Union Budget 2013-14: Focuses on Economic Growth, Middle Class To Pay More

Finance minister P. Chidambaram presented the Union Budget for 2013-14 in the Parliament on February 28. It was Chidambaram's eighth annual budget, the second highest by anyone in India after a record ten by former Prime Minister Morarji Desai. Overall, it was 82nd Union Budget in the Indian history, including interim and special-situation budgetary proposals, since the first one of independent India was presented by then finance minister R.K. Shanmukham Chetty on November 26, 1947.

Individually, Chidambaram presented the Union Budget for the eighth time, the second-highest by any finance minister. The maximum number of 10 budgets have been presented by Morarji Desai, while Pranab Mukherjee (currently President of the country), Yashwant Sinha, Y.B. Chavan and C.D. Deshmukh have presented seven budgets each in the past.

Plan Outlay

The finance minister has proposed a 29.4 percent hike in the plan expenditure for the union budget 2013-14. The plan expenditure for the next fiscal will be about Rs.5.53 lakh crore, the finance minister said.

The budget expenditure is Rs.16,65,297 crore and the plan expenditure is Rs.5,55,322 crore," Chidambaram said, adding that the plan expenditure in 12th Five-Year Plan was revised to Rs.14,30,825 crore or 96 percent of budgeted expenditure.

Growth Rate

India’s economic growth, as per official estimates, decelerated to 5 percent and 6.2 percent in the past two years, from 8.6 percent and 9.1 percent in the two years preceding them. Chidambaram said the Indian economy was today constrained by three factors: high fiscal deficit, slow growth and high inflation.

The finance minister said a whopping Rs.16.65 lakh crore (Rs.16.65 trillion or nearly $300 billion) would be spent under plan expenditure during 2013-14, which will be 30 percent higher than the outlay for this fiscal.

Fiscal Deficit

While doing a shade better than the targeted fiscal deficit of 5.3 percent of Gross Domestic Product (GDP) at 5.2 percent for the current fiscal, the finance minister has stuck to his target of 4.8 percent of GDP for 2013-14, even while stepping up defense allocation by 14 percent over the revised estimates in the current fiscal.

Similar hikes have been proposed in various sectors. although it is clear that he managed to create a cushion through compression in spending during the current financial year. Expenditure under several key heads, including roads and rural housing actually fell in the current fiscal compared to the previous year.

Tax Rates

The 2013-14 Budget proposed a tax cut of Rs.2,000 for people earning an annual income of between Rs.200,000 and Rs.500,000 and said anything beyond that was not possible given the current circumstances. The finance minister said any hike in the exemption limit for direct tax that is paid by individuals would take millions out of the tax net and was neither a desirable proposition, nor feasible. Accordingly, he proposed a Rs.2,000 tax credit for those in the first slab. This measure will benefit 1.8 crore (18 million) tax payers," he said, adding that this would entail an outgo of Rs.3,600 crore ($650 million) to the exchequer.

The finance minister sought to kick-start the engines of growth by providing incentives for productive investment, stepping up expenditure in social sectors to invigorate the economy in the longer term and giving a token tax break at the lowest slab rate to offset the inflationary burden on the middle class.

The Budget proposed to levy a surcharge of 10 percent on individuals whose annual taxable incomes exceed Rs.1 crore. The surcharge will be levied for the 2013-14 financial year. The finance minister said there are only 42,800 individuals in the country who will be liable to pay the surcharge.

To provide for the various increased allocations, the finance minister moved to tap the well-heeled by way of a one-year surcharge of 10 percent on the ‘super rich’ section of tax payers – all 42,800 of them, that is — along with duties on imported or domestic luxury vehicles such as SUVs, mobile phones (priced over Rs. 2,000), and what has been the tax horse of most Finance Ministers —cigarettes. With other minor tinkering of duties, including Tax Deducted at Source (TDS) on sale of property worth Rs. 50 lakh, the net additional tax revenue in the kitty works out to Rs. 18,000 crore.

However, given the challenges that he faced by way of low growth, high inflation, the widening fiscal and current account deficits coupled with lower than targeted revenue collection during 2012-13, Chidambaram may have disappointed taxpayers looking for some major breaks. But he did provide a tax break of Rs. 2,000 to individual tax payers with taxable income of up to Rs. 5 lakh. This itself is estimated to benefit 1.8 crore tax payers and work out to a revenue sacrifice of Rs. 3,600 crore. Likewise, first-time buyers of affordable homes will get an additional deduction of interest of Rs. 1 lakh for home loans up to Rs. 25 lakh, which will be over and above the current Rs. 1.5 lakh deduction allowed for self-occupied dwellings.

Defense Allocation

The government has marginally increased its defense spending by 5.31 percent than 2012-13. The defense budget for 2013-14 starting April 1 will be Rs 2,03,672 crore, an increase of Rs 1,93,407 crore more from the 2012-13 budget.

The revised budget after the mid-fiscal cut was Rs 1,78,504 crore in December 2012. The hike is 14.10 percent, much lower than last year’s 17.6 percent hike. Also the share of defense spending in the GDP will be reduced from 1.9 percent for the year ending March 31 to 1.79 percent of the GDP. The share of defense spending in the overall expenditure will be 10 percent of government expenses, a decrease of 11 percent this year.

Finance Minister P. Chidambaram said that India plans to spend up to 2.03 trillion rupees ($37.7 billion) on defense next year, up from a revised 1.78 trillion rupees this year.

The finance minister said 867.41 billion rupees will be spent to buy defense equipment in the next fiscal year, up from this year's about 695.79 billion rupees. The government had originally planned to spend 795.78 billion rupees on purchasing defense equipment this year.

