Delhi Budget 2014 : A Story of Unkept Promises and the Perils of Centralization

Shri Arun Jaitley gives us a textbook example of why Swaraj should be adopted and why the Center should not budget for expenditure for the state, the districts, the blocks and the Mohalla Sabhas. He lacks the bandwidth, in-depth knowledge and intent to make Delhi free of its troubles. The Delhi Budget was yet again a business as usual budget, which goes back on many of the promises made by the BJP and could even be called a Sheila Dikshit budget.

The Delhi Budget presented by union finance minister Arun Jaitley in the Lok Sabha on Friday is a complete betrayal with the residents of the national capital, who have been cheated by the BJP-led government once again. There is not one line about tackling price rise, stopping the water tank mafias or anything that affects the common man. The BJP had, during the assembly elections and the Lok Sabha elections, both, promised 30% reduction in electricity tariffs, but despite having got a proper opportunity to do so, it finally failed to deliver on its promise, proving that the promise was merely to hoodwink the people. They added insult to injury after tariffs were further raised by 8.32% to add to the removal of the original relief provided by the AAP Government.

It is none other than Finance minister Arun Jaitley himself, who had mocked and derided the AAP government for providing electricity and water subsidy in a public statement and blog post on January 1 this year.

However, while presenting the Delhi budget on Friday, Mr Jaitley has done exactly the opposite of what he used to say earlier, but what is shocking is that the subsidy announced by him is exactly what the Sheila Dikshit government used to give. Minister Arun Jaitley announced subsidy of Rs 0.80 to Rs 1.20 per unit to small power consumers. Something that he himself opposed vehemently. This is the same subsidy that the Sheila Dikshit-led Congress government used to give to the people of Delhi. We knew that both of them were brothers and sister in corruption, but didn’t know that they were deviant classmates who copied each others’ budgets and policies.

Jaitley saab, please let us know when you will write a blog post defending this subsidy that you have given. We eagerly wait to read it.

We are not opposed to this subsidy, but we do unconditionally criticize your double standards. This temporary subsidy is not enough. We demand a 50% subsidy as given during the tenure of the AAP government. We had given a written statement for an allocation of 699 crores to be incorporated in this f/y  as a power subsidy while the discoms are audited to give relief to consumers. But this has not been followed through on or implemented. There is enough evidence on record to suggest that the discoms have siphoned off huge amounts by fudging their account books. On the basis of the evidence available in public domain, the AAP government had ordered a CAG audit of all the three discoms of Delhi to unearth the scam.  The CAG has been complaining that the discoms have not been cooperating with the auditors and have so far refused to make their account books available to them. Instead of forcing the distribution companies to comply with auditing norms, the government has come to their rescue by announcing this undue hike in electricity tariff.

Waah, Jaitley saab, Waah!

What happened to the claims by Delhi BJP leaders that a provision of Rs 700 crore would be made in the budget to bring down the electricity tariffs in Delhi ? Did their own central government not listen to them or were they trying to mislead the people ?

Well, moving on to your other faults, for which it seems we will have to convene night sessions of the Lok Sabha as well:

The current average demand for potable water in Delhi is around 1,100 mgd (million gallons per day) and the Delhi Jal Board supplies around 800 mgd water across the city after treating raw water in its treatment plants. The demand is projected to touch around 1,400 mgd by the end of the 12th Five-Year Plan in 2017.

However, nothing was done to increase the quality or quantity of water in New Delhi. He mentioned the Renuka Dam again like a manifesto promise. Jaitley saab, election time is over. It’s time to actually do work. You can’t keep doing pilot studies. The BJP government at the center forgets, actually does not know that the Dwarka water treatment plant has been non-functional for many years and that the Okhla plant working much below capacity due to lack of water. There is no mention in the budget of how water starved areas in Delhi will get adequate supply of water and how the tanker mafia would be eradicated to ensure all residents  will have access to clean water. The AAP government gave 20K liters of lifeline water for free, seized control of 35 tubewells operated illegally for high profit, and revived water harvesting systems. We may be new in governance, but are seemingly much better at it than you.

Before making the announcement about renovating and modernizing water treatment plants to merely show an increased number of such plants, the BJP government should have given adequate attention to the existing plants, which are non-functional due to water scarcity.

Mr. Jaitley says that he wishes to impose no taxes but the lawyer in him possibly slightly out-of-order and overburdened by his work in Defence and Finance, has forgotten that he is constitutional precedent states that he can’t raise new taxes on the citizens of Delhi. This only needs a cursory interpretation of Article 356 and 265, that says that no tax shall be levied without the authority of law, which in this case is vested in the state. Thus he claims victory in the media over something that he could not do.

And many of the “great” solutions proposed are just restatements of initiatives made by the AAP government in Delhi. The 100 new ambulances or online booking of beds in hospitals or opening up of forensic laboratories were all initiatives of the AAP government, which the minister conveniently copies without any mention of its origins.

Your government can be characterized by the phrases “Naam bade, darshan chhote” and “Abki baar jhooti sarkar.” At every stage in the evolution of your political party, you have lied to the masses. These Lok Sabha elections and Delhi Assembly elections were no different. Your manifestos were full of impossible claims and false pledges, which are being seen in effect everyday.

You promised to reduce the power tariff by 30 percent but have bowed to the regulators and discoms, and increased the tariff by 8.32%.

You have not made any progress on controlling price rise or made any allocations towards it. Where is your price force to check hoarders? Where are your online Mandis? Modi jee, it is time to deliver on your high-flying technology promises? Agar aise hi advanced technology aur transparency ke sapne dikhaakar usey chakna chur karte rahe, to janta maaf nahi karegi!

The BJP government also promised to bring police, DDA and other land-owning agencies under one roof to streamline governance. There have not made any outlays for this purpose. The BJP also promised to grant full statehood, but as their response to Shri Vijay Goel’s question in the Rajya Sabha suggests: they have no plan in mind to give the country’s capital, the independence that it deserves. The BJP which promised full statehood to Delhi hasn’t even started thinking about when and how to pursue this goal.

Sunn rahe hain, Dr. Harshavardhan?

Where is your academy to train prospective IAS/IPS/IFS officers? Where is your scholarship for meritorious students? Where is the CWG sport scholarships? Where is your online university? Where are your allocations for these programs, Jaitley saab? You had promised a program called Khel Mein Jeet Hain to sponsor and facilitate upcoming sports talent and use the Commonwealth Games infrastructure. However, all this is still missing. Iss budget mein Khel ki Jeet nahi, Dilli ki haar hai.

You had promised 50,000 new jobs by making Delhi the new green capital of the world? Where are the jobs? The unemployed restless masses of Delhi ask you this question. And for all your pretense for being pro-business, you have done thing to promote honest industry. Only the corrupt will thrive under you. The AAP government in 49 days had announced a simplification of the VAT process, raised the ceiling limit from Rs. 50 lakh to Rs. 1 crore, removed the 6% commission levied on farmers for selling produce at government mandis and removed FDI in retail till real benefits are known. We improvised by creating night shelters in abandoned buses, started the process of regulating colonies, provided lifeline water, and recognized and started regularizing over 1 lakh contract workers. The Aam Aadmi Party will further ensure minimum wages and regulate their working hours, weekly holidays and working conditions. Provision of social security shall be initiated along the lines of the Construction Workers’ Welfare Board. That is real pro-business governance, Modijee. That is real pro-people governance, Modijee.

