Budget 2021-22: In Pursuit of Atamnirbhar Bharat - Funds from Monetization of Govt. Assets and Debt Instead of Taxing the Haves | Sher Singh Sangwan

The budget 2021-21 is broadly in pursuit of Atamnirbhar Bharat (ANB) mission which was announced by the Government in May 2020 with the packages amounting to Rs.27.1 lakh crore including both the monitory and fiscal measures. The slogan of be vocal with local was followed by structural reforms like redefinition of MSMEs, privatization of the Mineral Sector & Public Sector Undertakings, Agriculture and Labour Reforms, one Nation One Ration Card for ease of labour mobility and Production Linked Incentive(PLI) Schemes. In that continuation, the budget 2020-21 may be broadly be called an upgraded version of the ‘make in India` pursuit in some earlier budgets of BJP government. In addition to manufacture in India, this budget aims self-sufficiency oilseeds and pulses too.

But the limitation for the budget-analyst is change in the style presentation every year to make it difficult to compare over the years. Moreover, after dismantling Planning Commission and Five Year Plans (FYP), the budget is presented like a rolling FYP which create an aura but hide the annual allocation. I have tried to cull out the annual allocation for the last three years i.e. actual spending for the year 2019-20, budget estimates(BE) for the year 2020-21, revised estimates(RE) for the year 2020-21 and the BE for the year 2021-22 from different statements. Further, the year 2021-21 was an abnormal year due to Covid-epidemic requiring unprecedented spending and idling of economic activities. Therefore, the comparison is made between the BE of 2020-21(presented without expecting the epidemic) and BE of 2021-22 when the recovery is expected partially. To accomplish the objective of ANB, this budget is focused through 6 pillars viz., i) Health and Well being, ii) Physical and Financial Capital and Infrastructure, iii) Inclusive Development for Aspirational India, iv) Reinvigorating Human Capital, v) Innovation and R&D and vi) Minimum Government and Maximum Governance. Some highlights of these pillars are critically discussed herewith.

Pillar 1. Health and Wellbeing

To improve health facilities, a new centrally sponsored scheme, PM AtmaNirbhar Swasth Bharat Yojana, will be launched to develop capacities of primary, secondary, and tertiary care Health Systems, strengthen existing national institutions, and create new Institutions with an outlay of about Rs.64180 crore over 6 years. Under this pursuit, the Mission Poshan 2.0 will be launched by merging the supplementary Nutrition Programme and the Poshan Abhiyan in 112 aspirational Districts. The Jal Jeevan Mission (Urban) for supply tap water in 2.86 crore Urban households; liquid waste management, facel sludge management and waste water treatment will be focused for better health care. The air pollution will be reduced by effectively managing waste from construction-and-demolition activities. A total allocation of Rs Rs287000 crore is announced 5 years from 2021-2026. Accordingly, the total allocation 2021-22 are 127 % higher than the BE of 2021 with 144 % increases in capital expenditure. Besides, an amount of Rs35000 crore has been provided for Covid-19 Pneumococcal Vaccine, a Made in India.
In connection with clean air for well being, the budget has announced voluntary vehicles scrapping policy with features such as: compulsory automatic fitness tests of private vehicles above 20 years and Commercial vehicles over 15 years. Even the vehicles older than 8 years will be subjected to a ‘green tax’, which will see owners shell out an additional 10 to 25 percent of road tax at the time of the renewal of the vehicle’s fitness certificate. The policy will be implemented on PPP mode with substantial penalties upto seizure of the vehicles. Whereas, those who opt for the voluntary scrappage scheme, will be eligible for benefits & incentives as when they purchase a new vehicle. It may promote sales of more fuel efficient vehicles, reduce pollution levels and revive & boost the Indian Auto- industry.