Despite the cut in this year's defense budget, India will become the world's fourth-largest defense spender by 2020, behind the United States, China and Russia, and surpassing France, Japan and the United Kingdom. It is predicted that India's defense spending will reach $65.4 billion in 2020.

Boost to Agriculture

Finance Minister P Chidambaram hiked the agriculture budget by 22 percent, increased farm credit limit to small and marginal farmers from Rs 5,75,000 crore to Rs 7,00,000 crore in 2013-14 and announced setting up “nutri-farms” pilot project.

The sector got a major boost, in line with the UPA’s ambitious food security Bill (which got an allocation of Rs 10,000 crore) and the next general election, as sufficient sops have been announced for farmers in the Budget.

Also for the first time perhaps, the government set aside separate funds - Rs 500 crore - to start a program on crop diversification.

Education Sector

The Union Budget set aside a budget of Rs 79,451 crore for the entire education sector, including literacy and higher and technical education. This represents a meagre Rs 5,395 crore increase over the budget estimate of Rs 74,056 crore for the Ministry of HRD in the last financial year. The hike constitutes 7.2 percent over 2012-13, whereas last year the increase for the education sector budget was a handsome 18.6 percent. Expenditure on education as a proportion of the GDP has increased from 2.59 percent in 2007-08 to 3.31 percent in 2012-13.

The Plan Budget is Rs 65,869 crore which is Rs 4,442 crore more than Rs 61,427 crore in last fiscal. It will certainly ask for more money with the Right to Education Act (RTE) in mind.

The budget for school education is Rs 49,659 crore which is only 8 percent more than last year. The allocation for the Sarva Shiksha Abhiyan (SSA) is up from Rs 25,500 crore last fiscal to Rs 27, 258 this year an increase of Rs 1,758 crore which is very low considering SSA is the main vehicle to implement the RTE Act. Midday Meal Scheme has been allocated Rs 13,125 crore as against Rs 11,937 crore last year, an increase of Rs 1,260 crore.

Skill Development of Youth

The 2013-14 Budget has allocated Rs.1,000 crore to develop job-oriented skills among youth. Assuming that 10 lakh (one million) youth can be motivated in one year, skill trained youth will give enormous boost in employment and productivity," Chidambaram said, while presenting the federal 2013-14 budget to the Lok Sabha, the lower house of parliament.

The finance minister allocated Rs.1,000 crore (Rs.10 billion) for the "ambition", saying that it would be a "trigger for skill development in the country".

Infrastructure

Infrastructure got a major thrust in the 2013-14 budget with Finance Minister P. Chidambaram announcing a slew of measures to boost sector's growth, like raising Rs 50,000 crore through taxfree bonds and setting up of major ports.

In some other decisions which would boost the infrastructure development in the country, the government also said that it would set up a road regulatory authority in the financial year 2013-14 to address financial stress, construction risk and contract management in the road sector and start work on two more industrial corridors between Bangalore and Chennai and Bangalore and Mumbai.

"The power transmission system from Srinagar to Leh will be constructed at the cost of Rs 1,840 crore, Rs 226 crore provided in current budget," Chidambaram said in his budgetary proposals for next fiscal.

In a move that is also strategic for the region, the proposed 220 kV line from Srinagar to Leh, to be implemented by Power Grid Corp, will pass through Kargil, Drass, Khalsi and is aimed at enhancing the reliability of power supply.

Highlights

* Fiscal deficit for 2013-14 pegged at 4.8 percent of GDP and 5.2 percent in 2012-13

* Plan expenditure pegged at Rs. 5,55,322 crore and Non-Plan at Rs. 11,09,975 crore

* New taxes to collect Rs. 18,000 crore for government

* Voluntary Compliance Encouragement Scheme launched for Recovering service tax dues

* Rs 14,000 crore earmarked for capital infusion in public Sector banks in 2013-14

* Refinance capacity of SIDBI raised to Rs. 10,000 crore

* TUF Scheme for textile sector to continue in 12th Plan With an investment of Rs. 1.51 lakh crore

* No change in income tax slabs

* Relief of Rs. 2,000 for tax payers in tax bracket of Rs2-5 lakh

* Ten percent surcharge on persons with taxable income of over Rs. 1 crore

* Tobacco products, SUVs and mobile phones to cost more

* Income limit under Rajiv Gandhi Equity Savings Scheme Raised to 12 lakh from Rs. 10 lakh

* First home loan of up to Rs. 25 lakh to get extra Interest deduction of up to Rs. 1 lakh

* Duty free limit of gold import increased to Rs. 50,000 For male passengers and Rs. 1 lakh for female passengers

* India’s first women’s bank to be set up by October

* Concessional six percent interest on loans to weavers

* Commodity transaction tax of 0.01 percent proposed on non-agri futures traded on commodity bourses

* Securities transaction tax brought down to 0.01 percent

* No change in basic customs duty; normal excise and Service tax rates unchanged at 12 percent

* Handmade carpets and textile floor coverings of coir or jute exempted from excise duty

* Excise duty on SUVs increased to 30 percent from 27 percent

* Chidambaram says India to become $5 trillion economy, And among top five in the world by 2025

* Rashtriya Swasthya Bima Yojana benefit extended to Rickshaw pullers, auto and taxi drivers, among others

* ‘Nirbhaya Fund’ of Rs. 1,000 crore to empower women and Provide safety in the wake of Delhi gang rape incident

*Rs 9,000 crore earmarked as first installment of balance of CST compensation to states

* Defense allocation at Rs. 203,672 crore, education Rs. 65,867 crore and rural development ministry Rs. 80,194 crore

* Rs 10,000 crore earmarked for national food security toward incremental cost

* Farm credit target set at Rs. 7 lakh crore as against Rs. 5.75 lakh crore in 2012-13

* Direct benefit transfer scheme to be rolled out in the entire country during tenure of UPA government

Assessment

At first glance, the budget may appear harmless to the middle-class. In fact, it might even appear friendly what with all those improvements in housing loan deductions and stock market investments. But make no mistake, this budget will bite the average citizen in more ways than one.

