Expected Education Sector Reform in Budget 2008

Recent surveys show that cost of primary education in the country may increase in the years to come, which might be a major concern for the Finance Minister in regard to the 2008-09 Budget. University education is subsidized but primary education is not: The children belonging to poor household find it difficult to bear these expenses. On the contrary, expenses incurred on University education, approximately 14 per cent of the total costs have to be borne by a household. Moreover the cost of education at the University level is approximately half that of the cost of education at the primary level. Bringing about reforms in the education sector is one of the topics that would be taken for discussion in the forthcoming Budget.

A general trend observed conveys that in those education systems where funding of the educational establishment is done privately, there is a tendency to overlook the needs of the less privileged. This in turn deprives many children who despite having the interest to pursue education is unable to do so due to the high educational cost involved. This is mainly prevalent in the primary level.

It has been observed that there are very few countries where education at the primary as well as at the secondary level is funded by the government. The necessary fund is made available to the various educational institutions, which are run publicly. However, there are few countries, India being one of them where education at the primary level and at the secondary level is catered by the private organizations. Therefore, in such a system the poor are kept outside the purview. Usually, it is the government, which designates the responsibility to the private bodies for imparting education.

It is likely that another expected education sector reform in Budget 2008-09, would include the procedure followed in distributing the various resources pertaining to education in India. It has been found that distribution of fund for the same (educational resources) is very irregular especially among the school going children in the country.

One common trend followed in the country is children of poor people are unable to get the optimum benefits at the primary school level. At this level, educational resources are improperly disbursed, education at this level is managed by private foundations assigned by the government, this excludes the poor children from availing education. On the other hand, at the University level where educational resources are much more subsidized, the poor people cannot reach up to that level since they are unable to overcome the initial barriers (primary education).

Studies reveal that United States of America is the only country investing the maximum in matters related to education. It has been ascertained that public education budget of United States of America, if taken into account equals the public education budget of the following nations, if combined together.

• Central Asia
• Caribbean and Latin America
• Arab Regions
• Eastern as well as Central Europe
• Sub Saharan Africa

Airlines Industry expects that the private airline companies, which are heading for acquisitions as well as mergers ought to be relieved of income tax. The same approach was taken for Indian as well as Air India. The facility of tax relief was given to them to ease the merger of Indian and Air India. Expectations of Indian Airlines Industry From Budget - 2008, as per the pre budget memorandum prepared by the Federation of Indian Airlines (FIA) also hopes that the budget would take care of the accumulated losses as well keep in mind the depreciation. The Finance Act - 2007 had amended Section 72(A) provisions pertaining to depreciation and accumulated losses. Thereafter, merger of Indian as well as Air India was effected. This was followed by the merger of Air Sahara and Jet Airways. Even Kingfisher Airlines purchased a stock in Air Deccan. The merger of Air Sahara and Jet Airways followed by Kingfisher Airline's purchasing stock was carried out without availing of the provisions of income tax.

The Federation representing the airline industry also states that the capital costs owing to airline business and the circumstances under which the airlines operate are similar in case of private as well as public sector airlines. FIA identifies and discusses issues related to and on behalf of airline industry. The various matters are taken up with the government departments, regulatory bodies as well as the key shareholders.

Expectations of Indian airlines industry from budget 2008 also include matters related to ATF or Aviation turbine fuel. The FIA has urged the government to furnish a “declared good status” to the ATF, the reason being if this status is acquired, a uniform sales tax of 4 per cent would be levied throughout the country. Other expectations of Indian Airlines industry from budget 2008 also include the request for slashing Customs duty pertaining to ATF by 50 per cent for operations within the country and bringing down the rate to 5 per cent.

The FIA decided to take this step of requesting the government to reduce prices of ATF because IOC, HPCL, BPCL, all of which are public sector oil companies dealing with marketing of the same did not budge even though they had been requested to decrease cost of aviation turbine fuel.

The FIA feels that if these measures are taken the distinction, which exists in the cost of aviation turbine fuel for domestically operated airlines as well as the internationally operating airlines would be removed. Usually the price rate of aviation turbine fuel for domestic flights are 70 per cent to 90 per cent more as compared to the international ones.

A small instance would make the disparities clear. In Dubai, the price of ATF was Rs. 24,806.23 for every kiloliter on the other hand the cost of ATF in Chennai was Rs. 43,298.75 while in Delhi the cost of aviation turbine fuel was Rs.39.767.84 for the same amount of ATF.

The Government is planning to raise investment significantly on the Agriculture sector in the coming budget 2007-08. Though the contribution of agriculture sector to the total Gross Domestic Product in India has declined, still it cannot be ignored. The sector has given larger employment opportunities in the country and has provided livelihood to more than half of total population.

For a sustainable economic growth, agriculture plays an important role. For the case of Indian Economy, for maintaining a growth rate of around 10 percent, the agricultural productivity is a must.

Keeping in view India’s much euphoric economic growth, the Government is planning for a rising productivity through public investments. In this direction the Government is to invest more on irrigation projects and creation of better agricultural infrastructure. Apart from this, the Government is planning for a raising production in Paddy, Wheat and Pulses.

Investment on Agriculture made by the private sector in India is following a declining trend in the recent years. So for enhancing private sector investments the Government is planning for a tax concession for the private investment.

