Six paragraphs of the finance minister’s Union Budget speech were devoted to legislation and other steps to tackle corruption. Crusaders don’t believe the government has the will to follow cases to the end
Following a year of national outrage over scams and the repeated raps from the Supreme Court about being ineffective in dealing with black money, the government decided to devote six paragraphs in the Union Budget text to this issue. But how much will come out of it? According to crusaders against tax evasion, all these talks boil down to zilch.
"I am happy that the finance minister thought the issue important enough to mention it in the Union Budget," said eminent chartered accountant MR Venkatesh, who has been at the forefront of the battle against tax evasion. "But how much do you take away from all that philosophical talk? Nothing."
Today, finance minister Pranab Mukherjee announced that India, being concerned about the issue, has adopted a five-pronged strategy to tackle it. It has also become a member of several international financial task forces and anti-corruption drives and signed many tax information exchange agreements with many nations and agencies. The minister mentioned that 2009 amendment to the legislation on money laundering was successful and some 1,200 cases had been registered under this law in two years.
KVM Pai, former chief income tax commissioner, has petitioned the Supreme Court on amnesty proposals to retrieve tax information from evaders after the prime minister's office and the Central Board of Direct Taxes refused to answer him. He said that the government is deliberately avoiding the issue.
"How does it matter what commissions we have joined? Where is the money? Has any move been made to recover it? The government is silent," Mr Pai said, after hearing the finance minister's Budget speech. "At the cost of penalty, everyone must give details of transactions with both foreign and domestic banks. That information can be used to retrieve the money." Mr Pai mentioned that much money is also stashed away in banks in the US and the UK, from where information can be easily obtained.
Mr Venkatesh echoed these thoughts and said, "All this philosophical talk that the minister gave about his strategy and noble intensions is nothing new. India should immediately ratify the UN Convention Against Corruption. We don't require more laws, what we need is political will."
It should be noted that while the minister said that the number of cases registered against money laundering has gone up, he did not comment on how many of these cases had been followed through or solved. No announcements were made about retrieving the money stored in tax havens.
Mr Venkatesh said, "Money Laundering legislation is a very draconian legislation. A charge can be slapped on anyone. In most cases, these have been applied to common people. However, the crooks are roaming free. The government is actually aiding them, and not the aam aadmi who it boasts it is working for."
Pranab Mukherjee in his Budget speech left customs duty on crude oil unchanged at 5% and that on petrol and diesel untouched at 7.5%. In fact, he refrained from mentioning the impact of rising crude oil prices on an economy which is 75% dependent on imported oil to meet its energy needs
Petrol and diesel prices look set to increase after finance minister Pranab Mukherjee ignored calls for its reduction in customs and excise duty to contain the impact of the spurt in global crude oil prices that have touched a two year high of $110 per barrel, reports PTI.
Mr Mukherjee in his Budget for 2011-12 left customs duty on crude oil unchanged at 5% and that on petrol and diesel untouched at 7.5%. Excise duty on petrol will remain at Rs14.35 a litre and diesel at Rs4.60 per litre.
In fact, he refrained from mentioning the impact of rising crude oil prices on an economy which is 75% dependent on imported oil to meet its energy needs.
State-owned firms—Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL)—are currently losing about Rs2.25 a litre on petrol, a fuel that was freed from government control in June last year. Oil firms had refrained from raising petrol prices in anticipation of a cut in customs and excise duty in the Budget for 2011-12.
Similarly, the oil firms currently sell diesel at Rs10.74 per litre lower than imported cost and in absence of a duty cut, an increase in prices is the only option left to meet rise in cost of raw material (crude oil).
Oil minister S Jaipal Reddy had last week stated he would take the case for an auto fuel price hike to an Empowered Group of Ministers (EGoM) headed by Mukherjee after the budget.
The timing of the hike remains to be seen as the government may be jittery of raising prices when Parliament is in session. The Budget session of Parliament goes for a 3-4 week break from 18th March and there is a likelihood of rates being hiked then.
Besides petrol and diesel, the oil firms lose Rs21.60 a litre on PDS kerosene and Rs356.07 per 14.2-kg domestic LPG cylinder.
The only other way to avoid a fuel price hike would have been higher government subsidy. But Mr Mukherjee has provisioned only Rs23,640 crore in 2011-12 as oil subsidy, lower than Rs38,386 crore of current fiscal.
The budgetary provision for the purpose during 2011-12 will be less than one-fourth of the projected Rs1,05,000 crore revenue loss that state oil firms anticipate on selling diesel, domestic LPG and kerosene next fiscal.
The revenue loss projected for 2011-12 fiscal is higher than Rs1,03,292 crore under-recovery in 2008-09 when global crude oil prices had touched $147 per barrel.
Of this, the government had provided Rs71,292 crore in cash and to contain impact also lowered customs duty on crude to zero and that on products to 2.5%.
At current prices, the oil firms are projected to lose Rs76,559 crore in the current fiscal, half of which is to come from government by way of cash compensation. Further, one-third would be contributed by upstream firms like ONGC and the remaining absorbed by oil marketing firms.
Of the Rs46,963 crore revenue loss due to under-recovery during April-December 2010-11, Rs21,000 crore has come as cash assistance from the government while another Rs15,654 crore was provided by upstream firms like ONGC.