Just take the seemingly innocuous proposal to impose service tax on all air-conditioned restaurants. With most decent restaurants — we are not talking of the up-market ones here — climate-controlled, eating out will become at least another 12 percent more expensive. Remember that restaurants are in the process of revising their price-lists even now with rising prices of food commodities.

Cellular phones are now a necessity and smart phones are increasingly becoming so as they help you do your daily business on the go. As much as 97 percent of all telephone connections in the country are cellular. Yet, smart phones (or phones that cost more than Rs.2,000) will now become pricier with the sharp rise in excise duty to 6 percent from 1 percent. In addition to driving business to the grey market, this proposal will also undo the efforts to push people into using their mobiles extensively for transactions.

It can be said that it must not be forgotten that the finance minister appears to have placed enormous trust in the growth figures going northward in the coming months, and with that he hopes the revenues will follow. After all, by not changing the income tax slabs or too significantly altering the indirect tax proposals which previously existed, Chidambaram hopes to mop just under Rs18,000 crore from his new tax proposals.

However, since that is far less than what the Government needs to meet its expenditure, the Minister is banking heavily on upward economic growth to trigger revenue generation. But growth has dipped from a high of nine percent only a few years ago to around five percent now. While the Minister hopes for a turnaround to six percent and above, there remains a big ‘if'.

Economic Survey 2012-13: Reflects India's Grim Reality, Cautions Against Growing Taxes

Finance Minister P. Chidambaram presented the pre-Budget Economic Survey for 2012-13 to Parliament on February 27. The Survey reflects the grim reality that India is facing a severe slowdown and must act fast to spur investment, restart stalled projects, cut interest rates and contain its fiscal deficit.

Growth Rate

The Survey made it clear that this fiscal’s five per cent growth, the slowest in the past decade, could no longer be blamed on external factors alone, and the government will have to act on the domestic front to come out of the slump.

The Economic Survey, while projecting an optimistic growth rate of 6.1-6.7 percent for 2013-14, stated that to contain the fiscal deficit the government should widen the tax base and cap subsidies, particularly through better targeting and plugging leakages. It also claimed the downturn was more or less over, and that the economy was looking up. Claiming that the downturn was “more or less over” and that the economy was looking up, the Survey projected a cautiously optimistic growth rate of 6.1-6.7 percent while conceding that the Gross Domestic Product (GDP) growth for the current fiscal was likely to slip to the decade’s low of five per cent — compared to the estimates by the Central Statistical Organisation (CSO) of 6.2 percent for 2011-12 and 9.3 percent the year before.

Fiscal Deficit

The Survey had pegged the fiscal deficit at 5.1 percent for the GDP for 2012-13, which the finance minister later revised to 5.3 in view of the rising expenditure and subdued revenue collection. For the new fiscal, the finance minister has committed to bring it down to 4.8 per- cent.

The 2012-13 Survey notes that the government needs to contain the fiscal deficit especially by shrinking wasteful and discretionary subsidies. The Survey said: "Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and LPG need to be raised in line with their prices prevailing in the international market.

In addition, delays in getting permissions for projects need to be curbed so that investment can pick up. Implementation of GST, if approved, would create an integrated market and bring more producers in the tax net. Also, the direct benefit transfer scheme recently rolled out on the AADHAAR platform will target subsidies better.

Agriculture Reforms

Economic Survey states that with agriculture growth rate falling short of the four per cent target in the past five years, the country’s annual economic report card (the first since the beginning of the 12th Five-Year Plan period), calls for increase in yields and reforms like a suitable sustainable strategy to maximize agricultural income and make it a viable option.

The farm sector achieved 3.6 percent growth during the 11th Five year Plan (2007-12) – higher than growth of 2.5 and 2.4 percent during ninth and 10th Five-Year Plans but lower than expectations of 4 percent growth target.

Therefore, in the face of stiff challenge of feeding its growing population, the Survey has sought urgent reforms to boost crop yield and private investment in infrastructure to motivate farmers.

Economic Survey for 2012-13 has emphasized putting in place a strategy for farm development in the eastern and northeastern regions amid saturation in crop yields in Green Revolution belt, especially in the States of Punjab and Haryana.

Tax Rate

In what may bring cheer to the well-heeled in the wake of a raging pre-Budget debate over squeezing more out of the super-rich class, the Survey suggested the government’s efforts to raise additional revenue should be through widening of the tax base and not by increasing the rates. The Survey stated: “It is much better to achieve a higher tax-GDP ratio by broadening the base which is taxed rather than increasing marginal tax rates significantly — higher and higher tax rates impinge more and more on incentives to undertake taxable activity, while encouraging tax evasion.”

Several experts, including PMEAC Chairman C. Rangarajan, have pitched for higher rates of taxes on super-rich. The Survey, prepared by a group of economist led by Chief Economic Advisor Raghuram Rajan, said it is better to achieve fiscal consolidation partly through a higher tax-GDP ratio than merely through reduction in expenditure as it would only hurt development spending.

The Tax-GDP ratio touched a peak of 11.9 percent in 2007-08, but declined to 9.6 percent in 2009-10. It was 9.9 percent in 2011-12. “Raising the tax-GDP ratio to above the 11 percent level is critical for sustaining the process of fiscal consolidation in the long run,” it said.

Gross tax revenue in April-December 2012 has grown by 15 percent to over Rs. 6.81 lakh crore. However, the growth in tax collection was “significantly” short of the growth envisaged in Budget. The tax collection until December 2012, was 63.2 percent of Budget estimates, lower than the last five-year average of 69 percent.

