Budget 2011: Finance Minister has limited tax proposals

PwC analyses the impact of Budget proposals for 2011-12 on individuals and industry.

DIRECT TAX

A. Personal Tax

1. Tax threshold
Budget Change: The Finance Bill proposes upward revision of the minimum threshold of taxation:
 

Impact Analysis: The real benefit of this measure would be for senior citizens between 60 and 64 years who will save Rs 9,270 and persons above 80 years who will save Rs 26,780 p.a. provided they have matching income at that age.

2. TAX SAVING INVESTMENTS
Budget Change: New Pension Scheme (NPS) - Currently, both employee's and employer's contribution to NPS are considered for overall ceiling of deduction of Rs 100,000 under sections 80C/CCC/CCD for tax saving instruments.

It is proposed that employer's contribution to NPS will no longer be a part of the ceiling. Additionally, the employer can claim tax deduction for the contribution up to 10 per cent of employee's salary.

Impact Analysis: Employees, whose other contributions do not cover the ceiling of Rs 100,000 would have a larger window for contribution to NPS. Larger contribution by the employer would benefit the employer with higher tax deduction and the employee with tax saving. However, the restriction in section 40A(9) should be removed to enable the employer's tax deduction.

Infrastructure bonds - Deduction of Rs 20,000 available in respect of investment in long-term infrastructure extended by one year.

Impact Analysis: This proposal would give a tax driven boost to the infrastructure sector.

3. RETURN OF INCOME
Budget Change: The proposals include - (i) exemption for certain specified categories of small taxpayers from furnishing tax returns, (ii) introduction of new simplified return form SUGAM for presumptive taxpayers.

Impact Analysis: Filing exemption would benefit salaried taxpayers whose entire tax has been withheld by the employer. It is expected that the exemption would be limited to the lower income group. However, the effective benefit would be limited if persons having other income such as dividend, interest are not included.

SUGAM should ensure better compliance and widen tax base.

B. Corporate Tax

1. SURCHARGE
Budget Change: Surcharge will be reduced - (i) domestic companies from 7.5 per cent to 5 per cent (ii) foreign companies from 2.5 per cent to 2 per cent.

Impact Analysis: These proposals would result in a marginal reduction in the corporate tax rates:
 

2. MINIMUM ALTERNATE TAX (MAT)
Budget Change: Increase in MAT from 18 per cent to 18.5 per cent with effective rate for (i) Domestic companies - 20.01 per cent (from 19.93 per cent), (ii) branches of foreign companies - 19.44 per cent (from 19.53 per cent).

Impact Analysis: The additional tax burden would offset reduction in surcharge for MAT paying companies. However, foreign companies would see a marginal reduction. MAT for domestic companies at 20.01 per cent would align with the proposed rate of 20 per cent in Direct Tax Code (DTC).

3. PROFIT-BASED TAX HOLIDAY
STPIs/EOUs

No extension of tax holiday u/s 10A/10B.

Mineral oil
No tax holiday for profits from mineral oil blocks awarded after March 31, 2011 under NELP-IX or otherwise.

Impact Analysis: These proposals align to the government's policy shift from profit-based incentives. However, this may affect small and medium exporters of services - especially in the IT/ITeS sector.

Power sector
Power units commencing power generation, distribution or transmission, or completing substantial renovation and modernisation before March 31, 2012 will be eligible for tax holiday under section 80IA(4).

Impact Analysis: This extension would benefit existing investments missing the completion deadline of March 31, 2011 who can enjoy grandfathering of benefits under DTC.

4. INVESTMENT/EXPENDITURE BASED INCENTIVES
Budget Change: Housing and fertiliser industry - Businesses such as cold-chain, warehousing facilities, etc enjoy 100 per cent deduction of certain capital expenditure. This benefit would now be extended to notified affordable housing projects and fertiliser units.

Scientific research - Contribution to scientific research programmes of national laboratory/university/IITs, etc. would enjoy weighted deduction of 200 per cent (from 175 per cent).

Impact Analysis: The proposals are in line with the government's policy shift towards incentivising investments. These benefits would provide impetus to low cost housing and R&D in the country. These benefits should be continued under DTC.

