Indian Budget 2003-2004

Bio-technology

107. Biotech is our today’s sunrise, tomorrow’s showpiece industry. The Government, to facilitate units engaged in R&D in bio-technology and the pharmaceuticals sector, has decided to remove the existing restriction of minimum export obligation of Rs.20 crore for availing exemption from customs duty for specified equipments. Further, the restriction of full exemption being limited to only 1 per cent of last year’s export turnover is also lifted for R&D units. Moreover, in respect of R&D units with manufacturing facilities, the benefit of full customs duty exemption for specified equipment will also be available for their manufacturing activity to the extent of 25 per cent of the previous year’s export turnover.

108. So far as benefits under direct taxes are concerned, biotech enjoys the same tax incentives as the IT or pharmaceuticals industry.

109. Tourism, in addition to generating incomes, is amongst the most effective employment creating sectors. To provide a set of incentives to this industry, the following proposals will be implemented:

1. withdraw the expenditure tax;

2. extend the benefit of Section 10(23G) to financial institutions that advance long-term capital to hotels in three-star and above categories;

3. the benefit of set-off of unabsorbed loss and depreciation on amalgamation will henceforth be available to hotels under Section 72A of the Income Tax Act;

4. continue the exemption for the hotel industry from the levy of service tax; and

5. reduce basic customs duty on imported equipment for ropeway projects to 5 per cent without payment of CVD and SAD.

110. It is our hope and expectation that the States, on their part, will now give a commensurate boost to the tourism sector by abolishing the luxury tax that they charge.

111. Traditionally, India has always excelled in the field of diamond and gem cutting, polishing and in the craft of gold smithy. With a view to nurturing this industry, it is proposed to reduce the customs duty on rough, coloured gem stones from 5 per cent, and on semi-processed, half-cut or broken diamonds from 15 per cent to nil. Customs duty on cut and polished diamonds and gem stones will also be reduced from the present 15 per cent to 5 per cent.

112. As for gold, it is proposed to reduce the customs duty on imported gold to Rs.100 per 10 grams from the present level of Rs.250 per 10 grams, but only when it is brought in the form of serially numbered bars, or in the form of gold coins, not as ‘tola’ bars, please. It is my hope and expectation that this will become the first step in enabling India to shortly emerge as the gold-trading capital of the world.

113. The gems and jewellery industry has also been quite apprehensive about withdrawal of benefits under Sections 10A and 10B of the Income Tax Act. I would like to assure them that no such step is contemplated. Keeping in view the substantial value addition that takes place in the case of cutting and polishing of diamonds and gems, it is also proposed to extend the benefits under Sections 10A and 10B of the Income Tax Act to these activities.

114. Export Credit Guarantee Corporation of India Ltd. (ECGC) has been playing a crucial role by providing credit insurance cover for exports from the country. There is great potential for project exports from India with our exporters winning bids against intense international competition. In order to enable ECGC to provide adequate underwriting support to such projects, the Government has decided to increase its share capital to Rs.80 crore.

115. A vibrant small-scale industry, contributing to both industrial and export growth, is critical for sustained growth in income and employment.

• Speaker, as I have already said, the full benefits of the declining rates of interest have percolated neither to agriculture, nor to small-scale industry. The recent announcement by the State Bank of India and the decision by the Indian Bank Association about an interest rate band of 2 per cent above and below PLR for secured advances will help the SSI sector in obtaining bank finance at moderate rates of interest. In addition, benefits and entitlements available to this sector shall be placed on the Ministry’s website, for ready reference.

116. Accessing the global market with consumer goods of quality, at competitive prices, produced in both large- and small-scale establishments operating under flexible conditions, is the goal that we need to target. Members will recall that last year, Government had announced the dereservation of over 50 items. After consultations with stakeholders in respect of certain other items in the reserved list, it is now proposed to withdraw SSI reservation from another 75 items of laboratory chemicals and reagents, leather and leather products, plastic products, chemicals and chemicals products and paper products. The Minister of Small Scale Industries will announce the details of these items separately. To help further investment in the SSI sector, Government will examine the question of a limited partnership act.

117. An initiative to promote India as both a production centre and an investment destination, called ‘India Development Initiative’, shall be established in the Ministry of Finance, with an allocation of Rs.200 crore for 2003-04. This initiative will also leverage and promote our strategic economic interests abroad.

118. Disinvestment receipts for the current year are estimated at Rs.3360 crore. I am confident that the pace of disinvestment will accelerate in the coming year. I wish to also state that details about the already announced Disinvestment Fund and Asset Management Company, to hold residual shares post disinvestment, shall be finalized early in 2003-04. Mr. Speaker, Sir, disinvestment is not merely for mobilizing revenues for the Government, it is mainly for unlocking the productive potential of these undertakings, and for reorienting the Government, away from business and towards the business of governance.