Rate of Inflation

Predicting that headline inflation may fall to 6.2–6.6 percent by next month, the Survey stated that elevated food inflation would continue to remain an area of concern as it inched towards double digits in December 2012. While 2012, the inflation was driven by protein items, this year it has been due to increase in prices of cereals such as wheat, rice and maize.

Inflation which is one of the major areas of concern for the United Progressive Alliance (UPA) Government, has remained in the range of above seven per cent since December 2009, while to add to its woes food inflation, too, has remained on the higher side during the same period, and according to the Economic Survey for 2012-13, easy money policy of major developed and developing nations may further aggravate inflationary expectations in India.

The survey further added that inflation has remained muted in the current financial year and declined to a three year low of 6.62 percent in January 2013. The average wholesale prices-based inflation in 2012 (April-December) moderated to 7.55 percent from 8.94 percent in the corresponding period of 2011-12.

Industrial Production

With the spurt in factory output last October turning out to be an aberration in the wake of sharp downturns in the months after, the latest Economic Survey has sought to describe the industrial production scenario as a ‘mixed picture’ of sluggishness bottoming out as well as continuing for a little longer period.

What came as a surprise to the government while India Inc. maintained a ‘we said so’ stance to clamor for easing of interest rates, was that industrial growth, as measured by the Index of Industrial Production (IIP), witnessed a smart recovery with a robust 8.3 per cent expansion in October, 2012.

Despite the downward bias, the Survey has highlighted at least two factors which point to some optimism on the industrial front.

First is the data on frequency distribution of products/product groups within the IIP basket which indicates that the number of products with negative growth has declined from 182 in the fourth quarter of 2011-12 to 160 in October-November 2012.

The second positive factor is the Reserve Bank of India’s ‘Business expectation index’, which showed moderately positive growth during the third quarter of the current fiscal after posting persistent negative growth for the previous six quarters. Since the RBI business index tracks IIP growth fairly closely, the change in trend suggests a possible bottoming out of IIP growth moderation.

Foreign Direct Investment

According to the Economic Survey, Foreign Direct Investment (FDI) in India slumped by 43.3 percent at $15.85 billion in April-November period of the current financial year as compared to $27.93 billion in the corresponding period previous year. The overseas investment flows in top five services declined by 9.7 percent at $8.19 billion during the period under review.

The Survey stated that overall FDI inflows increased by 33.6 percent in 2011-12. Overseas investment inflows in services surged by 57.62 percent in the financial year ended March 31, 2012.

The document presented a day ahead of the Union Budget 2013-14 pointed out that the government has taken many policy initiatives to liberalize FDI policy for services sector. This includes increasing FDI limit from 49 percent to 74 percent in teleports and DTH and cable networks, permitting FDI up to 74 percent in mobile TV, up to 49 percent in scheduled and non-scheduled air transport services and up to 50 percent in multi-brand retail trading.

The Survey stated that the government has also amended the existing policy on FDI in single brand product retail trading.

Health Sector

The country’s spending on health remains abysmally low with the Survey revealing that the spending on health, as compared to the spending on the rest of social services, has actually been declining in the country. Raising alarm over the decline, the survey has called for increased focus on health and education if India's demographic dividend is to be used to its advantage. Between 2011 and 2016, as many as 63.5 million workers, mainly aged between 20 and 35 years, will join India's pool. For this segment to be productively engaged, spending on health and education must remain consistent, the survey says.

But the ground situation paints to a sorry picture. The combined central and state expenditure on social services as a proportion of total expenditure increased from 22.4 per cent in 2007-08 to 25.1 per cent in 2012-13 and the spending on education among all the social services also increased over this period from 43.9 to 46.6 per cent.

However, the combined general spending (federal and states) on health has fallen over the past five years from 21.5 per cent to 19.2 per cent.

Petroleum Subsidies

The 2012-13 Survey has called for addressing the key issues of petroleum subsidies, clarity on gas pricing policy, petroleum price distortion and concerns over various disputes pertaining to the New Exploration Licensing Policy (NELP). It stated that addressing the key fiscal risk of petroleum subsidies is critical in better fiscal marksmanship.

It stated further that the overall subsidy bill of the government, it said, was likely to overshoot the target of Rs.1.79 lakh crore this financial year due to higher crude oil prices. The government had put the petroleum products subsidy at Rs.43,580 crore, food subsidy at Rs.75,000 crore and fertilizer subsidy at Rs.60,974 crore, taking the total subsidy bill to Rs.1,79,554 crore for 2012-13.

Employment Rate

The 2012-13 Economic Survey stated that the employment rate between June 2011 and June 2012 went up by approximately 7 lakh led mainly by the IT and BPO sector which accounted for almost half of the increase. It stated that upward trend in employment since July 2009 continues despite the economic slowdown.

A sector wise analysis shows that the textiles sector including apparels saw 1.70 lakh job additions, followed by transport sector (0.45 lakh), metals (0.26 lakh), gems and jewelry (0.19 lakh) and automobiles (0.11 lakh) in June 2012 over June 2011.

The survey said that employment in handloom/power loom and leather sectors has marginally declined during this period.

It said that there has been a sustained and consecutive increase in employment in both the public and private sectors covered at overall level during the last eleven quarters with a total addition of 30.73 lakh employment during this recovery period.

According to the Survey, India is on the brink of a demographic revolution with the proportion of working-age population between 15 and 59 years likely to increase from approximately 58 per cent in 2001 to more than 64 per cent by 2021. Moreover around 63.5 million new entrants to the working age group between 2011 and 2016, the bulk of whom will be in the relatively younger age group of 20-35 years.