Modijee, you are portrayed as having the face of a lion but have the heart and mind of a rabbit in front of the corrupt owners of society. The corrupt, greedy and malevolent elements of Delhi are happy with your government coming to power. The AAP government despite being new in politics struck fear into the hearts of those who targeted the weak. An FIR was filed on the CWG street-light scam in which Shunglu committee indicted Shiela Dixit. An FIR and investigation was started into 3 Delhi Jal Board targeting scams to the tune of 341 crores. There was a probe in the 184 crore Salimgarh bypass project on the basis of the Shunglu committee report. We delivered on our zero tolerance on corruption promise. Do let us know when you start doing so. We eagerly await it.

You pretend to help senior citizens but have done nothing to fulfill your promise of raising their pensions, giving RWAs funds to provide local programs, establish fast-track courts for citizens or even remove regular problems in their access of healthcare or banking. Under the social welfare schemes, Dr. Harshavardhan said his government would increase the pension of elderly, physically challenged, widows and destitute women. It remains the same. You have forgotten the people who built this country.

In healthcare, you made huge promises of mobile healthcare, extremely cheap health insurance, doubling the OPD treatment facilities, free transportation for patients, home visits for senior citizens, but yet again, as it has been the trend of your government, these are all empty promises. Even the presence of ex-Delhi CM candidate, and current MP from Delhi Dr. Harshavardhan who is also our health minister has not given you the impetus to do any work.

Dr. Harshavardhan, achcha hota agar aap isey Das Bahaaney keh dete na ki Das Iraade.

A Delhi Women’s Protection Force was promised with the promise of recruitment of 25,000 officers to protect women. However, no allocations have been made and your budget simply restates whatever plans there already were. Where are the special courts to tackle and fast-track cases against women? Are you not serious towards the security of women, Mr. Jaitley?

When the AAP government was in place, we conducted an infrastructure audit of 1000 government schools, gave Rs. 1 lakh per school for immediate needs, set up a help line for nursery admission and removal of management quota. We promised to open 500 schools but were cut short by your government’s tieup with the Congress. In this budget, you promise allocations for only 20 schools. Delhi ke bachche kahaan padenge, Jaitley jee?

You have said that you’d like to work to integrate the public transport infrastructure, make it safer for ladies and integrate payment systems, whilst simultaneously building new lanes and doubling the buses on road. I feel like that you’ve forgotten everything in your manifesto. The manifesto also stated the party would implement long-awaited mono rail, which would be complimentary with Delhi Metro, to ensure all areas of the capital are covered by it. I’ve traveled in Delhi: I can’t see the monorail. I’ve looked at your documents. I can’t see a monorail. Sirjee, jhooth bolna kab band karenge?

Achche din transport ke nahi, aapke hi aaye hain!

Dr. Harshavardhan came up with Das Din, Das Iraade. All of them are now broken. We can only ask him “Kya hua tera vaada, woh kasam,woh iraada?”

Aur rahi baat Jaitley saab aur Modi jee ki. You celebrate the anniversary of Bal Gangadhar Tilak but refuse to understand and implement the concept of real Swaraj. That will only come when you relinquish your power and give it to the people. And while your budget hasn’t delivered on your promises or delivered Swaraj to the masses, we promise that we will overhaul this business-as-usual UPA-III budget when we come to electoral power in Delhi.

Disclaimer: This was originally prepared as a note on the Delhi Budget. It was then infused with political rhetoric for delivery as a speech in Parliament. These do not represent the official views of the Aam Aadmi Party.

The AAP MPs: Your CCTVs and Voice in Lok Sabha

“There is no one force, no group, and no class that is the preserver of liberty. Liberty is preserved by those who are against the existing chief power. Oppositions which do not express genuine social forces are as trivial, in relation to entrenched power, as the old court jesters.”
― James Burnham, The Machiavellians, Defenders of Freedom

This quote among many others is what drives the Aam Aadmi Party MPs as they go daily into Parliament and attempt in all earnestness to be an honest and constructive opposition, while representing the interests of their constituencies and the country to the best of their ability.

The current AAP MPs are Dharam Vira Gandhi (Patiala), Shri Bhagwat Mann (Sangrur), Shri Sadhu Singh (Faridkot) and Shri Harinder Singh Khalsa (Fatehgarh Sahib), all representing the state of Punjab.

One of the crucial components of everyday Parliamentary procedure is the question hour, where there are starred and unstarred questions. While you may remember it distantly from your high school civics textbooks, allow me to jog your memory quickly. Question Hour is when the members of Parliament can ask the Council of Ministers headed by the Prime Minister questions which deserve a oral or written answer. These can be informational, confrontational or just showing a red flag at something the government hasn’t done, is doing wrong or ought to have done. The Parliament Secretariat then chooses 20 starred and 200 unstarred questions for each day’s business by lottery. The last date of submission is 15 days before the Ministry is supposed to answer these questions.

Much like AAP’s crowdsourced-by-necessity model, I invite you to tell us what you would like the MPs to ask our current government. As an analogy that was once used, they will be your CCTVs and Voice in Lok Sabha. And while we cannot guarantee what questions are chosen by the Parliamentary Secretariat, we can guarantee that we will keep asking the right questions on behalf of the people of Punjab and India.

After figuring out the details of the how/when/what/where of this issue, I’ll be coming back to you, the people, to ask you what you want to ask your members of Parliament. For now, keeping watching your AAP MPs give it back to the government in majority on a day-to-day basis on Lok Sabha TV. They may have 282 but our 4 Punjabi Khalsas are worth 1.25 lakh each. You do the math 🙂

PS: I think political writing is getting to me already. A lot more rhetoric than was required. Anyway, I’m reasonably self aware so I’ll curb it. If I don’t feel free to call me out on it!

Critiquing the Railway Administration, rather than the Railway Budget

The Indian Railways are truly the lifeline of the country, connecting every human and natural resource in India. People were anxious to see some strong actions being taken to improve the governance of railways, known for rampant corruption and poor quality of services. Annual growth rate of freight earnings fell from 12.65 per cent to 9.49 per cent and that of passenger earnings from 10.52 per cent to 7.10 per cent. These growth rates were below Compound Annual Growth Rate (CAGR) achieved in 2000-09. The government’s immediate knee-jerk response was to raise the prices of passenger fares and the freight fares, saying that the consumer must bear the cost of transportation and that prices must go up to compensate for that.

While we agree with the first part of the sentence, we disagree with the second. We’d also like to add that the consumer must bear the true cost of transportation, and not an inflated cost. The question of the Indian Railways has been framed as a question of ‘Survival of railways and/or better services necessitates fare rise’ versus ‘How will the poor afford it?’ The central issue is a far more practical one – it’s an issue of ‘Good Governance’, a cause particularly close to Prime Minister Modi’s heart, at least in his election campaign. The rail fare hike is a classic example of the sheer lack of ability or willingness or both in using ‘governance’ as a lever of value creation for the country.