2. Physical and Financial Capital and Infrastructure

The PLI scheme for ANB has been announced for 13 sectors with commitment of about Rs1.97 lakh crore over 5 years starting FY 2021-22. Its objectives like increase in scale & size in key sectors and nurturing global champions Besides PLI schemes, 7 Mega Investment Textiles Parks (MITRA) will be established in 3 years to make textile industry globally competitive and attract large investments and generate employment. Further, the National Infrastructure Pipeline (NIP) announced in December 2019 will be expanded from 6835 projects to 7400 projects. The NIP targets are to be achieved in the coming years by creating the institutional structures, monetizing public assets including land and raising share of capital expenditure in Central and State budgets. The objectives are laudable but its implementation over long period may caste apprehensions.

To finance the massive Infrastructure,professionally managed Development Financial Institution (DFI)will be set upby passing a Bill. A sum of Rs20000 crore is provided to capitalize the FDI which will have a lending portfolio of at least Rs 5 lakh crore in three years. To augment funds for infrastructure and real estate sectors, debt financing of infrastructure Investment Trust (InvITs) and Real Estate Investment Trusts (REITs) by Foreign Portfolio Investors (FPIs) will be enabled by making suitable amendments in the relevant legislations. Asset monetization programme (AMP) will be undertaken through National Highways Authority of India and Power Grid Corporation of India Limited Ltd (PGCIL) which will sponsor one InvIT each to attract international and domestic institutional investors. Other core infrastructure assets that will be rolled out under the AMP are Freight Corridor assets of Railways, operations and management of Airports, Oil and Gas Pipelines of GAIL, Warehousing Assets of Central Warehousing Corporation and NAFED, Sports Stadiums, etc. These steps are linked with the dictum of more governesses and less Government in business. Accordingly, the capital expenditure in the BE of 2021-22 is Rs 5.54 lakh crore i.e. 34.5% above the BE of 2020-21.

In pursuit of ANB and make in India strategy to happen, the budget specifically focuses on bringing down the logistic costs by improving road and rail net work. To augment expressways and economic corridors, the budget focus on Delhi-Mumbai (260 km), Bengaluru—Chennai (278 km), Delhi-Dehradun (210 km) and Kanpur-Lucknow(63 km), Amritsar-Jamnagar, etc. Some NH works are mentioned in Tamil Nadu, Kerala, West Bengal and Assam; the poll bound states in April 2021. The budget provides Rs104591 crore for roads & bridges with increases of 29.4% over BE of 2020-21. It is expected that Western Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022. Besides, the Sonnagar-Gomoh Section (263.7 km) of Eastern DFC will be taken up in PPP mode in 2021-22. The electrification of the Broad Gauge Route Kilometers (RKM) will be increased to 72 % by December 2021 and to 100% by December, 2023. The budget has provided a sum of Rs110055 crore to Railways, of which Rs107100 crore is for capital expenditure. To improve urban transport, a PPP model will enable private sector Players to finance, acquire and operate over 20000 buses. Besides, two new technologies i.e., ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lower cost but same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities. To do away with the monopoly of distribution companies across the country either government or private; A framework will be put in place to give consumers alternatives to choose from among more than one. At the same time to ensure viability of Distribution Companies, a scheme of pre-paid smart metering and feeder separation, upgradation of systems, etc. will be launched with an outlay of Rs305984 crore over 5 years.

To improve Shipping, Major Ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them. Hence, 7 projects worth more than Rs 2000 crore will be offered by the Major Ports on PPP mode in FY21-22. Further. Subsidy support of Rs1624 crore will be provided to Indian shipping companies over 5 years for applying in global tenders floated by Ministries and CPSEs. Moreover, the present recycling capacity of Ships at around 4.5 Million Light Displacement Tonne (LDT) will be doubled by 2024 to generate an additional 1.5 lakh jobs for our youth. Outreach of Petroleum & Natural Gas will be extended to cover 100 more districts in next 3 years. Further, one crore more beneficiaries will be covered in Ujjwala Scheme for uplifting their living standard.