The Survey added that the annual growth rate of employment in the private sector in 2011 was 5.6 per cent whereas that in the public sector was negative.

CAG Reports on Allocation and Pricing of Coal-Bearing Areas, 2G Spectrum: Whither Growing Corruption in India?

Reactions to recent reports of the Comptroller and Auditor General (CAG) of India on the allocation and pricing of coal-bearing areas and second-generation telecommunications spectrum (2G Spectrum) are reminiscent of the well-known parable of the blind men and the elephant. Depending on the political persuasion and ideological inclination of the person concerned, the reports are either futile exercises in exaggeration or an important endeavor to hold those in power and authority accountable for their actions.

The reports are either consciously aimed at embarrassing the government using dubious data and specious assumptions or these are attempts to bring about greater transparency in public finance and curb corruption in high places. Everything depends on which side you are on. The CAG has repeatedly talked about “presumptive” or “notional” losses. The government, in turn, argues that the losses are not real but hypothetical and that the auditors of the constitutional body need more than a few basic lessons in mathematics and economics. So what if the coal has not been mined?

The fact is simply that the coal acreages no longer belong to the government. Forget local inhabitants or indigenous communities, the coal blocks now belong to particular privately controlled companies, some of whose promoters and directors have rather close links with relatives of certain Congress leaders. Coal, incidentally, is a subject of the federal government.

In both the “Coalgate” and the 2G scam reports, what the CAG has stated is that there was inaction by those at the top, including Prime Minister Dr Manmohan Singh and Finance Minister Palaniappan Chidambaram. Both predictably protest their innocence. Despite the clean chit given to the finance minister by the Supreme Court on August 24, what cannot be disputed is that he knew very well what the disgraced Former Communications Minister Andimuthu Raja had been doing (he, in fact, says that he did not approve of some of his actions).

In fact, it was Dr Singh’s own government’s ministers and bureaucrats (including those in his office) — and not just those representing the state governments of Rajasthan, Chhattisgarh, Jharkhand, West Bengal, and Orissa — who ensured that his advice to have competitive bidding for coal blocks was not operationalized for more than six years.

Dr Singh, Chidambaram and their supporters have provided long, detailed and convoluted explanations about why what should have happened — auction of coal blocks and spectrum — did not happen. In both instances, previous governments (especially those run by the NDA) have been blamed. Two wrongs do not make a right.

Prime Minister’s Reaction

Prime Minister Manmohan Singh took “full responsibility” for the coal allocations made under a policy in existence since 1993. Amid slogan-shouting by the Bharatiya Janata Party (BJP) the prime minister has told Parliament that there is no impropriety in coal allocations. The CAG report is “flawed” as the auditor’s methodology to calculate the loss is questionable, he says and argues that it is not the CAG’s job to suggest a change of policy from allocation to auction of natural resources and tell the government to overrule state objections in changing the law.

Speaking both inside and outside Parliament, Dr Singh said he was not running away from taking “full responsibility” for decisions taken by the coal ministry when he had held the portfolio himself. He, however, declared that the allegation of impropriety “is without any basis and is unsupported by facts”.

As the uproar by the BJP on the floor of the two Houses continued for the fifth day in a row, the Prime Minister read out his statement amid the din. After reading a few paragraphs, he laid the statement on the table. Daring the BJP to hold a debate in the House to let the country judge the truth, he declared: “We have a very strong and credible case as the CAG’s observations are clearly disputable.” As BJP continued to create a ruckus, both Houses saw repeated adjournments, and no legislative businesses could be transacted.

Unconvincing Remarks

The prime minister’s statement presented in the Parliament and the remarks he made to the media outside the Parliament on the controversial coal block allotments are as unconvincing as the stand that his party has adopted since the scam broke out in public few months ago.

In fact, it is because Dr Singh wants to gloss over the salient aspects of the charges that have been leveled against him that he has tried to present the image of a ‘combative' leader; he took on the comptroller and auditor general of India for alleging “impropriety” which was “without basis and unsupported by facts”. Well, that is not for Dr Singh to decide since there is the Public Accounts Committee (PAC) which will study CAG's observations and submit its report to the Parliament on the merits of those observations. 

The prime minister does refer to his government's resolve to ‘challenge' in the PAC the findings of the country's premier audit organization, but then we also know that the Congress has scant regard for what is one of Parliament's most important panels. The obnoxious manner in which members of the party, assisted by some of their allies, had conducted themselves when the PAC was hearing CAG's 2G Spectrum scam report, is still fresh in the minds of the people.

The prime minister pats his own back by saying that it was the UPA government which “for the first time conceived the idea of making allocations through the competitive bidding route in June 2004.” But that unfortunately is not the point here. What happened thereafter is. Dr Singh swiftly dumped the auction idea and cleared a proposal to dole out coal blocks to private parties at vastly under-priced rates. By the time the government returned to its original ‘concept' of putting in place a mechanism for competitive bidding — and it took the regime over two years to do so — more than 140 coal blocks located in various States had been sold down the river to private players, many of whom have not even till date begun mining the resource.

BJP's Flawed Reasoning

After disrupting the winter session, BJP is at it again, insisting that the prime minister must resign for the so-called Coalgate scam before the Parliament is allowed to function. Led by senior leaders like Arun Jaitley and Sushma Swaraj in the presence of LK Advani and cheered on by Nitin Gadkari from outside, it rejects a debate in Parliament as the matter will merely be talked. A non-confidence motion is, however, ruled out as the numbers do not favor them. Meanwhile, disruption of Parliament is being paraded as a national duty. The argument is that similar disruption alone forced the resignation of Raja and Maran following the CAG’s 2G Spectrum scam report. And if Raja could resign as Minister for Telcom, Dr Singh must resign as he held additional charge of the Coal Ministry during the years when Coalgate occurred.

