2. INDIA: THE BUDGET FOR 2004-2005

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        THE BUDGET FOR 2004-2005

      During the pre-budget meeting, on 5 June 2004, the economists asked the government to privatize the Public Sector Undertakings (PSUs) that would be vulnerable in future to global competition and demanded the Government to redefine the “profit making PSUs” accordingly. The words were reminiscent of the words used by a new union minister as soon as assuming power.

The Cabinet Committee on Economic Affairs (CCEC) was constituted on 7 June 2004.

The budget for 2004-2005 was presented to the Parliament on 8 June 2004. The salient features of the budget were 0.15 transaction charges on share transfer,  10 percent service taxes on insurance premiums and 10% tax on service charges in banks. These taxes were consistent with the letters sent to the NDA Government by Mr. V. Sabarimuthu.

The budget provided for a package for backward States. Bihar got over Re.3000 crore through this provision.

Further, the Government allowed 49% equity sale of Delhi and Mumbai airports, 5% equity sale of the NTPC and 74%  Foreign Direct Investments (FDI) on civil aviation, insurance and telecom.

However, Re. 14,000 crore was allotted for strengthening the PSUs.

The principal opposition party, the BJP, said that it would oppose the increase in the FDI limits in insurance, civil aviation and telecom sectors.

    The brokers in the stock market opposed the transaction tax.

    However, there was a provision to give 5% more money to the brokers. This could be misused because the amount was not specified. 

Former Prime Minister of India Mr. Chandra Sekar, said that interest payment was tad over 27.1 per cent, pension and travel expenses 11 percent, subsidies 9.1 percent, defence 16.1 percent and plan allocation 34.26 percent. He said that the budget called for political and intellectual resources.

The newspapers criticized the allocation of Re. 14000 crore for developing the PSUs. They wanted the Government to privatize the old PSUs, as the role of the Government in those sectors had been completed.

According to a public enterprise survey (2002-2003) released by the Government, on 9 June 2004, the total turnover of 240 PSUs was Re. 5,44,390 crore with a profit of 32,141 crore. The profit of top ten PSUs was 29,951 crore. The ONGC alone had a profit of Re. 10,529 crore. The Fertilizer Corporation of India recorded a loss of Re. 1,166 crore.