Financial Capital

• The budget proposes to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code which would purchase investment grade debt securities both in stressed and normal times for development of the Bond market.
• FDI limit in Insurance Companies to be increasedfrom 49 % to 74% in and allow foreign ownership and control with safeguards like majority of Directors & key management persons to be resident Indians, 50% of Directors to be independent and certain percentage of profits to be retained as general reserve.
• Resolution of Stressed Assets by setting upan Asset Reconstruction Company Limited and Asset Management Company for aggregating and taking over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds/Potential investors.
• To consolidate the financial capacity of PSBs, Rs20000 crore is proposed for recapitalization.
• To streamline the provisionsof increases inthe Deposit Insurance cover from Rs1 lakh to Rs 5 lakh for bank customers, hence, the DICGC Act, 1961 will be amended in this Session.
• To expedite recovery in NBFCs with minimum asset size of Rs100 crore, the minimum loan size for recovery under SARFAESI Act, 2002 is to be reduced from Rs50lakh to Rs20 lakh. To ensure faster resolution of cases, NCLT framework will be strengthened, e-Courts system shall be implemented and with alternate methods of debt resolution for MSMEs.
• It is proposed to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from “not exceeding Rs 50 Lakh†to “not above Rs2 Crore†and turnover from “not exceeding Rs 2 Crore†to “not above `20 Crore†. This will benefit more than two lakh companies in easing their compliance requirements.
• Tobenefits Start-ups and Innovators, it is proposed to incorporate one Person Companies (OPCs). The OPCs will grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 to 120 days and also allow NRIs to incorporate OPCs.

Disinvestment and Strategic Sale

• The disinvestmentof BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited would be completed in 2021-22. Other than IDBI Bank, it is proposed to privatize two Public Sector Banks and one General Insurance company in the year 2021-22. The IPO of LIC will also come.
• To pursue ANB, disinvestment in all nonstrategic and strategic sectors where bare minimum CPSEs will be maintained and rest privatized. In the remaining sectors all CPSEs will be privatized. The strategic sectors are Atomic energy, Space and Defence; Transport and Telecommunications’; Power, Petroleum, Coal and other minerals and Banking, Insurance and financial services. In these sectors, there will be bare minimum presence of the PSEs. The remaining strategic sector CPSEs will be privatized or merged or subsidiaries with other CPSEs or closed. In non-strategic sectors, CPSEs will be privatized, otherwise shall be closed.
• Post disinvestment, economic growth of CPSEs & FIs will be through infusion of private capital, technology and best management practices. Disinvestment proceeds will be used to finance various social sector and developmental programmes of the government.
• Center will give incentives to States to take to disinvestment of their Public Sector Companies so as make use of all idle assets for ANB. About of Rs 175000 crore is the expected receipts from disinvestment in BE 2021-22.
• The non-core assets largely consist of surplus land with government Departments and PSEs. Monetizing of land will be through a SpecialPurpose Vehiclein the form of a company.
• A new mechanism will ensure timely completion of closure of sick or loss-making CPSEs.
• Under the Treasury Single Account (TSA) System autonomous bodies directly draw funds from the Government’s account at the time of actual expenditure, saving interest costs. The TSA System will be made universally applicable from 2021-22.
  All the above infrastructural and financial capital improvement will be pursued through the policy of monetization of govt. land privatization of the PSUs and which were conceived as milestones of industrialization in the second FYP.

• More than 15,000 schools will be strengthened as exemplar schools for handholding and mentoring other schools to achieve the ideals of the new National Education Policy.
• 100 new Sainik Schools will be set up in partnership with NGOs/private schools/states.
• The Higher Education Commission of India announced In Budget 2019-20, will be set up through legislation this year. It will be an umbrella body having 4 separate vehicles for standard-setting, accreditation, regulation, and funding.
• For better synergy among various research institutions, universities, and colleges supported by the GOI in different cities, in 9 cities, umbrella structures will be created while retaining their internal autonomy. A Glue Grant will be set aside for this purpose.
• A Central University in Leh will be set up for higher education in Ladakh.
• Initiatives on Education as part of NEP, it is proposed to develop National Professional Standards for Teachers (NPST) in the form of capabilities of teachers. It will be followed by all 92 lakh teachers of public and private school system in the country. A unique indigenous toy-based learning—pedagogy and A National Digital Educational Architecture (NDEAR) will be set up to support teaching and learning activities in all schools of the Centre and the States/ Union Territories. A new system of assessing students for cognitive levels as well as unique strengths and the potential will be introduced. Senior and retired teachers will be engaged for individual mentoring of school teachers and educators.
• To benefit ST 750 Eklavya model residential schools will be set up in tribal areas.
• With a view to make youth employable, Government proposes to introduce a concept of post-education apprenticeship i.e. training of graduates and diploma holders in Engineering. An amount of Rs3000 crore is provided for this. Further to impart skill qualifications, it is proposed to establish partnership with the United Arab Emirates (UAE) and Japan.