In the Coalgate matter, four Opposition-led state governments (Chhattisgarh, Orissa, Rajasthan, and West Bengal) and Jharkhand had opposed coal auctions as proposed by the Centre and recommended allocations of coal blocks in their states for local power and cement manufacture. Taking federal sensitivities into account, the federal government did not press its case for open auctions, a factor indirectly noted with some approval by the chief justice of India in a lecture delivered in Delhi recently.

Instead of allowing the Parliament to debate the matter and send it to the Public Accounts Committee for detailed scrutiny before the House takes a final view on the matter, the Jaitley argument is that the party is entitled to trump the whole, thus enabling a strident minority in the House to impose its will on the majority, and that too without the requisite parliamentary debate and investigation, in violation of every rule and canon of democratic process and conscience. This is the kernel of the matter, not the bogus, political spiel spewed out by the BJP and other persons before TV channels looking for meaningless but high-TRP-rated gladiatorial fights night after night.

Jaitley says “Parliamentary obstructionism … is a weapon to be used in the rarest of the rare cases.” But, unfortunately, the BJP seems bent on disrupting the Parliament constantly.

Assessment

It can be said that the UPA government’s strategy to hold the ground until winter sets in is neither politically prudent nor morally defensible. If one were to accept the finance minister’s argument that there was no loss in the allocation of coal blocks as the coal has not been “taken out of mother earth,” then surely the proper course would be to ensure that the companies which benefited from the discretionary allocation of the blocks are not allowed to profit from the coal that still remains unmined.

Nevertheless, the problem is that the government’s defense of the allocation is varied, full of holes, and contradictory. On one hand, the UPA is trying to present a luminously clean picture of the whole scenario, on the other BJP is not a less known perpetrator of corruption. It is high time that the parties stopped fooling the public and appreciated the intelligence of the common people.

Mohammed Hamid Ansari Reelected Vice President of India: Becomes Second Person To Get Two Terms in Country’s Second Highest Office

United Progressive Alliance’s (UPA) candidate Mohammed Hamid Ansari was reelected vice president of India on August 7, defeating NDA’s candidate Jaswant Singh by a large margin of 252 votes. As expected, the election of Ansari for a second term as the vice president was noncontroversial and smooth. The surprise, if any, was not in the outcome, but in the political churning that overflowed from the presidential election. After the Bharatiya Janata Party (BJP) made an overambitious attempt to disrupt Pranab Mukherjee’s bid for the presidency, this was an occasion to recover lost ground. The party sought to first retain its old allies such as the Shiv Sena and the Janata Dal (United), and then win over non-Congress allies such as the All India Anna Dravida Munnetra Kazhagam, instead of looking to poach disgruntled elements within the UPA. The less ambitious strategy was not intended to win the election for its candidate, Jaswant Singh, but to keep the National Democratic Alliance (NDA) united and in fighting mode for the 2014 Lok Sabha polls.

Seventy-five-year old former IFS officer, Ansari becomes the second person after Dr Sarvapalli Radhakrishnan, India’s first vice president (and second president), to get two terms in the second highest office.

Ansari got 490 votes, against Singh’s 238, of the 736 votes polled. Eight votes were declared invalid. Altogether 787 members of two Houses of Parliament were eligible to vote.

Ansari, a Padma Shri recipient, was a surprise choice for vice president in 2007, proposed by the Left, then giving outside support to the UPA government. Congress president Sonia Gandhi had named Ansari as the second choice of her party for the presidential election after Pranab Mukherjee. The Left had no problem supporting him again.

Among those who did not vote were ailing Union minister Vilasrao Deshmukh, admitted to a Chennai hospital, and BJP’s Shatrughan Sinha, recovering from surgery, in addition to 21 BJD members, 11 from TDP and six from the Congress and supporting parties.

Others who did not vote included two nominated MPs, two each from the BJP, AGP, RSP and TRS and Y.S. Jagan Mohan Reddy, one of two YSR Congress members.

Ansari will once again be the chairman of the Rajya Sabha (upper house of the Parliament) by virtue of his election as vice president.

Career Profile

Born in Kolkata (Calcutta) on April 1, 1937, while his family hailed from Ghazipur, Uttar Pradesh, Ansari completed his schooling from St. Edwards High School in Shimla, attended the St. Xavier's College, University of Calcutta, and pursued MA in Political Science at the Aligarh Muslim University (AMU), where he also got his doctorate degree and worked as lecturer.

Ansari – the grand-nephew of former Congress President Mukhtar Ahmad Ansari, a leader of the Indian independence movement – is also a reputed West Asia scholar. He has authored a book-- Travelling Through Conflict. He has written books on Palestine, Iraq and Iran. Some of his views have run contrary to India's official position. He had questioned India's vote at the International Atomic Energy Agency (IAEA) on Iran's nuclear program where the country voted against Iran.

Ansari also upheld a decision as NCM Chairperson when in 2007 he agreed with the position taken by St. Stephens College, Delhi, to earmark seats for Dalit Christians.

Ansari was chairman of a working group on "Confidence building measures across segments of society in the State," established by the Second round Table Conference of the Prime Minister on Jammu and Kashmir in 2006. The report of the working group was adopted by the Third round Table in April 2007.

In the past, a suave and sober Ansari has served in many positions, including as Permanent Representative of India to the United Nations, Indian High Commissioner to Australia and Ambassador to the United Arab Emirates, Afghanistan, Iran and Saudi Arabia. He joined the Indian Foreign Service in 1961.

Ansari became vice chancellor of the AMU in May, 2000 and held the post until March, 2002. He is also known for his role in ensuring compensation to the victims of the Gujarat riots and pushing for a complete re-look into the relief and rehabilitation for riot victims since 1984. He is also known for his strong views on burning issues.