Let’s get this straight – Indian railways is not bleeding because paying consumers pay enough. It is bleeding because of (a) massive revenue leakage, especially in freight due to under-reported loads (b) Massive padding up of costs for railway contracts because of these lucrative railway contracts being in the stranglehold of the contractor-mafia-bureaucrat-politician nexus.

Interestingly, it doesn’t even need a smart Prime Minister to tackle these problems, but just someone who listens to his arms of government, like the Comptroller Auditor General of India. CAG has over the years, in its audit reports, indicated poor financial health of the railways and have recommended measures to improve the operating ratio (which is currently hovering at around 94%) to leave money for planned expenditure, which has over the years shrank far below minimum.

Sample this. A CAG Report in 2009 on the Indian Railways has detailed both the problems faced by the Indian Railways and solutions to tackle them. It finds that there was non-recovery of 102.53 crores on account of railway freight with respect to coal alone in 2009-10.

In totality thousands of crores are lost every year by the Railways in

  • administrative delays,
  • payment non-recoveries,
  • irregular application of railway freight rules and
  • irregular grants of train load rates.

Prime Minister Modi’s simplistic solution of raising passenger and freight rates, instead of tackling institutional defects mentioned above, and others like
defective planning, engineering faux pas and poor enforcement of contracts, makes one seriously doubt the good governance credentials of this newly elected government.

And in case you thought that inefficiency was the only problem with the Indian Railways, think again. Corruption exists in its many forms in the Indian Railways and has led to losses worth thousands of crores. Sample this. A test audit by the comptroller and auditor general (CAG) of the railway’s dual policy for transportation of iron ore has confirmed widespread suspicion that exporters have been blatantly misusing the policy. The CAG audit sent to the railway ministry says that just in cases where it carried out the test audit recoverable dues to the government is over a staggering Rs 17,000 crore. And the figure is on the basis of an audit carried out at only 26 of the 75 loading points and 10 unloading points out of a total of 41.

The railway administration permitted these parties to avail of the domestic rate despite non-submission of any of the prescribed documents. And by letting them pay domestic rate, railways suffered a revenue loss of Rs 258.38 crore, indicating collusion between the railway administration staff and the parties, with the total prescribed penalty against 443 parties being estimated at Rs 17588.16 crore. These are losses related to just one policy and its application on the ground. One shudders at the scale of corruption in the Indian Railways. As Atul Kumar, an Indian Railway Store Service officer, who exposed a cartel pricing strategy by vendors to the Indian Railways, leading to a scam of RS. 5000 crore rupees each year, said ” The CommonWealth Games is a much smaller and one time scam. The scam in railway procurement is much bigger and perennial.”

And now back to the Budget. There is the oft-ridiculed Bullet Train between Ahmedabad and Mumbai. First of all, it is a misnomer. A bullet train has a speed faster than 300-350 kilometers an hour. Your proposal won’t be able to do that. Most countries make decisions of using bullet trains after reaching at least 5-6,000 dollars of per capita income in their economic growth cycle. In a country of India’s poverty, where your union budget under allocates funds for the PDS scheme, this spending is grotesque. It takes 100 crores per kilometer of tracks, at a total cost of 55,000-60,000 crores to make a “bullet train” from Ahmedabad to Mumbai. Tracks can be made faster to about 200 km/hr at about 7-8% the cost. But the government wants to build us a Shanghai with the human development of Sierra Leone.

Also, the budget talks about leveraging PSU resources for financing infrastructure projects. It looks like government just want financial resources of these profit-making enterprises without learning anything about their efficient administration. Much more clarity is required on this front as similar attempts earlier have become a burden on otherwise performing organizations.

On the point of true costs, here’s another interesting example of how vendors and cartels supplying equipment to the Railways massively increase the costs of the Railways, which the government expects the consumer to bear. The Railways buys from pre-approved vendors. After getting approved, the vendors take advantage and form cartels and quote exorbitant prices. They dictate prices and this problem is known to all. But due to kickbacks involved or perhaps more due to normal bureaucratic apathy, nothing fruitful is done. For example, ‘In the case of fragrance dispensers installed in AC-2 tier coaches and toilets in 2005, the Railways Research Design & Standards Organisation (RDSO) told the management to install a specific brand of odour control systems in trains. The brands were Auto Janitor and Microburst produced by a UK-based company. Three Mumbai-based suppliers – Dinesh Kumar & Company, SR Electronics and Jade International- were named by sources. In 2007, Jade imported the dispensers for Rs. 415 each and sold them to Railways for Rs. 4600 a piece – more than ten times the cost. Dispenser refills were imported for Rs. 226 and sold to the Railways for Rs. 1300 each – at five times the cost. The Railways cut out competition by making specifications match a particular brand. Other vendors say that similar dispensers are available locally at about Rs. 700 per piece.’  The issue of quality control in food catering has got attention in budget but there are many more basic problems which lead to such issues. Lack of accountability is due to cartels amongst pre-approved vendors and the oft-quoted PPP approach might lead to a further rigging of the system. Don’t get me wrong, PPPs aren’t bad. But ineffective implementation leaves even lesser responsibility and accountability in the hands of the government.

The budget scored some great points on its plans for linking academia with the railways. It proposed to set up a railway university and offer summer internships for engineering and management students. It was a much-anticipated move because there has been a divorce of railways from academia and practicality. On this front another good thing was setting up of Innovation Incubation Centre to encourage new and practical ideas from the grassroots to improve the functioning of the railways. But the budget is silent on the timeline of setting up of such institutes and also the allocation of cost. Such kind of declarations suits a manifesto more than a budget. Outlays need to be made.

E-ticketing to support 7200 tickets per minute to allow 1,20,000 simultaneous users. This is laughable. There are teenager in Punjab who are armed with better technological skills who can make a better layout, infrastructure and data center for the Indian Railways website. It seems that your government’s ability to pursue good technology is restricted to only Facebook and Twitter. The one place where the private sector needs to be roped in to get in, solve the problem and get out: you haven’t used them efficiently.

Sanitation in railways is in ruins and not much has been done over the years to improve it. The budget allocated 40% more funds over previous year to cleanliness activities. But, unfortunately, again the focus is on synthetic solutions in the form of more PPP contracts instead on improving efficiency of existing staff. Though the PPP mode is not bad per se but railways has enough resources (including the existing PPP contractors) to get the task done. For example, recently Railways initiated a cleanliness Drive at all India level for 15 days. What is interesting was that no additional resources were used rather the existing staff was used in an efficient manner.

CCTV cameras at booking counters are essentially required. It helps curb the menace of touts(especially in the booking of tatkal and long route tickets) and help the passengers get the required services without having to pay additional money.