5. SPECIAL ECONOMIC ZONES
Budget Change: MAT - SEZ developers and units would pay MAT AT 20.01 per cent

DDT - SEZ developers would also pay DDT at 16.22 per cent on dividends distributed from SEZ profits

Impact Analysis: This proposal would advance levy of MAT and DDT on SEZs by a year (from introduction of DTC). It may negatively impact cost of operating in an SEZ and reduce investments in hitherto attractive SEZ Scheme.

6. TRANSFER PRICING (TP)
Budget Change: Allowable variation between mean and transfer price to be notified.

Impact Analysis: The government has recognised that a one-size-fits-all variation of 5 per cent does not address the dynamics of industry sectors. Customising such variation to diverse sectors is expected to lean towards an industry-friendly safe harbour regime.

Budget Change: TPO’s powers are proposed to be extended - (i) to scrutinise international transactions beyond those referred by the AO, (ii) to on-site survey.

Impact Analysis: The amendment seeks to overturn the Delhi Tribunal ruling in Amadeus India Pvt. Ltd's case, which restricted the TPO's power to examine only AO referred international transactions.

On-site surveys will enable the TPO to verify the function-asset-risk analysis given considerable importance in Tribunal rulings and appreciate the comparability analysis better.

Budget Change: Due date for filing of tax return extended to November 30 for assessees subject to TP compliance.

Impact Analysis: This proposal seeks to facilitate preparation of TP documentation based on contemporaneous comparable data pertaining to the year of the international transaction. The databases would also need to be suitably updated. The proposals do not contain deferral of timeline for Tax Audit Reports.

7. DIVIDEND FROM FOREIGN SUBSIDIARY COMPANY
Budget Change: Dividend received by domestic companies from overseas subsidiaries is proposed to be taxed at 15 per cent on gross basis.

Impact Analysis: Taxation of such overseas dividend will be at par with domestic dividends subject to DDT, with no benefit for losses. This would facilitate repatriation of funds to India and taxation thereof in line with proposed Controlled Foreign Corporation regulations under DTC.

C. Limited Liability Partnerships (LLPs)

Budget Change: LLPs are proposed to be charged Alternate Minimum Tax (AMT) of 18.5 per cent (effectively 19.06 per cent). The tax will be charged on total income without deductions under Chapter VI-A and that for SEZs. Credit for AMT paid can be carried forward for set-off up to 10 years.

Impact Analysis: Whilst liberalisation of FDI in LLP is still awaited, AMT has been introduced. AMT is not on "book profits" but effectively, on gross total income. This charge would affect LLPs having profit from businesses enjoying tax holiday under SEZs. Unlike for companies, adjustment in income under the normal provisions would vary AMT. Provisions for carrying forward AMT needs to be grandfathered under DTC.

D. Infrastructure debt funds

Budget Change: Notified Infrastructure debt funds would be tax exempt. Non-residents receiving interest from such funds would be taxed beneficially at 5 per cent.

Impact Analysis: The tax benefits would reduce funding costs for infrastructure development. The government may consider extending the benefit to domestic investors.

E. Settlement Commission (SC)

Budget Change: Relatives of persons under search cases who have filed application to SC, can also approach SC.

SC would be empowered to rectify, within 6 months, any apparent mistake in its orders.

Impact Analysis: The relatives of SC applicants in search cases can obtain speedy resolution of disputes. The power of rectification would prospectively reverse the Supreme Court ruling in Brij Lal's case, which held that the SC cannot amend its order.

F. Liaison Offices (LO)

Budget Change: LOs of foreign companies would need to file annual information reports (of their activities) with income-tax department within sixty days from the end of the financial year.

Impact Analysis: This proposal would help the income-tax department in tracking any income generating activity of LOs. However, the provisions do not contain any measures against non-compliance.

G. Anti avoidance measures for transactions with non co-operating countries

Budget Change: A "toolbox of counter-measures" is proposed to be introduced for transactions with (to be) notified countries that do not effectively exchange information with India. Measures include (i) application of TP regulations to all transactions, (ii) restrictions on tax deduction of payments including acceptance to disclose information, (iii) enhanced rate of withholding tax, and (iv) taxation of unexplained receipts.

