FinMin initiates exercise for interim budget

 
Gearing up for the presentation of interim budget, the Finance Ministry has asked different central government departments to come up with their demands by January 10.

The third and final batch of Supplementary Demands for Grants for 2013-2014 (excluding Railways) is proposed to be presented to Parliament in the forthcoming Budget Session.

Since the general elections are scheduled to be held by May 2014, the government would be presenting a vote-on-account or interim budget instead of the regular full fledged Budget ahead of the scheduled date of February 28.

The regular Budget is likely to be presented by the new government sometime in July.

The Finance Ministry, in a communication to different ministries, said: "under no circumstances should the RE (revised estimate) ceilings be breached".

While seeking supplementary grants, the ministries have been asked to ensure that the expenditure for 2013-2014 has to be contained within the RE level.

"Instructions relating to 33 per cent and 15 per cent expenditure ceilings in the last quarter and last month respectively of the financial year may be scrupulously followed," it added.

Through the Second Batch of Supplementary Demands for Grants, the government had got Parliament's nod for Rs 18,594.27 crore additional spending in the current fiscal to meet expenditure, mainly towards petroleum and fertiliser subsidies.

The Finance Ministry further said while processing proposals for Supplementary Grants, the Grant controlling authority must invariably identify savings available within the Grant so that the infructuous or inflated Supplementary Demands are weeded out and the eventuality of surrender after obtaining Supplementary Grant is avoided.

Further, it said, supplementary demand should be sought for the minimum necessary amount but it should be sufficient to cover any foreseeable excess.

In order to ensure that this fine balance is met, it would be necessary to keep the expenditure under close watch on a daily basis and promptly inform the Finance Ministry if there is a significant variation requiring correction in the proposals.

"We will try our best to accommodate requests for changes keeping in view the tight schedule of printing of Supplementary Demands, which happens to overlap with the work of preparation of annual Budget documents," the Ministry added.

Direct tax collection rises 13% in Apr-Nov

Amid slowing economy, the gross direct tax collection has risen only by 13.18 per cent to Rs 3.68 lakh crore during the April-November period of 2013-14 fiscal.

The collections had totalled Rs 3.25 lakh crore during the first eight months of the 2012-13 fiscal.

Net direct tax collections rose 14.60 per cent to Rs 3,10,317 crore during April-November, as against Rs 2,70,771 crore in the year-ago period, the Finance Ministry said in a statement on Thursday.

The government has fixed direct tax collection target of over Rs 6.68 lakh crore for 2013-14, envisaging a growth of 19 per cent, as against Rs 5.65 lakh crore in 2012-13.

The gross collection of corporate taxes increased 9.66 per cent to Rs 2,25,124 crore during April-November, up from Rs 2,05,291 crore in the year-ago period, the Finance Ministry said in a statement today.

Gross collection of personal income tax was up by 19.60 per cent to Rs 1,39,763 crore in the first eight months of this fiscal, from Rs 1,16,862 crore in the year-ago period.

Securities Transaction Tax or STT mop-up stands at Rs 3,053 crore.

Finance Ministry keen on selling 10 pc govt stake in Indian Oil in Nov

The Finance Ministry wants to sell 10 per cent of the government's stake in Indian Oil Corp (IOC) by end of the month in a bid to achieve its Rs 40,000 crore disinvestment target.

So far, the government has raised about Rs 1,325 crore from stake sales in six companies.

"We want to push the IOC stake sale first, within November itself. This will pave the way for disinvestment of other oil sector PSUs like Engineers India," a senior Finance Ministry official said on Sunday.

IOC shares closed at Rs 213.20 on the Bombay Stock Exchange on Friday. They have fallen 43 per cent from the 52-week peak of Rs 375 on January 18.

At the current price, the sale of 19.16 crore IOC shares, equivalent to 10 per cent of the government's holding in the company, would fetch more than Rs 4,000 crore, which is 10 per cent of this financial year's disinvestment target.

Last month, the Department of Disinvestment put off overseas roadshows for the IOC stake sale following opposition from the company and the Petroleum Ministry, which cited poor market conditions. The roadshows were planned in London, US, Singapore, Hong Kong and Dubai.

Citibank, HSBC and UBS Securities are among the five merchant bankers selected to manage the oil retailer's share sale.

IOC Chairman RS Butola had written to the Oil Ministry in September, saying, "Current share price of IOC, already undervalued, may not fetch the fair value in the prevailing uncertain environment and investors in all probability are likely to factor in huge discount in their assessment of share price."

A share sale under present conditions could fetch a low price and would further dent IOC's efforts to raise loans for crude oil imports.

The government held a 78.92 per cent stake in the country's largest oil refiner as of September 30.

IOC posted an 82.5 per cent drop in net profit to Rs 1,683.92 crore for the July-September quarter after losses from foreign exchange and sales of diesel, cooking gas and kerosene below cost.

The government plans to sell 10 per cent in Engineers India. At the current market price of Rs 175.10, the sale of 3.36 crore EIL shares would fetch about Rs 600 crore.

Rupee to stabilise in a day or two: FinMin

New Delhi: The Finance Ministry Thursday said the rupee will stabilise within a couple of days as inflows of NRI deposits and export proceeds are likely to be strong.

"Strong FCNR (B) inflows, export realisation will strengthen rupee... Rupee will stabilise in 1 or 2 days," Economic Affairs Secretary Arvind Mayaram said.

The rupee weakened to 62.58 against the US dollar in the early trade today.