Unlike the annual budget, women safety received good attention in the form of proposed induction of 4000 women RPF constables. But again the lack of numbers/outlays and timelines create doubts of their own. Also, the budget has been good on the side of welfare of employees. It increased its contribution towards Staff Benefit Fund, proposed special schemes for the meritorious employees, ACs in loco cabins and the Hospital Management Information System. We welcome these steps. Though the proposal to use 5% bio-diesel and to harness solar energy by utilizing rooftop spaces are indeed good but again the problem is same that no outlays and timeline are given.

Yes, there were many things to critique in this budget, and many good thought experiments as well, which we hope will be implemented on the ground. 5 years should be ample time for that. However we pose some more fundamental questions, which the government shall address in its rebuttal and actions of the future.

The question arises as to why the railway is struggling to survive? Is it because passengers are not paying enough or bad governance in the functioning of the railways, probably the result of contractor-bureaucrat-politician nexus? The question is, why has the average revenue per train load of freight not gone up? Why has the average bid in railway contracts not gone down in the last 30 days? Why are railway contractors and officials not trembling with the appointment of Mr. Modi with such a handsome majority? Why are they actually smiling with the rate hike? Are they perhaps emboldened? I don’t know. It will be interesting to carry out a mood survey of these folks. And to then to investigate whether co-relations exist with the funding patterns of the MP’s from those areas. However, till BJP and Congress remain steadfastly against RTI for political parties we will never know this information.

Before I open up another Pandora’s box, meant for discussion, for another day, I yield the floor back to the Respected Speaker of the House.

Note: The points and details given below were, in some part, used in different speeches and media releases on the Railway Budget done by AAP.This note was prepared with the help of an IIM-Calcutta alumnus who chooses not to be named, and Siddharth Jain. As you can see, the writing is much more loose and well, political than it is purely policy-based. I’ve tried to edit them but haven’t really gone through them with a fine comb to save time for myself 🙂

Links to Read:

http://www.business-standard.com/article/economy-policy/cag-report-raps-railways-114021100634_1.html

http://indiatoday.intoday.in/story/cag-unearths-rs-17000-crore-railway-transportation-scam/1/308874.html

http://saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/union_audit/recent_reports/union_compliance/2013/Railway/Report_12/Report_12.html

http://businesstoday.intoday.in/story/railways-lost-rs-2486-cr-due-to-irregularities-cag/1/203234.html

http://ibnlive.in.com/news/railways-accounts-not-transparent-cag-report/173324-3.html

Disclaimer: This article is not an official statement of the Aam Aadmi Party, though it has been written from their perspective. Any errors in this analysis, grammar or form are the author’s own, and not a mistake of the Aam Aadmi Party.

 

Wohi Din Aane Waale Hain?: Arun Jaitley’s Budgetary Damp Squib

India faces unprecedented levels of inflation, with the prices of potatoes, onions, LPG, Diesel, Petrol and sugar rising steadily and steeply. The government’s economic survey projects that growth will be at 5.5% averaged over 2 years. The Rangarajan Committee’s recent “starvation line” has 3 out of 10 Indians below it, while a poverty line might actually encompass more than 3 out of 5 of India’s citizens. This is the context in which the Union Budget should have been framed. However, Finance Minister Shri Arun Jaitley has forgotten the Aam Aadmi who bears the brunt of inequality and slow exclusive growth, as he presented this Union Budget.

Presented on 10th July 2014 was P. Chidambaram’s interim Budget with a few bells and whistles, a few cosmetic changes and a complete lack of vision. It has been called Chidambaram’s Budget with a saffron lipstick. We won’t go so far, but are disappointed by this damp squib. Even the artificially inflated fiscal deficit number of 4.1% being brought down by about half a percent every year, had no concrete steps associated with it. We welcome you to look at our analysis on P. Chidambaram’s budget, we mean, Shri Arun Jaitley’s budget, in the appendix.

There are a few good things about this budget, and we support them wholeheartedly. The Aam Aadmi Party supports the fact that there was no withdrawal of surcharges and excesses. We support the fact that the government has not pursued a retrospective withdrawal of the retrospective amendments in the income tax act. The government has been prudent to set up a high level committee under CBDT (Central Board of Direct Taxes) to adjudge such cases, before action is taken, instead of passing a verdict based on 45 days in government that it has spent firefighting price rise. Bank capitalization, e-visas to promote tourism and 15 model rural health centers are all extremely good ideas, though not much thought has been put into their implementation or their funding.

However, for a government that came to power and got its historic mandate by targeting price rise and black money, there was very little content in the budget speech to target these two problems, except for a price stabilization fund for agricultural commodities. No action was taken by the government on past requests by the CBDT (Central Board of Direct Taxes) to fill more than 30,000 vacant spots in our different financial intelligence departments, which could hunt down black money and tax irregularities. It was particularly concerning to hear nothing about the revision or repeal of double tax avoidance treaties, especially with Mauritius and the usage of participatory notes in India’s financial landscape, both of which cause huge amounts of revenue losses.

The first indication of the lack of long-term vision was obvious. Instead of a visionary budget, we got a business-as-usual budget. The Aam Aadmi Party is supportive of the introduction of the idea of the General Sales Tax, we are disappointed by the fact that even after so many years of being in active opposition, and supporting the GST, the BJP-led NDA government doesn’t have a plan or timeline for the introduction of the GST. Despite bipartisan consensus on the issue, with only legitimate revenue sharing concerns, the GST was the lowest hanging fruit that the government could have passed off as its vision. However it hasn’t even done that! So one shudders to think as to how it will confront more contentious issues.

While this budget attempts to touch almost every aspect of life in India, it is cursory in its approach and rather shallow with its details. There are a lot of pilot schemes whose place in a vision for the future is not evident, while some projects have extremely meager outlays for meaningful work to be done. And then there are some line items which are rather inexplicable. The Sardar Patel Statue of Unity, commissioned by then Chief Minister Narendra Modi, was supposed to be a state project, crowdfunded by the people of this country and diaspora. Now it has received 500 crores in Anandiben Patel’s budget for 2014-15 and 200 crores from the central government. Maybe they’ll come back to the central government for funds. Who knows? It may be a great idea, but I do find it interesting that the allocation towards the statue was more than the allocation on schemes to promote SC and ST entrepreneurs, or that on awareness towards the “Beti Bachao, Beti Padhao” campaign, targeted towards girl’s education.

Another area of concern is the usage of disinvestment in the coming year to fund a lot of these projects, where they seek to raise about 60,000 crores. While the Aam Aadmi Party is not opposed to disinvestment in principle, we must ensure that the government doesn’t use it as a regular source of income to plug deficits. Asset sale is not revenue, and will not plug your fiscal deficit, in the long run. Another point to remember that the methodology to arrive at a disinvestment is rigorous and carefully studied.

Much like previous budgets, there is a lack of transparency in data. In this low growth economy, the revenue projections are optimistic while expenditure ones are pessimistic.There is a lack of transparency in data and its accounting. For example, expenditure done by the government as part of flagship schemes like MNREGA are currently shown under the line item of central assistance to states, bloating that number from 1.19 lakh crores to 3.38 lakh crores, which is not a true representation of the Center or particular state’s fiscal situation, since states have only 10% flexibility on how those funds are used.