Impact Analysis: These measures would effectively cover limited number of tax havens with whom India does not have a comprehensive or limited treaty for exchange of information. Channelisation of funds from these havens into India would be subject to stricter scrutiny and burden of higher taxation, making them unremunerative. Additionally, through the authorisation for collection of information, the government can unearth unaccounted income.

H. Mutual Funds

Budget Change: Tax on income distribution to unit holders other than individual /HUF is proposed to be increased for (i) money market mutual fund or liquid funds from 25 per cent to 30 per cent, (ii) other debt funds from 20 per cent to 30 per cent.

Impact Analysis: While tax on income distribution to individuals/HUFs has not been increased, they may be affected unless differential dividends are paid to unit-holders (individuals/HUFs and others).

I. Others 

• Tax officers in India empowered to collect information from persons, based on requests received from overseas Tax office, notwithstanding that no proceedings are pending in respect of that person in India.
• Time lapsed in obtaining information from overseas tax authorities to be excluded from assessment timelines. 
• Time-limit for obtaining exemption from EPFO extended till March 31, 2012. 
• Ceiling for receipts by charitable institutions from advancement of any other object of general public utility increased to Rs 25,00,000 
• Three more Centralised Processing Centres to be set up for faster processing of tax returns and refunds 
• Requirement of Document Identification Number dispensed with.

Kaushik Mukerjee
(Executive Director) Team members: Anand R Bhat (Associate Director), Pallavi Singhal (Associate Director), Suchint Majmudar (Associate Director), Gaurav Bajoria (Manager), Raghavendra N (Manager),Vikash Dhariwal (Manager)

INDIRECT TAX

The Finance Minister in the Union Budget 2011 has sought to achieve a fine balance between fiscal management and economic growth. The Budget 2011 has laid a roadmap for an inclusive growth of the Indian economy estimated at 8.6 per cent, keeping an eye on the projected fiscal deficit of 4.6 per cent. The buoyancy in tax revenues has permitted the finance minister not to roll back the indirect tax rates to 2008 levels. At the same time, several proposals indicate a clear intention of the central government to move towards GST through a consensus approach with the state governments.

GST - Current State of play

The finance minister, in his speech, strongly reaffirmed his commitment to the introduction of the GST. However, unlike for the DTC, which is now formally slated for introduction from 1st April, 2012, the finance minister refrained from announcing a date for roll out of the GST. Nevertheless, the finance minister has detailed the actions taken so far towards implementation of the GST, as below:

• The Constitution Amendment Bill, a necessary pre-cursor to the roll of the dual GST, would be tabled in the current session of the Parliament.
• Drafting of the model legislation for the central and state GST is in progress. 
• Necessary progress has been made on the national IT Infrastructure, which would be the backbone of the GST. The key business processes of registration, returns and payments under the proposed GST are in advanced stages of finalisation and will be part of the infrastructure modules. 
• The National Securities Depository Limited (NSDL) has been chosen as the technology partner for incubating the National Information Utility. It is expected that by June 2011, the NSDL will set up a pilot portal in collaboration with eleven States prior to its roll out across the country.

The finance minister also announced several significant Budget proposals, which are key steps towards the convergence of the current indirect tax regime with the GST such as pruning of excise duty exemptions and extending it to several more products, broadening the service tax base, introduction of point of taxation rules for services, maintaining rate parity between excise duty and service tax, etc.

We now proceed to discuss the major changes envisaged in the Budget proposals with respect to the different indirect taxes.

CUSTOMS DUTY

• Rationalisation of customs duty rates
• Introduction of self assessment scheme 
• Exemption from additional duty of customs on DTA sales made by SEZ units 
• Increase in time limit for issue of demand notices/filing of refund claims

IMPACT ANALYSIS

Rationalisation of customs duty rates
The peak rate of basic custom duty has been maintained at 10 per cent. However, the duty rates of 2 per cent, 2.5 per cent and 3 per cent have been converged to a median rate of 2.5 per cent. The convergence of the three duty slabs into one is a step towards rationalisation of the duty structure.

Introduction of self assessment scheme
Continuing with the theme of procedural simplification, it is proposed to introduce the concept of self assessment for levy of customs duty on import/export of goods. This is a significant initiative towards expeditious clearance of cargo.