The remaining Rs10,309 crore has been absorbed by oil marketing companies (OMCs).
In 2009-10, Rs26,000 crore in cash assistance was provided by the government to make up for over 56% of the total Rs46,051 crore revenue loss.
Upstream firms provided Rs14,430 crore and the remaining Rs5,621 crore was absorbed by OMCs.
Petrol prices have risen Rs10.44 per litre this fiscal in eight instalments. Petrol on 1 April 2010 had cost Rs47.93 a litre while today it costs Rs58.37 per litre.
Diesel prices are, however, lower at Rs37.75 a litre as compared to Rs38.10 per litre on 1 April 2010.
Fuel consumption is projected to rise by 4.74% to 144.35 million tonnes in the current fiscal from 137.8 million tonnes in the previous year. During April-December, the consumption was 105.268 million tonnes.
The Sensex and Nifty have made higher highs and higher lows for two days. But that says nothing for now
The market opened in the green this morning and was range-bound till the time finance minister Pranab Mukherjee began his Budget speech. Early announcements about a strong economy and growth of 9% next fiscal, with the focus on bringing down inflation, drove the indices higher. However, a smaller-than-expected hike in the income-tax exemption limit for individuals and nothing heard on the burning issue of crude prices pushed the indices back to the day's lows.
The market gained 550 points to the day's high and the Nifty was up 127 points as the FM concluded his speech. But the gains were short-lived, as profit-booking dragged the indices lower, and they closed around the opening levels.
The Sensex and Nifty closed in the positive today, but this hides the massive intraday volatility. The benchmarks opened with a positive gap at 17,811 and 5,330 respectively. During the budget speech, the Sensex fell to 17,750 while Nifty hit 5,312. After the budget speech was over, the indices climbed to their intra-day highs of 18,297 on the Sensex and 5,477 on the Nifty, and then collapsed again to their intra-day lows, though these were well above the Friday's lows. Finally, the Sensex ended 122 points up at 17,823 and the Nifty was up 30 points at 5,333. The advance-decline ratio on the National Stock Exchange was 934:795.
The market breadth on the key benchmarks was in favour of the gainers. The Sensex settled with 16 gainers and 14 losers, while the Nifty had 27 advancing stocks, 22 declining stocks and one stock remained unchanged. The broader markets also ended on a positive note, but lagged the Sensex. The BSE Mid-cap index gained 0.31% and the BSE Small-cap index rose 0.36%.
In the sectoral space, the BSE Fast Moving Consumer Goods index (up 4.47%) was the top gainer. This was followed by BSE PSU (up 2%) and BSE Realty (up 1.30%). The BSE Healthcare index (down 0.04%) was the lone loser, while the BSE IT ended flat.
The top gainers on the Sensex were ITC (up 8.23%), Mahindra & Mahindra (up 3.19%), Maruti Suzuki (up 3.07%), ONGC (up 2.93%) and Sterlite Industries (up 2.38%). The top losers were Reliance Infrastructure (down 4.46%), Jaiprakash Associates (down 2.88%), Hero Honda (down 2.36%), Tata Motors (down 2.11%) and Tata Power (down 1.79%).
Describing the budget as 'positive' and 'growth-oriented', the Indian industry welcomed the proposals announced by the finance minister. They said the measures to strengthen the farm sector and the move to reduce the fiscal deficit to 4.6% were steps in the right direction. The industry also hailed the move to make the foreign direct investment policy more 'user-friendly'.
Markets in Asia recovered from early losses to settle mostly higher, as the spike in oil prices boosted energy stocks. However, profit-booking kept a tab on the gains. A decline in the value of the yen pushed up Japanese stocks. The South Korean market suffered a deep cut, following threats by North Korea to attack South Korea and the US as the two allies planned joint military drills.
The Shanghai Composite gained 0.93%, the Hang Seng surged 1.42%, the Jakarta Composite rose 0.78%, the KLSE Composite added 0.13% and the Nikkei 225 advanced 0.92%. On the other hand, the Straits Times fell 0.48% and the Seoul Composite declined 1.23%.
Back home, outflows by foreign institutional investors (FIIs) on Friday were offset by domestic institutional investors (DIIs). While FIIs were net sellers of stocks worth Rs561.46 crore, DIIs were net buyers at Rs555.29 crore.
Coal India (up 12.42%) has decided to revise product prices with effect from 25 February 2011. The move would generate additional revenue of around Rs650 crore in 2010-11 and Rs6,200 crore in 2011-12, the company said.
Reliance Industries (RIL) (down 0.10%) is in talks with Japan's Orix Corporation to buy its 23.87% stake in Infrastructure Leasing & Finance Company (IL&FS), one of India's leading infrastructure developers and financiers, for around $1.2 billion. If the deal fructifies, it will make RIL the second largest investor in IL&FS after Life Insurance Corporation of India and will pave the way for its entry into the financial services business.
Sharon Bio-Medicine (up 5%) has signed a memorandum of understanding with Uzpharmsanoat, the state-joint stock concern of the Republic of Uzbekistan for setting up a pharmaceutical plant in Navoi Free Industrial Economic Zone in Uzbekistan. As per the agreement, Sharon Bio-Medicine will provide necessary technology to the new company and make investments along with the Uzbek government in the proposed company.