Allocations for Sarva Shiksha Abhiyan and Rashtriya Madhyamik Shiksha Abhiyan were retained at roughly same amounts as the Interim Budget at Rs. 28,635 crore and Rs. 4,996 crore respectively. However, The Economic Survey, released just a day before the Union Budget, acknowledged the shortage of nurses and doctors as well as lack of quality teachers in the education system, but the budget made no mention of making allocations on how these human resources will be bolstered the SSA and the NRHM. Most of the budgetary outlays in healthcare in this budget are curative and not preventive medicine. Similarly, institutes like the IITs, IIMs and AIIMs have been promised to make certain states happy, but no structural measures to get more teachers, equipment and improving their quality have been taken.

The focus of this government has been to provide a stable and predictable tax regime to spur growth and ensure an investor friendly environment. There are a lot of corporate friendly policies and mentions of the PPP (Public Private Partnership), accompanied by an increase in the FDI cap in Defence and Insurance up to 49%. We ask that the government treads with caution and doesn’t lose the scope for maneuverability or control over the country’s defence, natural resources or financial condition.

And then, there are many things that the Union Budget is silent on, things that it should have voiced a vision, direction or even an opinion. The budget has been silent on social protection for the unorganized sector, challenges of maternal mortality, challenge of infant mortality etc. There is no mention of the need for reviewing and rationalizing tax exemption and revenue foregone because of the same. Strong emphasis was placed on industrial corridors, EPZs and SEZs with no comment on land acquisition and displacement concerns. This is rather disturbing and must be looked at seriously. At the same time, there has also been no comment on the pricing or determination of the market value of agricultural and industrial/commercial land, which is probably one of the largest sources of notional revenue losses.

It was also evident that the Indian government hasn’t gotten out of the constant idolatry worship which plagues the names of our government projects. It used to be the Nehru-Gandhi before, and now there are right wing idols like DD Upadhyay and SP Mukherjee. The country would be infinitely better off, without these named policies and legislations, which are dissolved after any regime change in a post-election budget. Politics may have faces, but policies must not.

The Modi government has lost its first opportunity to present a radical piece of economic reform and has squandered it on multiple patches of piecemeal projects, rather extravagant and needless schemes, and continuation of projects, like in health and skill development from the UPA. While we were not afforded the luxury of time to adjust in New Delhi as a new government, we will not gift that disservice to Prime Minister Modi’s government. We will offer our criticism and constructive support to Prime Minister Narendra Modi and hope that this terrible start in financial and economic reform is not followed by a disastrous five years of governance.

APPENDIX

There are many questions that this budget raises with respect to financial discipline. It is interesting to note that while the GST and DTC will bring in structural reform in our taxes and possibly widen our tax base, there have been no efforts made to increase India’s appalling tax-GDP ratio, which currently stands at 17%. We do appreciate the fact that taxes were not increased in this budget when there is high inflation and low growth. However, we do hope that the government takes steps to improve our fiscal health as our economy improves with a quick implementation of the GST and DTC.

Further, in an economy where growth is low and thus, taxes won’t be generating high revenues, the additional receipts of the Union Government will be funded by non-tax revenue, that the government feels will come from ‘dividends and profits’ and ‘non-tax revenue from economic services’. Increased dependence on non-tax revenue in a period of high inflation could be counterproductive to India’s economic needs.

When decisions are made without a clear explanation as to why they’re being made, without any public declaration of data or thought processes leading to the decision, it throws up questions of possible bias or opacity in decision-making. For example, in the clause “Investment linked deduction extended to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semiconductor wafer fabrication manufacturing units.”, we have no idea what the revenue implications will be, who will benefit from it and what are the long-term benefits from this decision. The Aam Aadmi Party would like to see much more clarity in such policy decisions.

There has been an allocation of 500 crores for broadband connectivity to all the villages. While we think that this is a wonderful idea for the future, it is infeasible with respect to the long term costs of setup, operation and maintenance. The first priority should also be to at least provide broadband to panchayats, in accordance with previous legislation.

In some cases, the government has decided to conduct feasibility studies and pilot projects to evaluate long-term projects. We welcome evidence-based research, but desire that the motives and research questions behind these pilot projects be made clear. For example, there are already murmurings amongst social activists that the Van Bandhu Kalyan Yojana might be a front to reward workers of the Van Bandhu Parishad, an associate organization of the Rashtriya SwayamSevak Sangh (RSS), an organization that has helped the BJP electorally in Madhya Pradesh. While we make it categorical that the AAP makes no such allegation towards the government, history suggests that Professor Murli Manohar Joshi, the former Minister of Human Resources Development and current Member of Parliament has made past financial allotments to this group, which have been revoked subsequently due to their extremist views. The AAP would like the government to dispel any such suspicions by publishing the reasons of conducting pilot projects and/or feasibility studies for each project.

In the real estate space, Infrastructure Investment Trusts (InvITs) have been setup to reduce the burden on banks for borrowing, but there is no mention of a real estate regulatory authority that safeguards the people’s interests.

In education, there has been only a 4.2% increase in education than the 2013-14 Budget. Only 42% of the planned education outlay has been spent on primary education over the last 3 years (2012-13, 13-14,14-15) on SSA, which is far below the 60% benchmark. There was no emphasis on education spending with RMSA and RUSA budgets remaining the same as the interim budget presented by P. Chidambaram.

In healthcare, the spending on line items related to the Ministry of Health and Family Welfare remains same as the interim budget at 0.3%, with a marginal increase in the National Health Mission. We appreciate the creation of the 4 new AIIMS, rural health centers and medical colleges, and also the hikes in taxation on cigarettes, tobacco and aerated drinks. However, the lack of a timeline on the former leaves much to be desired. There was no hike in taxes on beedis, which are smoked 8 times more than cigarettes. There is a brief mention of the possibility of a PPP in the National Rural Health Mission through the Economic Survey. We oppose this possibility unequivocally, as rural India cannot bear the adverse selection effects that may enter the health market due to the entry of private players. Healthcare must be provided by the government in an efficient and transparent manner. Finally, while curative actions have been proposed in the name of free diagnosis and drug services, we hope that upcoming projects and budgets on preventive care as well.

On drinking water issues, There has been no change in the drinking water budget from the interim budget presented by P. Chidambaram with planned outlays at 10892 crores. There was a mention of a 3600 crore drinking water project to improve quality but this has always been in the budgetary outlay, with this budget leading to the fourth renaming of the same scheme, now called the “Swachch Bharat Abhiyan”.

In agriculture, we appreciate the creation of the price stabilisation fund, increase to the allocation of crop insurance schemes to about 3950 crores and a new national pilot project on soil health cards. However, there has been no mention on ensuring that the minimum support price formula improves the income security of the farmer. Allocation of agriculture has jumped by 25% from 30,000 crores to 37,500 crores but most of this increase has come from animal husbandry and fisheries which increased from 2100 crores to 8600 crores. The big problem remains that there were no allocations, announcements related to food security which was one of the cornerstones of the BJP manifesto that equated food security to national security. There’s a shortfall of about 22,000 crore than the minimum required budget for the food security budget. The NFHS stands as-is, with no concrete allocations on the PDS.