However, the customs officers will continue to retain the powers of verification and requisition of the supporting documents for the purpose of assessment. In the event, the self-assessment is found inappropriate; the customs officer can re-assess the duty payable. The customs officers are also empowered to carry out an audit of duty assessed by the assessee at his office or premises of the assessee, except in cases where a speaking order is issued on reassessment. The self assessment process as envisaged in customs thus follows similar processes already in place under the excise and service tax regime and is expected to reduce overall transaction costs to a significant extent.

Exemption from additional duty of customs on sales in domestic tariff area from SEZ units
The scope of exemption from additional duty of customs in lieu of VAT/CST available on DTA sales of goods manufactured/produced by SEZ units has now been expanded to include any goods cleared in DTA from a SEZ unit. However, the exemption would be available only if such goods, when sold in domestic tariff area, are not exempted from payment of sales tax or value added tax. Prior to these proposals, the exemption was applicable only to manufacturing units and the budget now extends the exemption to trading units as well in the SEZ.

Amendments in provisions for issue of demand notices / filing of refund claims
Presently, the customs authorities can issue a notice for recovering the short payment of customs duty within six months from the relevant date. Similarly, the assessees can also file refund claims for the excess payment of duty within six months from the relevant date. Budget 2011 proposes to extend the time limit to one year. This will bring the time limit on par with similar time limits that are prevalent under excise and service tax law.

EXCISE DUTY (CENVAT)

• Withdrawal of exemptions and key rate changes
• Substantial amendments to CENVAT Credit Rules, 2004
• Adjudication provisions amended

IMPACT ANALYSIS

Withdrawal of exemptions and key rate changes
Exemption from payment of excise duty has been withdrawn on 130 excisable goods and 1 per cent excise duty has been levied with no CENVAT credit facility. Thus, Budget 2011 has extended the excise tax to 130 out of 370 products which will be brought within the purview of the GST. The balance 240 products will be covered under the GST once it is introduced. These are largely day to day consumption goods. However, in respect of certain specified goods, manufacturers have an option to avail CENVAT credit and discharge excise duty at the rate of 5 per cent.

The tax rate on merit goods which hitherto was 4 per cent will now be 5 per cent. Items such as prepared food stuffs, drugs, medical equipment, textile goods etc would now be subject to the enhanced duty rate of 5 per cent.

The pruning of exemptions is a step towards broadening the tax base in anticipation of the GST.

Substantial amendments to CENVAT Credit Rules, 2004 ('CCR')
The CCR has been substantially amended, with a view to simplify the definitions and reduce disputes. Accordingly, the definitions of inputs, input service, exempted goods and exempted services have all been reworded. The concept of used in relation to manufacture/provision of services has been done away with, thereby restricting the scope of eligible inputs/input services to those used in manufacture of goods/provision of services.

The amendments also provide specific clarity on the inclusions and exclusions from the definition. Such clarity will assist in settling various open issues relating to availment of credits. The definition also excludes inputs/input services primarily meant for use by employees.

The CCR provides for restriction on utilisation of credit for manufacturers and service providers undertaking taxable and exempted activities. The provisions relating to restriction on utilisation on credit have been amended as below: 

• Trading services clarified as exempted services
• Amount payable for rendering exempt services and taxable services, when separate accounts are not maintained, has been reduced from 6 per cent to 5 per cent 
• Banking or financial companies are required to reverse 50 per cent of CENVAT credit availed in a month 
• Insurance companies also are required to reverse 20 per cent of CENVAT credit availed in a month. 
• Rule 6(5) providing full CENVAT credit for 17 specified input services has been deleted 
• No reversal of CENVAT credit in respect of services rendered to SEZ units and developers 
• For Works Contract services where service tax is paid under composition scheme, the CENVAT credit is now restricted to the extent of 40 per cent of tax paid on input services provided service tax is discharged on full value of the services

The above significant amendments made to the CENVAT Credit Rules would result in reduction in the CENVAT credit available to a manufacturer/service provider. It is, however, expected to bring in the much needed clarity and is a precursor to how the offset provisions may come about in the GST.

Adjudication provisions amended

• The adjudication provisions under excise law have been revamped. A separate category has been carved out for cases involving the extended period of limitation (fraud, collusion, wilful mis-statement, etc.) wherein a lower mandatory penalty of 50 per cent of the duty (rather than 100 per cent of the duty) would apply. These would cover cases where it is noticed during an audit, investigation or verification that duty has not been levied, short levied, not paid or short paid or erroneously refunded but the transactions to which such duty relates are entered in the underlying books and records.
• Interest on delayed payments of taxes and duties has been increased from 13 per cent to 18 per cent.