Mayaram said the weakness in rupee was due to shifting part of dollar purchases by oil companies to open market.

In August, the Reserve Bank had opened a special window to help the three state-owned oil marketing companies -- IOC, HPCL and BPCL -- to meet daily foreign exchange requirements and buy dollars directly from RBI.

"Rupee weakness is due to OMC forex demand being moved to market. 30-40 percent of OMC demand has moved to market," Mayaram said.

The PSU oil companies are the biggest buyers of dollars, requiring USD 8-8.5 billion every month for the import of an average 7.5 million tonne of crude oil.

The rupee has recovered over 10 percent since August 28, when it fell to a record low of 68.85 to the dollar. The gain in rupee followed optimism that the US Federal Reserve would delay the tapering of its bond buying programme.

To attract dollars, RBI in September had opened a special concessional window for swapping foreign currency non-resident (banks) (FCNR-B) deposits and overseas foreign currency borrowings for banks. So far USD 15.2 billion has come from this window.

The window will remain open till the end of this month, and many analysts have pegged the inflows from these instruments to be in the range of USD 20-25 billion.

The plight of the rupee started after the US Fed in its May 24 meeting hinted at shutting the easy money tap- repurchase of USD 85 billion worth of T-bills every month.

This had led to a spike in US interest rates, enticing FIIs to plumb for better returns back home by exiting emerging markets.

FIIs had sold domestic debt worth more than USD 52 billion so far in 2013

Before polls, govt sets up pay commission

all it a poll compulsion or genuine desire to help government servants, the Centre on Wednesday decided to constitute the seventh pay commission for its five million employees and three million pensioners — three years before the commission’s recommendations will actually take effect. “Prime Minister (Manmohan Singh) has approved the constitution of the seventh Central Pay Commission,” Finance Minister P Chidambaram said in a statement here.

The pay commission awards, analysts say, might entail a Rs 1-lakh-crore annual burden. But the finance ministry doesn’t want to think about it yet: “don’t pre-judge the issue; let the terms of reference be decided first”.

According to officials, the move might soon be followed by a decision to increase the retirement age of government employees to 62 years from the current 60.

A look at earlier instances suggests the constitution of the pay commission at this time could be aimed at reverting to the usual practice, breached when the sixth pay panel was set up. The Cabinet had approved setting up of the sixth pay commission in July 2006, and its recommendations came into effect retrospectively from January 2006. But, that was because the Bharatiya Janata Party (BJP) -led National Democratic Alliance (NDA) government, in power then, had initially refused to set up the commission. The Congress-led central government on Wednesday tried to beat the BJP, the main Opposition at present, on this count.

“NDA had rejected the legitimate formation of the sixth pay commission in 2003. The Congress set up the sixth pay commission in 2005 and now the seventh one in 2013,” Party general secretary incharge for communication, Ajay Maken, tweeted.

The NDA finance minister had said there was no need to constitute the sixth pay commission, as 50 per cent dearness allowance had already been merged with the basic pay.

Asked whether the fiscal consolidation exercise of the government would not be affected, as it was estimated the exchequer would take a hit of Rs 1 lakh crore due to the recommendations of the seventh pay commission, a senior finance ministry official said: “How can you estimate the burden on the exchequer. The terms of reference have yet to be decided.”

The year 2016-17 would be the terminal year of a five-year fiscal consolidation road map announced by the finance minister. By that time, the government aims to bring down the Centre’s fiscal deficit to three per cent of gross domestic product. In 2012-13, the first year of the road map, the deficit had stood at 4.9 per cent of GDP. The plan is to lower it further to 4.8 per cent this financial year, and then by 0.6 percentage points each year.

 

To a query on whether the government should be allowed to set up the commission — the model code of conduct would come into effect as Assembly polls are due in five states — the official said the decision had been announced, so setting up of the commission would not violate the election commission’s guidelines.

He said the department of personnel would now start discussions with staff associations of government employees for announcing the constitution of the commission, as well as its terms of reference. It would be set up in about a month’s time, he added.

According to the 2011 census, there were 725 million voters in India. The finance ministry tried to brush aside the view that the government had set up the commission to woo the eight million government employees, pensioners and, indirectly, their dependents ahead of general elections.

It rather said the commission had been set up three years in advance to ensure that the recommendations did not have to be implemented retrospectively and there wasn’t any sudden financial burden in a single year.

According to the finance ministry’s statement, the average time taken by a pay commission to file its recommendations is about two years. “Accordingly, allowing about two years for the seventh pay commission’s report, the recommendations are likely to be implemented with effect from January 1, 2016.”

Traditionally, pay commissions have been set up after every 10 years to revise the pay scales of central government employees. States also accept these recommendations for their employees after certain modifications. However, since the sixth commission, headed by Justice B N Sri Krishna, was set up three years later because of NDA’s initial rejection, the gap between the fifth and the sixth commissions had become 13 years. The seventh, being advanced by three years, could also differ from the usual 10-year pattern.

The key area that the sixth pay commission focused on was removing the ambiguity in various pay scales and reducing the number of scales. For that, it introduced running pay bands for all government posts. It had recommended pay hikes of 20-40 per cent and also suggested a new system of four pay bands with 20 grade pays which was accepted with minor changes.

It had also recommended the minimum basic pay of Rs 6,660 a month. However, that was increased to Rs 7,000 by the Cabinet. The financial implications on account of these recommendations were to the tune of around Rs 22,000 crore for 2008-09.