The Aam Aadmi Party appreciates the retention of the MNREGA. However, it has been poorly budget. In a year with a deficient monsoon with need for livelihood support with people in rural areas of the country, there should have been more allocations for MNREGA. The current allocation doesn’t take care of 5,000 crores worth unpaid wages from the past year which is of paramount importance.

On the issue of women’s safety, all the allocations remain the same as the interim budget. There is no clarity on where the crisis management centres will be opened, with all the specific schemes articulated by Shri Arun Jaitely already being funded by the Nirbhaya Fund. Other than the gender sensitisation project, there was nothing new for allocations related to women’s issues. It is also curious that there is a line item on gender mainstreaming, which possibly suggests no coordination between the budget makers on women’s issues.

On different issues related to children, there was have been virtually no allocations in strengthening the right to education, ICDS and ICPS, with allocation going down from 0.67% to 0.62% of the GDP between last year’s budget to this year’s allocation. There has been no increase in the National Child Labour Project, cuts to vaccination funding for BCG and some pools of the health ministry and the RCH related to children’s issue, with a total decrease of 83 crores.

On Muslim issues, the budget through the Ministry of Minority Affairs are exactly the same as the interim budget. Skills India is a restatement of the National Skill Development Program started by the interim budget in UPA-II.

We also believe that the Interusability of KYC and unified Demat accounts will be a help to the Aam investor by simplifying and reducing red tape. Prior to possible divestment in PSU banks, the Government should set up a PSU bank holding company as recommended by the PJ Nayak committee, since it is important to understand the roadmap on dealing with NPAs, consolidation of PSU banks and recapitalisation of banks as required by Basel-III norms.

It is a terrible idea to ask banks to provide long term infrastructure finance as there is an inherent asset liability mismatch in doing that. Instead the Government should permit and encourage Institutions that garner long term savings such as pensions, provident funds and insurance companies to fund infrastructure. On transfer pricing issues, we saw that lawyers rejoiced as the possibility of litigation reduced with the adoption of a range as opposed to arms-length pricing method, but we believe that this needs more careful scrutiny to ensure that the public’s interests are kept at the forefront.

Disclaimer: This article is not an official statement of the Aam Aadmi Party, though it has been written from their perspective. Any errors in this analysis, grammar or form are the author’s own, and not a mistake of the Aam Aadmi Party. Inputs were taken from a few economists who do not want to disclose their names, and from a budgetary thinktank in New Delhi.

Expectations from the Union Budget 2014

Here’s an article I wrote in the run-up to the Union Budget 2014 for the Aam Aadmi Party. I hope you find it interesting as you do a post-budget analysis! Most of the posts will be first drafts that I post, so do focus on the content and not the form or manner, as it may not be up to the mark. Inputs were taken from the institute of Charterd Accountants of India and the Center for Budgetary Governance and Accountability.

Disclaimer: This is not an official Aam Aadmi Party post or statement.

Expectations from the Union Budget 2014

This is the India of 2014. Potato and onion prices have risen by more than 20 Rs in the past few months at the wholesale purchasing level, while retail prices are off the charts due to speculative hoarding by traders. All this happens while the farmer doesn’t even enjoy the high prices due to lack of channels of distribution and storage. The farmer’s MSP have risen by 1-2% but fallen in real terms because of inflation. Potato wholesale inflation stood at 31.44% in May, taking the overall inflation to a five-month high of 6.01% during the month. The core inflation reached 8.3% in May; 0.3 percentage points lower than in April, but food inflation stands at around 10%. LPG prices are up by 16.5 Rs/kg while Diesel and Petrol will be hiked by 50 paise and 1.50 Rs per month, so that the public gradually bears the burden it cannot bear. Sugar prices have risen already, and so will the prices of electricity due to miscreant companies in the Nation’s Capital, New Delhi. The government’s Economic Survey projects that growth will be between 5.4% to 5.9% with a poor monsoon and external international factors possibly affecting our agricultural crop when India experiences its driest June in 113 years. It might not create the jobs that this country’s restless unemployed need, nor will it create the prosperity that our farmer: large or small, landowning or marginal or landless, desires. The Rangarajan Committee’s recent “starvation line” has 3 out of 10 Indians below it, while a poverty line might actually encompass more than 3 out of 5 of India’s citizens.

This is the context in which any exercise regarding the Union Budget should be understood. The Union Budget, we humbly submit, should be an exercise in enabling the Aam Aadmi of this country to enhance his potential and uplift the Aam Aadmi out of poverty, while allowing to fuel inclusive growth and development in the country. There is not a one single “Aam Aadmi”, but several different categories of this citizen, and AAP seek to represent their aspirations, needs, desire and dreams.  Each distinctive economic group (by profession or by income) needs to be addressed by a specific economic policy, to enable each group to maximize its potential. The nation is composed of the rural poor, urban poor, small and marginal farmers, landless labourers, urban lower and upper middle classes, small and medium enterprises and businesses along with their employees, big business and corporates in the private and public sector. It is a broad spectrum of lifestyles, incomes, living conditions and social strata.

For each different sector, we believe that the Government of India should seek to  increase the gross national happiness even as he attempts to push the growth and development agenda. Development at the cost of exclusion will be injustice to India’s citizens. Prime Minister Modi’s government has promised not just the moon, but the entire Milky Way in his electoral campaign. We must ensure that the Union Budget is held accountable to the promises made by Prime Minister Modi, that led to his historic election. To help his cause, we humbly suggest the following issues to be taken up as part of the Union Budget.

Ensuring Long-Term Fiscal Discipline

One of the fundamental things the Aam Aadmi Party should observe are initiatives that attempt to increase the appallingly low Tax-GDP ratio which currently hovers at 17%, in an efficient, transparent and feasible manner. We should look at all initiatives that raise taxes with an analytical lens as to how it improves the nation’s fiscal condition. We should welcome measures that aid it and denounce measures that don’t. The solutions provided should be realistic and fiscally sustainable. It is extremely important that we augment our tax resources. One key resource is that we augment the tax resources.

There is a need to rationalize and reduce the existing gamut of tax exemptions, particularly those meant for the corporate sector, and review the rationale for most of the exemptions. Tax breaks should be project-specific, and should not be treated as a ‘cost-saving’ source for corporations seeking sustained tax holidays. There is a need for a White Paper on tax exemptions providing detailed sectoral break-up of revenue foregone for different industries with a comparative assessment regarding objectives of exemptions fulfilled vis-à-vis magnitude of exemptions.

Adoption of a Nationwide GST(General Sales Tax)

To broaden the tax net and revenue, an all-encompassing GST might be provided in this budget. If there is an accurate and good proposal of the General Sales Tax, to replace individual taxes, the Aam Aadmi Party should support it. This has bipartisan consensus but should be properly accompanied with a better legislative framework where sharing of revenues between the Center and State is mandated and is proportional to their needs.