SERVICE TAX

• Introduction of new services and expansion in the scope of existing services
• Changes in composition rates and abatement 
• Point of Taxation Rules, 2011 to be made effective from 1 April, 2011 
• Grant of exemption/refund on services provided to SEZ 
• Fresh exemptions have been granted while a few existing notifications have been modified 
• Procedural amendments

IMPACT ANALYSIS

Broadening the service tax base by introduction of new taxable services and expansion in the scope of existing taxable services

Introduction of new taxable services:
The following two services are being introduced:- 

• Services provided by air-conditioned restaurants having license to serve liquor
• Short term accommodation provided in hotels/inns/ clubs/guest houses

Clarifications have been issued in regard to each of the above categories of services, defining them and providing the manner of computation of the tax in specified circumstances. Further, in calculating the taxable value, abatement of 70 per cent and 50 per cent respectively for the aforesaid two services have been proposed.

Scope of existing services widened:

• Authorised Service Stations Services to cover all persons and motor vehicles other than those meant for goods carriage or three wheeler auto rickshaws.
• Life Insurance Services to include all services, including in relation to management of investments. 
• Commercial Training or Coaching Services to include all coaching and training not recognised by law irrespective of whether the institute is providing any other course(s) recognised by law. 
• Club or Association Services to include services provided to non-members as well. 
• Business Support Services to include operational or administrative assistance of any kind. 
• Health Services have been expanded to cover all services provided by clinical establishments having a facility of central air-conditioning and more than 25 beds for in-patient treatment.

Diagnostic services with the aid of laboratory or medical equipment and health-related services provided by doctors, not being employees, providing health-related services from clinical establishment.

These are significant extensions of the tax to healthcare.

Change in composition rates & abatement:

• in respect of Air Passenger Transport Services, the service tax is being revised as under:
• Domestic journey (Economic class) : From Rs 100 to Rs 150 
• Domestic (other than economy) journey : 10.3 per cent on the ticket value 
• International journey (economy class): From Rs 500 to Rs 750 
• The composition rate in relation to purchase or sale of foreign currency, including money changing, has been reduced from 0.25 per cent to 0.1 per cent. The option of paying service tax on billed charges is being withdrawn.

Introduction of the Point of Taxation Rules

• The incidence of service tax levy has been shifted from the time of receipt of consideration for services to the time of provision of services. Detailed rules have been framed to cover various situations.
• The date of provision of services shall be deemed to be the earliest of the following dates: 
• Date of provision of service 
• Date of invoice 
• Date of payment

These rules are significant in nature and are a major pointer to how the GST is expected to operate in regard to taxation of services. However, while these rules are exhaustive and sufficient explanatory comments are available, transitional provisions are not currently incorporated there under. It could be that such provisions could be brought about in due course. It is, however, important to recognise that the fundamental change in the point of taxation of services and the possible lack of understanding, on the part of both the tax administration as well as the tax payers, in relation to these complicated provisions, could cause serious hardship. This needs to be addressed upfront and without delay, ahead of the introduction of these provisions with effect from 1 April, 2011.

Exemption/ refund of service tax on services provided to an SEZ

• The scope of outright exemption from service tax on services wholly consumed within the SEZ has been aligned with the Export of Services Rules. Consequently, if the conditions under the Export Rules are fulfiled with respect to the category of service provided by a service provider, the outright exemption as above will be available.
• If the SEZ Developer or Unit does not carry out any DTA operations, the outright exemption is available subject to filing of the relevant declarations.
• In case the outright exemption is not available, the SEZ unit/ developer will continue to be entitled for claiming refund from the government. However, such refund will be to the extent of the export turnover only and the computation will be done on the basis of proportions.

Additional exemptions:

• Exemption of service tax on services provided by an airport authority or person authorised by airport authority, in relation to works contract, when provided wholly within an airport.
• Exemption to Works Contract Tax Service provided within a port, for construction, repair, alteration and renovation of wharves, quays, docks, jetties, piers and railways.
• Exemption to transport of goods by air,rail and road services, where services are provided to a person located in India and where the goods are transferred from a place outside India to a final destination outside India. 
• Exemption given to services rendered to an exhibitor participating in an exhibition held outside India.

