRBs which have a negative net worth.
Housing Loans
89. The National Housing Bank (NHB) will shortly introduce a novel product for senior citizens: a 'reverse mortgage' under which a senior citizen who is the owner of a house can avail of a monthly stream of income against the mortgage of his/her house, while remaining the owner and occupying the house throughout his/her lifetime, without repayment or servicing of the loan.
90. Our people want housing loans. Banks and housing finance companies that lend against mortgages would have greater comfort if the mortgage can be guaranteed through a three way contract among borrower, lender and guarantor. Regulations will be put in place to allow the creation of mortgage guarantee companies.
Insurance
91. On December 6, 2006, Rashtrapatiji launched an exclusive health insurance scheme for senior citizens offered by National Insurance Company. I have asked the other three public sector insurance companies to offer a similar product to senior citizens, and they have agreed to do so in 2007-08.
92. The Micro Financial Sector (Development and Regulation) Bill as well as a comprehensive Bill to amend the insurance laws will be introduced in the Budget Session.
Financial Inclusion
93. Financial inclusion is the process of ensuring access to timely and adequate credit and financial services by vulnerable groups at an affordable cost. The Committee on Financial Inclusion has given an interim report. While we await the final report, Government has decided to implement, immediately, two recommendations. The first is to establish a Financial Inclusion Fund with NABARD for meeting the cost of developmental and promotional interventions. The second is to establish a Financial Inclusion Technology Fund to meet the costs of technology adoption. Each fund will have an overall corpus of Rs.500 crore, with initial funding to be contributed by the Central Government, RBI and NABARD.
Capital Markets
94. The capital market is an important instrument for intermediating financial resources. Recognising the strength of the Indian capital market, the International Organisation of Securities Commissions (IOSCO) has decided to hold its annual conference in Mumbai in April 2007. In line with measures announced every year to strengthen the market, I propose to:
• make PAN the sole identification number for all participants in the securities market with an alpha-numeric prefix or suffix to distinguish a particular kind of account;
• take forward the idea of Self Regulating Organisations (SRO) for different market participants under regulations that will be made by SEBI and, if necessary, supported by an enabling law;
• promote the flow of investment to the infrastructure sector by permitting mutual funds to launch and operate dedicated infrastructure funds;
• converge the different regulations that allow individuals and Indian mutual funds to invest in overseas securities by permitting individuals to invest through Indian mutual funds;
• allow short selling settled by delivery, and securities lending and borrowing to facilitate delivery, by institutions;
• put in place an enabling mechanism to permit Indian companies to unlock a part of their holdings in group companies for meeting their financing requirements by issue of Exchangeable Bonds.
Innovative Financing for Infrastructure
95. The minimum obligation of States to borrow from the National Small Savings Fund (NSSF) has been brought down to 80 per cent of net collections. Repayments of past NSSF loans by the Central and State Governments have also commenced from 2005-06, making available resources for long-term lending. I therefore propose that these funds may also be borrowed from NSSF by India Infrastructure Finance Company Limited (IIFCL).
96. An initiative that has borne fruit is the launch of the US$5 billion infrastructure financing initiative by Citigroup, Blackstone, IDFC and IIFCL.
97. A committee chaired by Shri Deepak Parekh has made a number of recommendations for financing infrastructure. One of the recommendations is to use a small part of the foreign exchange reserves without the risk of monetary expansion. The Committee has suggested the establishment of two wholly-owned overseas subsidiaries of IIFCL with the following objectives:
(i) to borrow funds from the RBI and lend to Indian companies implementing infrastructure projects in India, or to co-finance their ECBs for such projects, solely for capital expenditure outside India; and
(ii) to borrow funds from the RBI, invest such funds in highly rated collateral securities, and provide 'credit wrap' insurance to infrastructure projects in India for raising resources in international markets.
The loans by RBI to these two subsidiary companies will be guaranteed by the Government of India and the RBI will be assured of a return higher than the average rate of return on its incremental investment. Government proposes to examine the legal and regulatory aspects of the recommendation, in consultation with RBI, in order to find an innovative method of enhancing the financial resources for infrastructure.