Preventing Corruption, Crime and Tax Evasion Amongst Corporates

Corruption, crime and tax evasion are facilitated by people’s ability to hide their identity through secretive shell companies and other legal structures. This can be addressed through government-administered registers created to maintain information on the real, beneficial ownership of companies, trusts, foundations and similar legal structures.

The practice of MNCs being able to shift profits from country to country, to or via tax havens, has gained attention worldwide. While India has fairly strong corporate reporting standards, this can be further strengthened through requiring MNCs to publish for each country in which they operate: a breakdown of their employees, physical assets, sales, profits, and taxes due and paid.

Dealing with the Nation’s Natural Resources

Exploitation of the nation’s natural resources like gas, bauxite, iron ore among others should be under the control and supervision of the Government of India. The only time exceptions should be made to get the private sector involved is when it is infeasible for the government to be involved. Even in this case, the government should strictly maintain an efficient accountability mechanism and a tight leash on the private sector’s exploitation, with the ultimate goal of maximizing social surplus for the citizens of India, as opposed to maximizing private gain. The Aam Aadmi Party should be careful in observing and analyzing the legal provisions and fiscal implications of this budget with respect to Natural Resources, and should red flag any attempts to put private profit over public benefit.

Land Use: Defining Market Value for Commercial, Industrial and Agricultural Use

The Government of India should devise a transparent mechanism to establish the market value of agricultural land, and pricing mechanism to judge the value of the land when converted for industrial or commercial usage. The state coffers should not suffer on account of corruption or ineptitude shown during the conversion of land, which leads to bountiful gains to unscrupulous private land owners on account of the state coffers.

Structural, Legislative and Bureaucratic Reform: Key to Effective Implementation

Each proposal in the Union Budget, be it customs, excise, direct or indirect taxes, and any type of outlays on account of the Government should be accompanied by methods to ensure that the systemic problems that plague the system are tackled and not just its symptoms. For example, any serious attempt made by the government to stop inflation, especially in vegetables and essential food commodities cannot be tackled by hiking minimum export prices or by flooding the market with low-cost commodities. Instead, hoarding by traders and middlemen which leads to hiked retail prices despite low wholesale prices should be cracked down. Also, efficient supply chain management which includes storage and transportation of grains should be made available to farmers so that they can sell their produce in different markets, and not be caught in the middle throwing away their crops at really low prices or get stuck with the middleman.

We believe that by honestly exercising its executive powers and bureaucratic might, any government can make the standards of living better for the population at-large and pursue growth and development at the same time as providing its citizens essential services of health, education and housing of a high quality. The Aam Aadmi Party’s Government has proved to the nation that this is possible, and we hope, but with some skepticism that Prime Minister Modi delivers the same degree, if not better, governance for the nation.

Education

There is a need to increase the spending on education significantly to meet the recommendations of the Kothari Commission (1966) for 6 % of Gross National Product (as combined budgetary spending on education by Union and state Governments) as public expenditure on education. Between 2004 and 2011, government expenditure on secondary and higher education have increased only by a meager 0.1 per cent and 0.5 per cent of GDP respectively. The government needs to step up investments in secondary and higher education. Along with a significantly higher expenditure, there needs to be better enforcement and accountability mechanisms for our schools with the local area’s representatives and residents.

The Right of Children to Free and Compulsory Education Act, 2009 (RTE), requires private schools to strictly adhere to the rules and regulations of the Act. Continuous monitoring of private schools is necessary to regulate profiteering by private schools. Immediate recruitment of teachers to meet the provisions of RTE Act. Thorough training of existing teachers and appointment of trained teachers is required. It is important that the centre’s share in education has to rise since the states are already running over-capacity and are maxed out on funds and bandwidth to implement the Sarva Shiksha Abhiyan.

Achievement, attendance and other qualitative indices needs to be linked to the spending and not just enrolment. It is necessary that any government service like the quality of education or healthcare is tied to outcomes, and that budgetary outlays and planning are linked to outcomes, and have measurable metrics that are evaluated regularly to fine-tune the project.

The Aam Aadmi Party believes that the fundamental problem lies in our schools and opening more premier institutions in the name of IITs or IIMs does not correct the structural problem that the education system faces today. So, we believe that the government should not advance populist measures of yore, which only increase the number of “premier institutions” in name, without improving education, teaching and learning in schools.

The government should also set up an education finance bank, which can also raise deposits.The AAP feels that every student in the country should be able to receive a low-cost and high quality education that helps them realize their potential. The only exception where we believe the state should not subsidize education is where students attain professional education at the graduate and postgraduate level, which has a high degree of monetizability after completion of the course.

Housing

There should be a focus on providing every family the ability to own a house of their own, which can be provided by public provision of low-cost housing and low home loan interest rates in order to encourage home buyers. The Aam Aadmi should be able to afford and get by the bare minimums of Roti, Kapda aur Makaan.

Healthcare

There is a long-pending recommendation for stepping up public spending on health (Union and State governments combined) to 3% of the Gross Domestic Product (GDP); however, the present government spending on health is a mere 1 % of the GDP. There is a need to reduce current out-of-pocket expenditure on health care, which is at present 69 % of the total expenditure.

There should be a concerted effort to improve the quality and quantity of trained medical staff in the pyramidal medical infrastructure of the country. Universal healthcare provided by the government needs to be of a high quality. Only then will the country’s citizens trust it enough to not spend huge amounts out-of-pocket in private healthcare, which depletes their personal disposable income. This needs to be done by improving and opening more medical schools, providing better facilities, infrastructure and equipment to every medical practitioner from the District Hospital to the Primary Health Center and making public healthcare as attractive as private healthcare for both the providers and the end consumer.

The huge shortage of human resources in the health care sector is reflected even in premier institutions such as All India Institute of Medical Sciences (AIIMS). Another reason for such shortages is that the private sector, promoted and subsidized by the government, under the model of public-private partnership, draws away human resources from the under-resourced public sector. The problem is further accentuated by poor working conditions in public hospitals. There is a need to significantly augment human resources in public hospitals, to improve working conditions, and to work towards strengthening public facilities rather than subsidizing private hospitals. Strict regulation for health services provided by private agencies need to be drafted and strictly followed for ensuring accountability.

Until the government solves the problem of healthcare funding and insurance, we also believe that the medical reimbursement exemption limit should be increased.

Controlling Inflation through Interest Rates

Interest rates impact inflation which impact investment attractiveness. To fix some of the supply side inflation subsidies need to be reduced which means an increase in some prices. That is a move in the right direction, which will help interest rates to come down. The Aam Aadmi Party will not be an automatic naysayer of price increases, as long as the government honestly attempts to put in place systems that tackle the fundamental structural problems related to those commodities. However, price rise cannot be the only solution that a government selling us the good governance package offers to its public.

The Aam Aadmi is adversely affected by any upward movement of fuel prices directly. Increase in the price of diesel increases the transportation cost of essential items, while LPG and Kerosene hit the lower middle class and poor adversely. Adequate fiscal and administrative mechanisms need to be put in place where the government has adequate control on fuel prices and does not let them subject to the fluctuating prices of global crude oil prices.