Other amendments:
In order to foster a healthy and law abiding culture, it is proposed to change the penalty regime as follows: 

• Increase in penalty for non-compliance;
• Reduced penalty for disclosure of complete and true information 
• Prosecution provisions to be applicable in specific situations

In addition, with respect to refund of taxes to exporters of services, the finance minister, in his speech, has promised that a drawback mechanism along the lines of that prevalent for export of goods, will be introduced in order to speed up the process of obtaining payments for reimbursements of input taxes.

Central Sales Tax 
Contrary to the industry expectations of phasing out of the CST or at least a reduction in the rate thereof, the CST rate remains unchanged at 2 per cent. Further, taking a cue from the practice adopted by several state governments, the finance minister has proposed an increase in the rate on declared goods from 4 per cent to 5 per cent. This is surely a retrograde step and is not in line with commitments made earlier in relation to tax treatment of declared goods, ahead of the introduction of the GST.

To sum up, the indirect tax proposals in the Budget 2011 have sought to maintain stability in tax rates while broadening the tax base, reduce the overall litigation in respect of indirect taxes and placed the onus of compliance with the laws on industry.

Significant amendments are also proposed regarding service taxation, input tax off sets and other procedural matters. All of these are welcome measures. In short, Budget 2011 is a major curtain raiser on the forthcoming GST and it is only hoped that this most fundamental tax reform is brought about as soon as possible.

 S Madhavan
Leader Indirect Tax Practice

Team members: Dharmesh Panchal, Rahul Renavikar, Abhishek Shah, Nitin Vijaivergia, Niren Shethia, Kartik Solanki, Piyush Sangoi, Vaibhav Shah and Antara Sen

WHAT THE BUDGET MEANS FOR THE SOCIAL SECTOR?

According to Human Development Report (HDR) 2010, the Human Development Index (HDI) for India was 0.519 in 2010 with an overall global ranking of 119 (out of the 169 countries). We are still in the medium human development category and countries such as China, Sri Lanka, Thailand, Philippines, Egypt, Indonesia, and South Africa have better overall HDI ranking than us. There is a need for much faster and wider spread of basic health and education.

Despite overall allocation increasing by 17 per cent over last year, budget seems to lack the punch for accelerating inclusive development agenda. This article analyses the implication of Budget allocations for select schemes in the social sector.

Health

PUBLIC HEALTH CARE
Even with 20 per cent increased allocation, total plan allocation of Rs 26,760 crore is way below 1 per cent of GDP. Out-of-pocket (OOP) private expenditure on health care by an average Indian is one of the highest in the world. Around 71 per cent of the health care expenditure is borne through own resources as compared to average 15 per cent spend by individuals in developed world.

The proposal for widening of service tax net to cover diagnostics and hospitalisation in AC hospitals, will create a larger hole in the pockets of patients. This is likely to be rolled back after its huge criticism.

No major initiative has been announced in the Budget for improving the quantity and quality of human resources in health sector, being one of major bottlenecks faced by the sector.

NATIONAL RURAL HEALTH MISSION:
NRHM, the flagship programme to improve health status, seeks to provide accessible, affordable and effective primary care, especially to poor and vulnerable rural population.
 

Since the launch of the NRHM, institutional deliveries have jumped from around 10 lakh to 90 lakh; largely riding on the incentives provided under Janani Suraksha Scheme (JSY). The increased plan outlay will augur well for this scheme. Convergence of this scheme with other related schemes is essential to reap greater benefits.

INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS) :
The key objective of the scheme is to ensure adequate nutritional and health care for pregnant and nursing women; as well as children under six years. There has been significant progress in the implementation in terms of increase in number of operational projects, anganwadi centres (AWCs) and coverage of beneficiaries.

However, based on the National Health Family Survey 2005-06, the all India average for malnourished children is 47 per cent and 58 per cent of pregnant women are anaemic. These figures suggest how far we are lagging behind.
 

The proposal in the Budget to raise the remuneration levels of anganwadi workers and anganwadi helpers is a welcome move. The increased allocation is a good sign for the scheme.