"The language used by the Pope sounds like that of his 12th-century counterpart who ordered the crusades... It surprises me because the Vatican has a very comprehensive relationship with the Muslim world," Ansari had said in 2006 as Chairman, Minorities Commission of India, in reaction to Pope Benedict XVI's comments on Islam.

As chairman of the Rajya Sabha, Ansari faced criticism when the Opposition parties expressed unhappiness at the manner in which he “abruptly” adjourned the House on the night of December 29, 2011 (Winter Session) during the debate on the Lokpal Bill.

Advantage UPA

The result of the election was a foregone conclusion as the numbers were stacked in favor of the ruling alliance. It managed to get the backing of its estranged ally Trinamool Congress and the parties extending it outside support. These include arch rivals, the Bahujan Samaj Party and the Samajwadi Party. The Left parties also supported Ansari.

Undoubtedly, the importance of the reelection of Ansari as the country's vice president lies not just in the United Progressive Alliance managing to get its candidate through with a convincing margin, after sending its presidential nominee Pranab Mukherjee to Rashtrapati Bhavan (President’s House).

Both these victories have undoubtedly come as a morale-booster for an otherwise beleaguered ruling combine, battered over the last two years by scams and crises. There was a time two months ago when the ability of the UPA to get its candidates elected as President and vice president was under serious doubt.

Nor does Ansari's import lie merely in him being able to successfully transit from being viewed as a nominee of the Left parties -- which had supported him for vice presidentship in 2007 and they had their way because of the clout they carried in UPA I -- to being adopted as the candidate of the Congress, and the UPA.

Pranab Mukherjee Takes Over as 13th President of India: First Bengali To Become Head of State

Veteran Congress leader Pranab Mukherjee has become  13th president of India. He is the first person from West Bengal to occupy the top Constitutional post and the third MP to be elevated to the office of President after Fakhruddin Ali Ahmed and Zail Singh.

The presidential election was a one-sided affair. Mukherjee — who was sworn in by Chief Justice of India S.H. Kapadia on July 25 — secured 68.12 per cent of the total 10,47,971 value votes cast by 4,659 members of the State/Territorial Assemblies and Parliament. Opposition-backed candidate PA Sangma, who was supported by the NDA, the AIADMK and the BJD, managed only 30.15 per cent of the votes.

There were a total of 81 invalid votes, to the value of 18,221. These include that of Samajwadi Party president Mulayam Singh Yadav, whose second ballot was invalidated by the Election Commission, for it violated the vote of secrecy.

Among the 748 Members of Parliament (excluding the nominated members who have no voting right) with the total vote value of 5,29,584, Mukherjee polled 527 votes (3,73,116) and Sangma got 206 votes (1,45,848).

There was some cross-voting in favor of Mukherjee in the BJP-ruled Karnataka: he got votes of 117 MLAs, against the BJP’s 103 in the 224-member Assembly. While three votes were declared invalid, one MLA did not vote.

In Kerala, Mukherjee made a clean sweep, polling all 124 votes; one was invalid. Sangma drew a blank. The CPI and RSP MLAs abstained from voting.

Only former President K.R. Narayanan, secured the maximum value votes of 9, 56, 290 (94.97 per cent), when he won in the 1997 election against the former Chief Election Commissioner, T.N. Seshan.

In the 2007 election, the outgoing President, Pratibha Patil, the first woman to hold the office, defeated the then Vice President, Bhairon Singh Shekhawat, securing 65.82 per cent of the total valid votes. Shekhawat polled 33.18 per cent.

Career Graph

Born on 11 Dec 1935 in Mirati village, Kirnahar disttricy, Birbhum (West Bengal), Mukherjee will embark on a new journey transcending political affiliations in the high Constitutional job with an ease none of his predecessors may have enjoyed because of his experience spanning 45 years in government and politics.

His election to the President's office today comes as a fitting finale for the veteran Congressman from West Bengal, until recently the troubleshooter of UPA, a task he has handled for the past eight years.

Not a lawyer by training but considered an expert in the working of the Constitution and governance, he was ever seen as the perennial 'No. 2' in government.

Mukherjee was a utility man from the days of Indira Gandhi, when he was the powerful Minister of State for Revenue during the Emergency, and later as Finance Minister in the 1980s.

His rise had been steady and such valuable was his contribution to government that his nomination as a Presidential candidate came after a huge dilemma for Congress party, which heads the UPA coalition that has moved from crisis to crisis in the past eight years.

The veteran leader, known for his photographic memory, had become a Rajya Sabha (upper house of the Parliament) member for the first time in 1969.

Mukherjee was for a long time member of the Upper House before his first direct election to the Lok Sabha in 2004 from Jangipur in West Bengal. He repeated his victory in the 2009 elections but had expressed a desire not to contest elections again in view of his advancing age.

Mukherjee was a top-ranking minister and presided over the Union Cabinet meetings in the absence of the Prime Minister during 1980-85.

Of course, Mukherjee had his own bad days in the Congress which he had to quit in the mid-80s after he had evinced interest in becoming the prime minister after the death of Indira Gandhi in 1984. It took some time before he came back into the party but once he was in, there was no stopping his rise once again.

Mukherjee became finance minister again in 2008 after P Chidambaram was shifted to the Home Ministry in the wake of 26/11 Mumbai terror attacks.

Again his importance was seen when P V Narasimha Rao made him Deputy Chairman of the Planning Commission as well as Minister of External Affairs. In between he had to quit because he ceased to be a member of Parliament and came back to the Cabinet after reelection.

Mukherjee started his public life in the 1960s in Bangla Congress during the time of former Chief Minister Ajoy Mukherjee of the United Front government when Jyoti Basu was Deputy Chief Minister in West Bengal. He was general secretary of Bangla Congress.