AAP believes that the government expenditure should allot portions of the budget to tackle the following issues:

  • Take steps to improve the state of the refugees;
  • Launch more banks for the poor
  • Grant more loans at easy rates for farmers;
  • Focus on the villages more than on the cities.
  • Provide support for new entrepreneurs and enterprises, both rural and urban

A Budget for the Aam Aurat

Frontline women workers in the Integrated Child Development Services (i.e. Anganwadi workers), National Rural Health Mission (Auxiliary Nurse Midwives) and Mid-May Meal (Cooks) should be recognised as regular employees, and, minimum wages and social security benefits should be ensured for them.

The AAP believes that as a part of the provisioning of social security for women, pension for widows should be increased and linked to inflation; also, there is an urgent need for ensuring pensions for all single women and women above the age of 55 years from economically weaker sections of the population.

Disinvestment, Capital Creation and Aadhar

In a stagflated economy, it may be necessary to pursue disinvestment as a strategy to close or improve loss-making public sector businesses. Before such steps are taken, there should be a thorough study on what value shall be gained, and on the method of this proposed disinvestment itself. However, it cannot be made into a yearly feature of our budget since it will be like, as the popular saying goes “Selling your wife’s jewels to settle debts and feed your family”. It is unsustainable in the long run.

It is important to note that capital spending towards asset creation was at 23% in the NDA between 1999-2004 while only 12% is used towards asset creation currently with most of the other expenditure being towards recurring expenses. If capital spending towards asset creation increases, we should welcome it. If it remains at status quo or decreases, it is an area of abject criticism.

It is important that Aadhar is used in some form by the government and not discarded as post ex-regime programs are thrown away. Direct Benefit Transfers should be used in cases where there is evidence to show that the benefit reaches the end-user and consumer. For example, until now, it has worked in fellowships, old age pensions but hasn’t been revolutionary in PDS. Leakages due to corruption should be corrected but after gathering enough evidence to give credence to the solution.

Transparency in Data

The credibility of fiscal numbers has taken something of a beating in recent years. Revenue projections appear optimistic, expenditure ones pessimistic and liabilities are perceived to be postponed in order to present a better picture. It is important for the government to clear all doubts on all of these parameters. Four months into the fiscal year, there should be a reasonable sense of revenue growth. The government will undoubtedly want to initiate several new programmes, for which it will allocate funds, but how these funds are to be mobilized must be made clear.

Most importantly, it must make a commitment to account for all expenditure commitments within the year in which they are made. The government has always had a loophole in this regard because it follows a cash-based accounting system. if money is committed, but not paid out in a given year, it does not count towards measuring the deficit. Transparency will be hugely helped by moving to an accrual-based system as quickly as possible. From the reform perspective, only by facing up to the true state of government finances can stakeholders be persuaded to support the more ambitious objectives that are addressed later in this column.

Enabling Adivasi India

The Union Government should accord legal status to TSP by enacting it as legislation on the lines of the draft bill for enactment of Scheduled Caste Sub Plan (SCSP) prepared by the Union Ministry of Social Justice and Empowerment. Notional expenditure in the name of development of infrastructure for Scheduled Tribes (ST) should be discouraged strongly

Agriculture

Minimum Support Price for agricultural commodities should be based on the formula suggested by the National Commission on Farmers (led by M. S. Swaminathan), which had made recommendations on the Minimum Support Price (MSP) for rice, wheat, millets and other commodities. The MSP should be one and a half times the total cost of production as suggested by the Swaminathan Commission. MSP should be declared on time (much before the harvesting season) and budgetary provisions should be made to open agricultural Mandies at every Panchayat throughout the year to procure agricultural produce to avoid distress sale and to provide facilities to farmers to store their produce.

In order to make agriculture a viable and profitable occupation, there is a need to establish a Farmers Income Commission which could recommend policy measures for securing a guaranteed income for farmers whose incomes fall below a threshold limit.

Food Security

The National Food Security Act (NFSA), 2013 has excluded 33 percent of the population from accessing the Public Distribution System (PDS) in continuing with the exclusionary criteria of targeting households as ‘priority’ and ‘general’ category. The New Union government should take steps towards universalizing the PDS in the country. Procurement and storage of foodgrains must be decentralised, preferably done at the Panchayat level.

Dalits

All the Ministries and Departments should be encouraged to: (i) identify what could be the additional difficulties / challenges confronting SCs in their sectors of concern, (ii) what kind of measures could be taken by them to address those special difficulties / challenges, and (iii) how much additional resources would be required for such special measures. These additional resources devoted for the special measures for SCs should then be reported under SCSP. The budgetary outlay under the SCSP should be the non-lapsable and non- divertible.

Persons with Disability

Adequate funds should be provided by the new Union government for setting up of disability units in all ministries and departments. Lack of awareness on various aspects leads to non- implementation of the rights of the disabled people; hence, there should be special allocation made in the budget for various departments on awareness creation and sensitization.

Sanitation and drinking water

In acknowledgment of the gender-based disadvantages faced by women in accessing water supply and sanitation facilities, the Union Ministry of Drinking Water and Sanitation must start reporting its gender-responsive budgetary outlays in the Gender Budget Statement every year.

Direct Taxes, Indirect Taxes and Capital Markets

  1. The GoI should consider retrospective withdrawal of retrospective amendments to tax laws and using retrospective taxation only in the “rarest of the rare” cases.
  2. The Government of India should take strong action against the use of participatory notes in funneling black money and should reconsider their use if the costs of using P-Notes outweigh its institutional benefits.
  3. Equity, fairness, responsiveness, simplicity and transparency are needed to run the tax department efficiently and honestly, and for this the government should attempt long-term structural and bureaucratic reform.
  4. Streamline the tax audit system by Anti Evasion Wing, CAG Audits and Service Tax Audit to avoid duplication and overauditing of enterprises.
  5. Double Tax Avoidance Agreements with countries like Mauritius and Singapore should also be reconsidered and repealed. For example, according to the tax treaty between India and Mauritius, a company resident in Mauritius selling shares of an Indian company will not pay tax in India. Since there is no capital gains tax in Mauritius, the gain will escape tax altogether. This is unacceptable to the Aam Aadmi Party, and we urge the central government to repeal or revise these treaties.
  6. Investor Courts to be established at district level, state level and national level to address the grievances and complaints of investors.
  7. Complete liberty on pricing of public issues should not be given since that results into manipulation of financial statements, manipulations in profits and share prices

It is also important to remember that the Gross Domestic Product is only one form of an economic indicator that seeks to capture a nations well being. It doesn’t capture parameters that capture social well being or gross national happiness. And thus, any analysis on the budget should also keep in mind these intangible and qualitative factors. The Aam Aadmi Party hopes that the Government of India will keep these issues in mind as it prepares the Union Budget and ensure that the budget tackles structural problems and attempts to start the path of reform and inclusive growth and development that the country needs desperately, and doesn’t end up being a large financial exercise in futility.