This is with regard to the Union Budget 2016-17 and its impact. I call it a mischievous Budget, on the following
I. Tax rebate on contributions to provident fund (PF), life insurance, housing loan, etc, is already restricted to Rs1.5 lakh. Private sector executives, who draw more salary and are contributing larger sums, are already paying tax on their contributions. Employees look for savings to fund their retirement corpus. If the amount is taxed, one can imagine their plight. These deposits earn low rate of interest compounded on half-yearly or yearly rests. The returns are not very high. This provision only indicated that policy-makers want to collect more revenue at the cost of small people.
II. This feeling gains credence, especially since the period of capital gains exemption on unlisted securities was brought down to two years from three years. Everyone knows who invests in these unlisted securities. Policy-makers are bestowing benefits on themselves and taxing the salary-earners who contribute to PF that goes into government bonds.
III. Everyone is praising the Budget as being rural-oriented, agriculture supportive, etc. The allocations to this sector will come from the taxes imposed on disclosures of tax-evaders. If the disclosures are |not substantial, from where are the resources coming?
IV. Farmers suffer for various reasons: (a) increased input and labour costs; (b) untimely rains; (c) poor remunerative prices for their produce; and (d) poor-quality seeds and fertilisers. Almost all reservoirs in a majority of the states are already dry. Groundwater levels are already precarious. Getting drinking water is posing a big problem. If the government is really interested in the agriculturists, they would have talked about the linking of the rivers and not about building four- or six- or eight-lane highways. In this context, we have to understand the behaviour of the people residing in various states. Eastern parts of the country, say, West Bengal and Orissa, with good water resources, agricultural fields and mineral resources, remain poor. We do not come across people with capitalist ideologies in these areas. Western parts, like Rajasthan and Gujarat, with large sandy terrain and not very fertile soil, exhibit more affluence. We rarely come across persons from these regions with a leftist attitude or concern for downtrodden.
The Budget is for the development of only a few and not for overall development of the public.
SM Ravipati, by email
INFRINGEMENT OF COMPETITION IN BANK SALARY ACCOUNTS
This is with regard to infringement of the principle of free competition in bank salary accounts of employees. Now, in theory at least, customers have a lot of choice in Indian banking industry. However, in reality, this choice exists only for the self-employed, the retired, the housewives and the like.
‘Employees’, as a category, do not have much of a choice. In much of the private sector, the employer implicitly makes the choice for the employee through salary accounts. This limits competition in banking; it also discriminates against ‘employees’ as a group compared to others.
Moreover, these days, there is frequent turnover in the job market and, as a consequence, many have been forced to migrate from one bank to another as far as their primary account is concerned. This matter now probably needs the intervention of the Reserve Bank of India and the Competition Commission of India so that the basic nature of banking service, as a utility, is maintained.
Sudip Kumar Ghose, by email
FUNNY LOGIC AND DOUBLE STANDARDS
This is with regard to the Union Budget 2016-17 and the tax policy on employees’ provident fund (EPF). “Okay, let’s get the PF (provident fund) issue out of the way. We have received a lot of complaints about the proposal to tax PF,” says Jayant Sinha, Union minister of state for finance! “Honestly, we were doing them a ‘favour’ by keeping PF tax-free. If you had taken the same money and put it in a bank fixed deposit, you would first have to pay tax on it and then pay tax on the interest. We want to keep provident fund and pension fund on the same page.”
Note the language of the minister... He is doing them a favour.
Clearly, no one in the government uses the EPF/PPF (public provident fund) as an option for saving, tax-savings or retirement-savings. Is the minister implying that all ministers have so much money that PF is not a useful scheme for them? Is PF used only by others—those poor, ordinary citizens who live on salaries?
Subrahmanian SH, by email
CHANGE OF SCOPE OF WORK ASSIGNED?
This is with regard to “Roadblocks to Road Building” by Sucheta Dalal. My experience is that positive change of scope happens more often than negative change of scope. Positive change of scope means addition by NHAI (National Highways Authority of India) of certain items. Items that get added often include junctions, culverts, minor bridges, etc. These arise due to local requests, safety considerations and, at times, because it was missed earlier by the estimators. Beyond a certain percentage of cost, the expense for such extra work is reimbursable by NHAI. The developer incurs the expense and waits for months or years to get this reimbursement; also, one should not forget that these items are estimated lower by NHAI vis-à-vis the cost incurred.
On the other hand, negative change of scope is very useful where a large part of land is not available, due to environment or other issues. However, 80% of the cost saved due to this negative change of scope needs to be paid to NHAI.
The provisional certificate of completion (PCC) is a very important provision in the agreement. Due to land issues, 100% completion of a road is near impossible. So, if only a small percentage of land acquisition is pending and the project is complete in all other respects, PCC is issued.
In the absence of such a provision, even when 90% of the project is complete, the developer will be unable to make any revenue for several years beyond the due date. It may be noted that the toll collection, in such cases, is partial, i.e., linked to the road length completed.
Sonica Agarwal, online comment
COURAGE TO ANSWER SOME QUESTIONS
This is with regard to “Wilful Defaulters Are a Result of Wilful Blindness” by Sucheta Dalal. Thank you for this article. When many are asking questions, Moneylife has shown the courage to answer some of the questions, including those raised by Mr Mallya. On 13 March 2016, I was reading an article by TV Mohandas Pai and wondering why authorities are after Mr Mallya whose Kingfisher Airlines’ default is a small amount compared to the Rs30,000-crore loss suffered by Air India.
I suggest that Mr Pai, too, can take the initiative in exposing the squandering of public funds which include bank deposits, money raised by corporates and so on.
Of late, every allegation is countered by another bigger allegation against someone else. The interests of the taxpayer, depositor and every citizen, who adds value to India’s GDP, need to be protected. Now is the time when authorities have woken up and the government is in no position to bail out wilful defaulters or anyone who is mismanaging ‘public funds’. Mr Mallya may be a member of the Rajya Sabha owing his position to the support of political parties. Even those political parties cannot rescue him from the present predicament in which he has landed.
IS US FEDERAL RESERVE THE GAME-CHANGER?
This is with regard to “I’m Back!” by Debashis Basu and Jason Monteiro. I completely disagree with this article. The movement of the Indian stock market matches completely with the Indonesian stock market. There was no Narendra Modi in Indonesia. But FIIs (foreign institutional investors) had a presence in both countries. When FIIs were set to exit EMs (emerging markets) in the wake of tapering of quantitative easing by the US Federal Reserve in August 2013, most EMs were affected. In January 2015, when the Fed indicated its intention to tighten rates, fund outflows from EMs started immediately. The US Fed is the game-changer and not Mr Modi. They are the masters of this universe. Anyone who misses this point misses the plot altogether.