5. Innovation and R&D

• To strengthen the overall research ecosystem of the country with focus on identified National-priority thrust areas, National Research Foundation (NRF) as announced in the budget of 2019-20, will be set with an outlay will be of Rs50000 crore over 5 years.
• Some new initiatives like —National Language Translation Mission to make available the wealth of governance and policy related knowledge on the Internet; to set up a PSU under the Department of Space to execute the PSLV-CS51 and other launches and to launch a Deep Ocean Mission with a budget outlay of more than Rs4000 crore, over five years.

6. Minimum Government, Maximum Governance

To bring about transparency, efficiency and governance, the National Commission for Allied Healthcare Professionals Bill is in Parliament for regulation of the 56 allied healthcare professions and a National Nursing and Midwifery Commission Bill will also introduced.

Over all Fiscal Position

Owing to a series of medium-sized packages due to corona during 2020-21, this year total RE are Rs 36.13 lakh crore against the original BE of Rs32.33 lakh crore. The fiscal deficit in RE 2020-21 is pegged at 9.5% of GDP which is funded through Government borrowings, Small Saving Funds and market borrowings. To continue the required push, the BE estimates for 2021-22 are Rs.37.81 lakh crore. It includes Rs 5.35 lakh crore as capital expenditure which is about 37% higher over the BE of 2020-21(Annexure-1). The fiscal deficit in BE 2021-22 is estimated to be 6.8% of GDP with gross market borrowing of about Rs 12 lakh crore. It is intended to reach a fiscal deficit level below 4.5% of GDP by 2025-26 by increasing the tax buoyancy and by monetization of assets of Public Sector Enterprises and land. Further, Government will discontinue the NSSF Loan to FCI for Food Subsidy and accordingly, Budget Provisions have been made in RE 2020-21 and BE 2021-22. The FRBM Act mandates fiscal deficit of 3% of GDP to be achieved by 31st March 2020-2021. But it has deviated due to unforeseen pandemic; therefore, an amendment to the FRBM Act will be introduced.

Comments on Main Highlights of Direct Tax Proposals

The announcements regarding direct tax proposal mainly focus on ease, transparency and efficiency in complying with tax payment. To illustrate,

• Senior citizens of 75 years and above will be exempted from filing income tax returns, if they have only pension and interest income, though the paying bank will deduct the necessary tax.
• To give relief from uncertainty for long time, the time limitfor re-opening of assessment is reduced from 6 years to 3 years except those serious tax evasion cases where evidence of concealment of income of Rs50 lakh or more in a year.
• Further, in continuity with the Vivad Se Vishwas Scheme, it is proposed to constitute a faceless Dispute Resolution Committee for those with a taxable income up to Rs50 lakh and disputed income up to Rs10 lakh.
• After the faceless assessment and appeal, it is now proposed to make National Faceless Income Tax Appellate Tribunal except personal hearing by video-conferencing, if needed.
• The entrepreneurs with turnover upto Rs5 crore are exempt from tax audit, if 95% of their transactions are digital. To further incentivize it, this limit is increased to Rs10 crore.
• Dividend was made taxable in the hands of shareholders. Now, to provide ease of compliance, it is proposed to make dividend payment to REIT/ InvIT exempt from TDS.
• In cases of FPIs, deduction of tax on dividend income will be at lower treaty rate. Further, the notified Infrastructure Debt Funds will be eligible to raise funds by issuing tax efficient Zero Coupon Bonds.
• To encourage purchase of affordable Housing/Rental Housing, deduction of interest up to Rs 1.5 lakh for loan taken is extended one more year upto 31st March 2022. Further, to keep up the supply of affordable houses, affordable housing projects/Rental Housing Projects for migrant workers will avail a tax holiday for one more year — till 31st March, 2022.
• In order to ease compliance for the taxpayer, income details of salary, tax payments, TDS, as well as details of capital gains from listed securities, dividend income and interest from banks, post office, etc. will also be pre-filled.
• To reduce compliance burden on small charitable trusts running educational institutions and hospitals, their tax exemption for annual receipt is increased from Rs 1 crore to Rs 5 crore.
• In order to ensure that employees’ contributions are deposited on time, the late deposit of employee’s contribution by the employer will not be allowed as deduction to the employer.
• In order to incentivize start-ups, their eligibility for claiming tax holiday will be extended by one more year — till 31st March, 2022. Further, in order to incentivize funding of the start-ups, their capital gains from investment will be exempted for one more year till 31-3.2022.