Union Finance Minister, P Chidambaram held a pre-Budget meeting with a group of eminent agriculturists and agricultural experts. Experts addressed the issues related to crop insurance, irrigation, water shed development, restoration of water bodies, agriculture extension, micro financing, agriculture marketing and contract farming. In a wide-ranging discussion, the following major suggestions were made by the various invitees:

• Given over-dependence of agriculture on vagaries of nature, insurance based on “weather related parameters” should receive attention in the next year’s budget. Panchayats should be the unit of settlement in case of crop failures. Weather insurance premium should not range more than 3-5 per cent of the sum assured.
• The existing crop insurance scheme covers only 5 percent of the farmers and hence the scheme needs to be expanded based on international experience on crop/agriculture insurance.
• Micro-infrastructure such as for irrigation under Bharat Nirman should be given benefits under Section-80 (IA) of the Income Tax Act.
• “On Farm Research” for local customization should be treated as R&D in laboratories and similar benefits extended to such activities.
• Agriculture extension services needs to be strengthened with minimum of costs and leakages and with adequate degree of decentralization.
• Special Economic Zones (SEZ) should not be allowed to encroach agriculture lands.
• Educated rural unemployed youths should be financed for enabling them to undertake dairying, poultry and service related activities.
• Major and medium irrigation should be major component of agriculture package meant for the farmers of Vidarbha region where many farmers’ suicides took place.
• Based on encouraging results of “sprinkler” and “drip irrigation” in Gujarat, these facilities should be extended to other areas and to various horticulture crops.
• A “National Programme on Tissue Culture and Animal Husbandry” should be started.
• Rain water-harvesting structures for all farmers with holding size less than 5 hectares should be covered under micro finance for agriculture sector.
• More financial incentives for water management for crop protection in coastal areas and with a medium to long- term perspective should be considered.
• Watershed programme is more than collecting rainwater and using it. International best practices such as “reverse pumping” should be considered through starting a “National Level Ground Water Re-charge Programme”.
• The programme on restoration of water bodies should be strengthened and receive more priority than linking of rivers.
• Contamination of ground water through over extraction and excessive use of nitrogenous fertilizers should be addressed through pilot projects and management intensive programmes. Such pilot projects can be financed by the Centre.
• Reclamation of waste, barren and uncultivable land should receive priority.
• Production and distribution of quality seeds based on local level research and technologies is the need of the hour. Direct fertilizer and irrigation subsidies may be reduced to release resources for providing subsidy to develop more productive varieties of seeds.
• Transition from traditional foodgrains to horticulture is expensive and the Government should bear the cost of the transition to help the farmers as well as farming.
• The Government should think of certain “fiscal instruments” to ensure that a part of the surplus generated by converting land use away from agriculture, is reinvested in the same area.
• Farming should be viewed as an important component of agri-system, which involves farming, agro processing and retailing. Contract farming which successfully counters the problems created by small size/fragmented land holdings should be encouraged. More investments to ensure movement from cereals to non- cereals such milk, eggs, meat are also needed.
• Food Corporation of India (FCI) should be asked to undertake minimum and not maximum procurement. For meeting the requirements of public distribution system, FCI can invite tenders and generate competition among private traders.
• The second green revolution should be based on investments and technologies suitable for Bihar, West Bengal, Eastern UP and Eastern Madhya Pradesh. Capital subsidies are needed for spreading the benefits of green revolution in these areas.
• Separate feeder lines for irrigation and village community should be considered.
• National Net work of field, block, State and National level food testing laboratories based on multi agency collaborations and laboratory information management system is highly desirable. Each laboratory will make use of standardized reagents and controls, food specific protocols, electronic reporting and will upgrade the existing food quality and testing infrastructure in the country.


Source: PIB

Automobile Sector

The Automobile sector in India has experienced a faster rate of growth in the recent years. Indian Auto makers have stepped forward by operating globally. The Motor Industry registered a growth rate of 22 per till September 2007. In the upcoming coming India budget 2008, it is expected that the Government will reduce the excise duty on the cars from the prevailing rate of 24 percent. The customs duty is also expected to come down from the present rate of 12.5 percent.

Information and Technology Sector:

The Information and Technology sector is considered to be an important area for its contribution to Indian Economy. As to statistics, the software industry in India stands at US $ 29.5 Billions, which is around 20 per cent of country’s exports. The IT and ITES services sector has become the most emerging sector in India today by creating huge employment opportunities in the country.

In the Union Budget 2006-07, 8 percent of excise duty was being imposed on packaged software. The incidence increase may be due to more compliance cost and more administration cost. Presently India has become the top destination for IT and IT related services. The hardware industry in the country is also experiencing a growing trend. Ongoing domestic taxes and levies have imposed some fiscal pressures.

Telecom Sector:

Though the telecom sector in India has experienced a faster rate of growth, still it suffers from the problem of complex tax structure. Presently the sector suffers from the problem of 12 per cent service tax, 6-10 per cent license fee, 2-6 percent spectrum charges, 1.5 percent asset deficit charges, and 2 percent education cess. Such types of tax system adversely affects to the country’s telecom sector.

A single tax system should be introduced for making the tax system investor friendly. For implementing this, the following steps should be undertaken:

• Reducing custom duties on some capital goods.
• Reducing excise duty on telecom products.
• Abolishment of CST of 4 percent for the telecom related equipment.


Oil and Gas Sector:

The oil and gas sector in India has experienced a progress in the recent years. Enactment of Petroleum and Natural Gas Regulatory Board Act is considered to be an important development in the in the industry. Apart from this, the Rangarajan Committee Report has helped a lot in measuring the gap between international prices and domestic prices.

The Government should keep special attention on the development of oil and gas industry related infrastructure. Apart from this, petrol and petroleum related products should come under the VAT by maintaining uniformity in rates across all the states.