RASHTRIYA SWASTHYA BIMA YOJANA (RSBY):
The RSBY has the prime objective of providing smart card-based cashless health insurance cover of Rs 30,000 per family per annum to BPL families in the unorganised sector where beneficiaries pay only Rs 30, while the government pays the balance premium to the insurer. The plan allocation for RSBY is 37 per cent lower than last year.
 

The scheme is being proposed to cover other unorganised sector workers in hazardous mining and associated industries like slate and slate pencil, dolomite, mica and asbestos. The plan outlay for the scheme is far below the expectation.

Education

In the Union Budget 2011-12, total allocation for education sector has been increased by 24 per cent to Rs 52,057 crore. The elementary education in India has made strides in recent years. However, the challenge of reducing dropout, increasing retention and maintaining quality of education persists. The dropout rate continues to be high (primary level Boys 28.7 per cent, Girls 21.8 per cent), and elementary level (Boys 48.7 per cent, Girls 49 per cent).

SARVA SHIKSHA ABHIYAN (SSA):
The objective of SSA is to achieve universalisation of elementary education. In addition to strengthening school infrastructure, scheme aims at providing quality education and promotes inclusiveness through regional interventions.
 

In the Budget, Rs 21,000 crore has been allocated for SSA as whole, which is 40 per cent higher than Budget for 2010-11 and expected to provide boost to elementary education initiatives.

MID-DAY MEAL SCHEME:
MDM is the flagship programme closely linked to SSA, implemented to improve nutritional status and increase attendance of students at primary level. The marginal increase in allocation for scheme over previous year Budget will not be even offsetting the inflation. This indicates that funds will not be available for extending the scheme to include the students of secondary level, as envisaged.
 

RASHTRIYA MADHYAMIK SHIKSHA ABHIYAN (RMSA):
The RMSA launched in with the objective of providing universal access to secondary education and universal retention by 2020. On the lines of SSA, a national mission is also proposed to implement this scheme. RMSA has 60 per cent increased allocation in the current Budget. The focus under this scheme would be on large scale infrastructure development. Objective of the scheme is to increase the enrolment rate at secondary stage from 52.26 per cent in 2005- 06 to 75 per cent within five years by providing a secondary school within reasonable distance of any habitation.
 

Livelihood & Sanitation

MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS) :
MGNREGS is one of the most discussed central flagship programme to facilitate rural development through guaranteed rural wage employment of 100 days annually to all adults with special focus on women. Despite, all the criticism and issues, the scheme has been able to provide benefits to over 4 crore households covering nearly one-sixth of the population and helped in building permanent infrastructure and assets in rural areas and also brought down migration from rural areas.
 

The budgetary provisions have been maintained at stagnant level. Recent announcement of the Ministry of Rural Development to enhance the wage rate in parity with the CPI for Agricultural Labour is expected to enhance utilisation in less responsive states. However, allocation in the Budget with revised wage rates looks inadequate.

TOTAL SANITATION CAMPAIGN (TSC) :
A target of achieving 62 per cent by 2015 in terms of the number of families having sanitation facilities has been set. The country is still in a challenging situation with more than 57.7per cent (DLHS-3 2007-08) families not yet having access to improved sanitation facility with 74per cent of them in rural areas.
 

The planned allocation has been marginally increased in the Budget. This could be sufficient considering the lower fund utilisation in past. There is a need to strengthen the core approach of the campaign to make it demand driven and people centric.

NATIONAL RURAL DRINKING WATER PROGRAMME :
The Bharat Nirman Programme plans to cover approximately 55 thousand uncovered habitations and provide safe drinking water to approximately 2.16 Lakh villages affected by poor water quality by 2012. In addition to coverage, sustainability of water resources and appropriate quality for drinking water supply continues to be difficult.
 

The Budget outlay for National Rural Drinking Water Programme (NRDWP) for the 2011-12 has been raised marginally similar to the sanitation programme. It seems the focuses here also is on quality enhancement and complete the coverage rather than on extension.

Ashok Varma
Executive Director, Government Reforms and Infrastructure Development
Team members: Aditi Bhutoria, Aditi Das, Alka Chadha, Gautam Anand, Sonal Shivagunde, Sujata Mullick and Sundeep Paulose