Indirect Tax Proposals

With a view to give impetus to ANB, the custom duties have been rationalized on400 items with a thrust on easy access to raw materials and exports of value added products. The main highlights of changes in custom duties are as under.

• To promote greater domestic value addition in electronics, rates of custom duty has been increased 2.5 to 10 % on 10 items like solar invertors/lantern, mobile chargers, printed circuit board, compressors of refrigerators and ACs, etc.
• To give relief to MSMEs and other industries from recent sharp rise in iron and steel prices, the Customs duties will be reduced by 1 to 3 % on caprolactam, nylon chips & fibers/yarn semis, flat & long products of non-alloy, alloy, stainless steels and copper scraps. Whereas, duties will increased from 10% to 15% on steel screws & plastic builder-wares.
• With increases in domestic production of garments, leather, and handicraft items in good quantity and quality, their exemption for free imports is withdrawn. The custom Duty on finished synthetic gem stones is increased to encourage their domestic processing.
• Custom duty Gold, silver, platinum, waste scrapes of precious metals, metal coins reduced by 2.5 %. However, an Agriculture Infrastructure and development Cess (AIDC) will be levied on above items such as apple, alcoholic beverages, crude edible oils and Peas, kabuli chana, Bengal gram, lentils for augmenting resources for agriculture infrastructure. The AIDC will be levied per liter @Rs2.5 on petrol and @ Rs 4 o Diesel but accordingly reducing excise duty to neutralize affects on prices. However, the Center will benefit at the cost of states which will not share the cess. Further, to benefit farmers, the customs duty is raised on cotton from nil to 10% and on raw silk & silk yarn from 10% to 15%.
  The purpose and changes proposed in direct and indirect taxes also point towards rewarding domestic production and services in pursuit of the ANB mission but the outcome in realizing the dream of ANB will depend upon honest implementation and delivery by the administration which is considered as the biggest constraints.

Resources Mobilization 

Budget indicates increased resources through tax bouncy along with mobilization through privatization and monetization of government assets. But as per the BE 2021-22, there are negative projections of both tax and non-tax revenues (Annexure-2). The public debt constitutes about 99 percent in capital receipt as per BE of 2021-22 and 2021-22. Out of that, public debt in 2021-22 accounts for 99 % as against 97 % in BE 2020-21. The disinvestment is Rs175000 in the BE 21-22 compared just Rs 32000 in RE of 20-21. There is worldwide opinion including India to tax the super-rich for fighting the corona and revive the economy. But government has not dared to mobilize from them despite willingness from some philanthropist corporate. Moreover, the inheritance and wealth taxes may have been revived to arrest the growing inequality in wealth and all the associated social evils due the severe disparities among the haves and have-nots.

(Author: Dr. Sher Singh Sangwan is Former Professor State bank of India, CRRID Chandigarh)

March 6, 2021

Annexure 1: Disbursement from Consolidated Fund of India - Budget 2021-22 (Rs Crore)

Annexure 1: Disbursement from Consolidated Fund of India - Budget 2021-22 (Rs Crore)

Annexure-2: Resource Mobilization for the budget 2021-22 (Rs crore)

Annexure-2: Resource Mobilization for the budget 2021-22 (Rs crore)