Finance minister has hiked duty on iron ore export to 20% in order to restrict export and conserve resources. The duty increase would hurt Sesa Goa, the largest private exporter of iron ore from the country
The finance minister today proposed to increase the export duty on all types of iron ore to a uniform 20%, a decision that will hurt iron ore exporters, particularly Sesa Goa.
Sesa Goa is the largest exporter of iron ore in the private sector and the company's stock price lost 7% (about Rs20) to Rs262.30 on the Bombay Stock Exchange today, while the benchmark Sensex closed up 0.69%.
Finance minister Pranab Mukherjee proposed to increase the export duty on "lumps" (one type of iron ore) from 15% to 20%, and the duty on "fines" from 5% to 20%, saying that iron ore is a natural resource that needs to be conserved. "Fines" constitute the bulk of exports from the country.
"The country's exporters of iron ore, those who mainly sell fines, will surely be affected by this increase in duty and Sesa Goa would be adversely hit as most of the company's business comes from the export of fines," Alok Kumar Nemani, analyst at Nomura Financial Advisory and Securities (India), told Moneylife.
Sesa Goa managing director PK Mukherjee declined to comment on the duty hike.
On the other hand, the finance minister has withdrawn the export duty on iron ore pellets, apparently to enhance exports after value-addition. Iron ore is the main ingredient for steel production.
Sajjan Jindal, vice chairman and managing director, JSW Steel, said, “The hike on export duty on iron ore fines and lumps to 20% advalorem is most welcome. I am sure that this will lead to greater value addition at home and encourage the domestic steel industry."
"This duty hike could also cause an increase in iron ore prices," Mr Nemani said.
India, the world's third largest iron ore producer, mined 218 million tonnes of iron ore in 2009-10 and exported nearly half of this. Sesa Goa is the country's largest producer and exporter of iron ore in the private sector. It exports almost 80% of its production, most of which is the "fines" quality of ore.
However, National Minerals Development Corporation (NMDC), another major iron ore producer, would not be affected much as the state-owned company exports only about 5%-10% of its production.
"With this increased export duty on fines, Sesa Goa's profitability would come down by 15%-18%," said an analyst from a Mumbai-based financial services company.
Steel minister Beni Prasad Verma was seeking a control on the export of iron ore, whereas major iron ore producing states like Orissa and Chhattisgarh were looking for a ban on exports.
The analyst said, "India has abundant reserves of iron ore, and export duty has been increased to preserve iron ore for the future."
Salaried taxpayers who do not have other sources of income and whose incomes are subject to TDS will be excluded from filing returns. The decision, which will come into effect from 1st June, will reduce the compliance burden on small taxpayers
New Delhi: In a big relief from cumbersome tax filing process for the salaried class, finance minister Pranab Mukherjee today proposed to exempt them from filing tax returns unless they have other sources of income, reports PTI.
The government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns, said the Memorandum to the Finance Bill 2011.
The decision, which will come into effect from 1 June 2011, will reduce the compliance burden on small taxpayers, it added.
Salaried taxpayers who do not have other sources of income and whose incomes are subject to Tax Deduction at Source (TDS) will be excluded from filing returns.
"Therefore, in cases where there is no other source of income, filing of a return is duplication of existing information," the Memorandum said.
Every person whose income exceeds the taxable limit is required to file return of income.
This year’s effort will not do anything to impact the huge mass just above the poverty line—or for those who aspire to join the Great Indian Middle Class
How, actually, does the Budget impact the large number of people on or around the upper limits of the poverty line heading into those who are aspiring to cross through into what is called the lower middle class, has been a question, like "rate of attrition" in the IT industry, which has never had any hard empirical data to support it.
Simply because the definitions of 'rate of attrition' or 'aspiring lower middle class' have never been defined.
So, to try and take matters further, we have to start somewhere. With some numbers that make sense and can be verified without too much problem. Let us, therefore, start with the minimum wages paid to some categories of people, in the private organised sector, let us call
them urban poor aspiring upwards:
a) The unskilled and semi-skilled labour, technically paid between Rs4,000 and Rs6,000 per month for about 54 hours weekly spread over six days, fully protected by ESI, EPFO and other benefits.
b) The security guard technically paid around Rs7,000-Rs9,000 rupees per month for 12 hours/7x weekly, and the sanitation worker technically paid around Rs5,000 rupees per month for 12 hours/6x weekly, fully protected by ESI, EPFO and other benefits.
c) The daily wager bus driver taken on contract by a government entity like the DTC, at between Rs275 and Rs325 per working day, with some benefits like ESI, but not fully protected.
d) And finally the daily wage labourer found at labour chowks in the NCR area, Rs250-Rs300 (plus) per day, subject to supply and demand, with minimal or absolutely no benefits at all.
These people are all, technically, well above the various existing definitions of the poverty line. When it comes to income, that is, as the sole parameter. Speak to them, however, and the reality is something else which presumably is never taught in colleges and elsewhere—unless, of course, a Harvard professor or similar such person does research on the subject and then further writes a book on the subject.
