Indian Budget 2003-2004

39. India will shortly become home to the second largest number of elderly persons in the world. The population of our elderly, at present estimated at 76 million, is expected to increase to 100 million in 2013. The interests of the pensioners and senior citizens are, therefore, a particular responsibility of the NDA Government.

40. To enable them to live their life of retirement in dignity, the tax rebate to senior citizens is proposed to be increased to Rs.20,000. As a result, their income up to Rs.1.53 lakh will henceforth become fully exempt from income tax. In the case of senior citizens on pension, the effective exemption limit may hereafter be actually higher and become Rs.1.83 lakh, because of standard deduction. They can get further relief by taking advantage of the tax rebate available under Section 88. In addition, to reduce their cost of compliance, but of much greater importance to them - to reduce bureaucratic hassles - I propose to accept self-declarations filed by our senior citizens, in regard to no deduction of tax at source from interest income, income from units, and such other sources.

41. Nevertheless, in the context of the declining rates of interest, I do take on board the difficulties that are often voiced and could be faced by our senior citizens and others. In order to provide relief to them, the Life Insurance Corporation of India (LIC) will launch a special pension policy, guaranteeing an annual return of 9 per cent, in the form of a monthly pension scheme.

42. This scheme will be called: Varishtha Pension Bima Yojana, through which a pensioner, or any citizen above 55 years of age, could on payment of a lump-sum amount get benefits calculated at 9 per cent per annum. For this scheme, and with pensions in mind, any citizen above the age of 55 years of age will qualify, and will get a monthly return in the form of a pension for life. Upon demise, the initial amount deposited will be returned to the spouse/nominee under the policy. The minimum and maximum monthly pensions proposed are Rs.250 and Rs.2,000 per month. This monthly pension will start from the month following the payment of the lump-sum amount by the citizen. The difference between the actual yield earned by the LIC, on the funds invested under the scheme, and the assured return of 9 per cent, will be reimbursed to the LIC annually, by the Government. Other details of this scheme will be announced shortly by the LIC.

43. For ex-servicemen, whose welfare is so close to my heart, I propose to grant income tax exemption to corporations set up under a Central or State Act for their benefit. It is a matter of great personal satisfaction to me, that of the Prime Minister’s scheme for establishing 227 ex-servicemen medical (XSM) facilities in the country, the first will be inaugurated in April this year. The Ministry of Finance fully supports this scheme.

44. My predecessor in office had, in 2001, announced a road map for a restructured pension scheme for new Central Government employees, and a scheme for the general public. This scheme is now ready. It will apply only to new entrants to Government service, except to the armed forces, and upon finalisation, offer a basket of pension choices. It will also be available, on a voluntary basis, to all employers for their employees, as well as to the self-employed.

45. This new pension system, when introduced, will be based on defined contribution, shared equally in the case of Government employees between the Government and the employees. There will, of course, be no contribution from the Government in respect of individuals who are not Government employees. The new pension scheme will be portable, allowing transfer of the benefits in case of change of employment, and will go into ‘individual pension accounts’ with Pension Funds. The Ministry of Finance will oversee and supervise the Pension Funds through a new and independent Pension Fund Regulatory and Development Authority.

46. I now come to the second of the ‘panch priorities’ – physical infrastructure. Demand generated by enhanced public investment in infrastructure has been a key stimulant underlying our current industrial recovery. In October 1998, the Prime Minister launched the National Highway Development Project (NHDP), one of the most ambitious highway projects in the world, providing strong backward linkages for our steel and cement industries. There is simply no alternative to providing quality roads, railroads, ports, airports, reliable and reasonably priced power supply, safe drinking water and sanitation. Without these India can not take full advantage of the opportunities now offered by technology and competition.

47. In developing infrastructure, there is need to encourage public-private partnership, so that public funds are leveraged, and the quality of service delivery improved, thus yielding better value for money.
48. Accordingly, Budget 2003-04 undertakes to provide a major thrust to infrastructure, principally to roads, railways, airports, and seaports, through innovative funding mechanisms. This comprehensive initiative will cover the following:

• 48 new road projects at an estimated cost of around Rs.40,000 crore; with a quarter of them being made of cement concrete;

• National Rail Vikas Yojana projects worth Rs.8,000 crore;

• Renovation/modernisation of two airports, and two seaports at an estimated cost of Rs.11,000 crore; and

• establishing two global standard international convention centres at an estimated cost of Rs.1,000 crore.

49. The total estimated cost of the above projects is about Rs.60,000 crore. In addition, the North-South and East-West corridors will be funded through the additional levy of a cess of 50 paise per liter of diesel and motor spirit. This levy will contribute a further Rs.2,600 crore for road development.

50. The essence of the new funding mechanism is to leverage public money through private sector partnership, wherever possible. The three critical components of the scheme are: release of public funds only when linked to specific and well-defined milestones in completion of the project, in physical terms; a sharing of the risks with the private promoters and financiers; and no open-ended Government guarantees at any stage.

51. These 48 projects, with a total length of over 10,000 kms., are over and above the NHDP. They have been identified where the traffic volume justifies four-laning. These projects will be funded on a build-operate-and-transfer (BOT) basis, with the Government providing a subsidy in the form of an annuity flow to meet only the shortfall between anticipated revenue and loan repayment liabilities. In the first year, 2003-04, at least 3,000 kms., of roads, or almost a third of the total of these 48 projects, will be taken up for four-laning.

52. Ministry of Railways has established a special purpose vehicle (SPV) to take up projects worth Rs.8,000 crore for the Golden Quadrilateral. Their projects will be funded through Rs.3,000 crore worth of equity, provided by the Government, and Rs.5,000 crore worth of loans. This SPV will raise debt from the market. Repayment of debt will be done by earmarking Railway receipts over the period of amortisation. Further, safety upgradation programme on the Golden Quadrilateral will be taken up simultaneously under this mechanism.

53. In addition to the existing initiatives for leasing of major airports, as well as of setting up two private airports in Bangalore and Hyderabad, it has now been decided to take up the Delhi and Mumbai airports, as the principal hubs of international travel to India, for modernisation to international standards. Two separate companies will be formed with initial equal equity participation from the Airports Authority. These two companies could also take joint venture partners. On completion, the management will be leased out.