When he does, and when you get to really speak to the constituency whose votes count, then out comes the next reality—poverty line and middle class aspirations have more to do with "savings potential", as well as the potential to manage what would best be known as micro-mini investments in whatever way possible for a secure old age.
Part of the social fabric in rural and non-urban India, in case we had forgotten, and still in existence today. Sometimes in some versions reviled also as "feudal". More on this on another day.
And in that, the savings potential of those in the native place is now considered to be higher than for those who moved on to the city in search of work. In some parts of the country, it is so evident that traditional supply of labour has just about dried up. Again, think Bihar, for example.
The big question, however, is this—how long will it last? And the second big one is this—can we go back to the village and admit that things are actually worse in the city? Till a few years ago, the budget was aimed at the chattering classes, typically people who read newspapers. That's not true anymore, because everybody has a television and a mobile phone.
But to cut to the bone, what does the present budget do for these people, the categories listed above—and similar ones?
To sum up my argument in brief:
a) It does not impact the minimum wages payable under a variety of Acts and rules, barring some adjustments for cost of living.
b) For some reason still not fully understood, it appears to announce an increase in the price of daily staples like the amount of potato inside a bread pakora and a reduction in the amount of urea and tea in a cup of tea.
c) It probably also increases the 'doosra' income that accrues to many in the urban organised/unorganised sectors. Increase in fuel prices due to withdrawal of subsidy, for example, may well be a big hit since resale prices will go up.
In other words, the budget is a mixed bag for those in that urban grey area between poverty line and aspirational lower middle class. However, with the easy availability of television and mobile phones, the conclusions they draw and the survival based techniques that evolve, will never be fully understood, because they choose to stay out of the public debate on the subject.
For example, even the dumbest of unskilled labourers in the organised sector now knows that he or she may well have a better saving potential in their native place, especially if that means Bihar. Caste and community are no longer parameters when brahmins are rearing buffaloes and bhumihars are not averse to making fortunes out of compost, for example, so those barriers have gone. (One of the most illuminating comments on this subject I heard was that we are now like the Sikh settlers, we will do anything to run a small business, it does not matter, it must simply make money and give our children a future, without too many problems).
However, one reason they still hang around, often working in subhuman conditions, is because the 'doosra' incomes they generate in the urban areas are still more than what they could save in their native places. And the second reason is that they are still not convinced that the change sweeping some parts of the country is here to stay. After all, something like GST, for example, has been on the cards for years now, and is still on what appears to be a constantly receding horizon.
And please believe me when I say this—the aspirational entrant into the middle class is more aware of barriers to entrepreneurship than, for example, your friendly neighbourhood banker. Or journalist.
When, then, will this change, is the bigger question they tend to want to get a response to from any budget, the basic infrastructure to help move goods and services that they know they can generate "back home".
And that is simply not being answered. Despite everything, there is still some long arm of the mai-baap sarkar at every crossroads in India, out to collect a rangdari or panidari or zakat or octroi or whatever, and keep pushing the aspirational back into the hole they are trying to climb out of.
So, in the period known as 'ad interim', many of them continue to work at minimum wages—and worse—and continue with subhuman urban lifestyles of the shanty town sort. Meanwhile, keeping in touch with the native place becomes easier, and a sublime shift back has started—as things improve in rural areas of some parts of India.
This budget probably realises and tries to address the moot question better than many in the past - when will it be easier for the aspirational urban poor to go back and try to become the "arrived" lower middle class in their native places? Fair enough, thank you very much, and I have no numbers to prove it.
The issue is—has it done enough?
The answer, never mind the rest of the numbers, is a big resounding NO. And the result, therefore, is that your maid and driver will now probably cost you more than the minimum wages they would make in organised private sector jobs.
Epilogue: The late Dewang Mehta, now forgotten even at the imposing structure called NASSCOM operating out of the International Youth Centre in the Diplomatic Enclave right in the heart of Delhi, often used to say at Bhartiya Vidya Bhavan alumni meetings that the best way to get something done and stop everybody from nosing around too much was to give the media a hard number without any basis to play with.
His take was that the media would accept what anybody said as gospel if it came with the right kind of salad and chicken sandwiches for early lunch on the way to their offices, after which they would play around with the syntax and grammar till just before evening High Tea, then proceed for dinner and more to discuss the same numbers with their favourite lobbyists, leaving the juniors to think up fancy subtitles and do all the slog for next day's papers and TV shows, and then next morning after breakfast there were babus sitting in their lofty ivory towers elsewhere who would call him to reconfirm, and then the whole lot of them would simply copy-paste whatever emerged to give the whole thing credibility.
Thus media favourites like "only 'xx' percent attrition" and 'yyy' million middle class" came to be great favourites, and had been refined into an art-form with a 24-hour cycle that could be resumed any time the next day before lunch, which further morphed into all of us in India actually believing the whole circus show as something of cogent value.
The beauty is that we continue to be able to do this even in places like Davos! What is our budget, in comparison, then?