A post-graduate in political science and history, he can recollect any event of historical importance or mundane political and other events, a matter of envy to many of his colleagues.

Son of a senior Congress leader Kinkar Mukherjee from West Bengal, Mukherjee had done MA (history), MA (political science), and LLB, DLitt. He had a brief stint as lawyer, teacher and journalist before he was embedded to his destiny of politics in 1969, when he became a member of the Rajya Sabha.

Mukherjee, who headed 83 GoMs and EGoMs from June 2004 until recently, was Leader of the Rajya Sabha from 1980-85 and later he became Leader of the Lok Sabha. Prime Minister Manmohan Singh is Leader of the Rajya Sabha.

When Mukherjee was Finance Minister, Manmohan Singh was appointed RBI Governor in 1982. In what could be described a case of chasing each other's shadow, Singh became Deputy Chairman of Planning Commission from 1985 to 1987, a post Mukherjee later held from 1991 to 1996, when Singh became Finance Minister in P V Narasimha Rao government.

Mukherjee also had a brief stint as Chairman of the Economic Advisory Cell of AICC between 1987 and 1989. Interestingly, Manmohan Singh also held this post, when Congress was out of power between 1999 and 2004.

Mukherjee, who started his career as a college teacher, always carried the traits of a teacher, never hestitating to give a reprimand or two to juniors whether in his party or the Opposition. He was also jocularly called 'GoM Mukherjee' in political circles as he headed 33 Groups of Ministers on various key issues including the recent one on setting up of Lokpal.

The man who headed Joint Committee on Lokpal that included Anna Hazare, Mukherjee has five books published to his credit on political and economic issues and under his editorial guidance, the history of Congress was published in which there was a candid admission of excesses during the Emergency.

Mukherjee was conferred the Best Parliamentarian Award in 1997. Ten years later, he was awarded Padma Vibhushan, the second highest civilian honor.

In Congress Party, Mukherjee became AICC treasurer in 1978. Journalists and AICC media department officials still recall Mukherjee's tenure as the Media Department Chairman of the party. Mukherjee was AICC General Secretary in 1998-99.

In 1984-1991, 1996 and 1998, Mukherjee was Chairman of the Campaign Committee of AICC, besides being a member of the Congress Working Committee and Congress Election Committee.

Mukherjee held all the key portfolios, including Defence from May 2004 to October 2006 and External Affairs from October 2006 to May 2009 besides the Finance portfolio, which he held again in 2009 after a gap of 27 years.

In the past, he also held portfolios like Commerce and Steel and Mines, Revenue and Banking (Independent Charge), Shipping and Transport, Industrial Development, Commerce and Supply besides presiding over a number of Parliamentary Committees.

Mukherjee got married to Suvra on July 13, 1957 and has two sons — Abhijit and Indrajit — and daughter Sharmistha. Abhijit is a Congress MLA in West Bengal.

Challenges in New Role

Mukherjee’s new role in Rashtrapati Bhavan (President’s House) will be quite contrary to the one he has just finished playing. The most critical test for Mukherjee as President will no doubt come in 2014 after the general election to the Lok Sabha (lower house of the Parliament). As in the past couple of decades, no one party is likely to get a majority of its own, and the bigger parties would have to depend on the support of alliance partners or new-found friends.

R. Venkataraman in 1989 and Sharma in 1996 followed the principle of inviting the leader of the single largest party to form the government. Rajiv Gandhi declined the invitation in 1989; Atal Behari Vajpayee accepted the invitation, but lasted as Prime Minister on that occasion for just 13 days. With these examples behind him, Narayanan insisted on letters of support from a claimant party’s allies before extending it an invitation to form the government.

Additional Qualities

Used to working long hours, he may have to find new outlets for his unbounded energy. Though it was apparent that the UPA had the numbers, 76-year-old Mukherjee campaigned tirelessly, moving from state to state, winning the support of even rivals in Karnataka, Bihar, Maharashtra and West Bengal. Reaching out to anyone and everyone who matters is a quality Mukherjee is known for. As president, he is expected to build bridges.

After being in the thick of politics for long years, will it be now Presidential activism for Mukherjee? Will he be able to rise above party politics in 2014 when the general election is expected to throw a split verdict? Since the Constitution is unclear about the formation of a government if no party gets a majority, the President is free to exercise discretion. In 1996 Shankar Dayal Sharma invited the BJP to form a government but it fell in 13 days as Atal Behari Vajpayee could not muster enough support. KR Narayanan, setting a precedent, asked for letters of support from the party staking the claim to form a government. How Mukherjee handles such a situation would be keenly watched. That may well be the defining moment for him.

Despite his personal religious observances — which are perfectly in consonance with India’s Constitution —Mukherjee is also a secular politician. One cannot imagine him chuckling with glee while the Babri Masjid was being vandalised or turning a blind ear to the cries of Muslims being massacred in Ahmedabad. As President, he may not be in a position to do either, but this is where a conversation with the late Giani Zail Singh, and what it revealed of British precedents, comes in.

Positive Points

* Constitutional expert: A Constitutional and governance expert, Mukherjee has always been seen as the perennial 'No. 2' in the government.

* Utility man: From the days of Indira Gandhi, Mukherjee's has been her trusted aide. He was the powerful Minister of State for Revenue during the Emergency, and later as Finance Minister in the 80s. For the past eight years, Mukherjee has been the Mr Troubleshooter for UPA.

* Photographic memory: The veteran leader is known for his sharp memory. He can recollect any event of historical importance or mundane political and other events, a matter of envy to many of his colleagues.

* Vast experience: With four decades of active life in politics, Mukherjee knows the Indian political system inside out.

Assessment

It can be said that in Mukherjee, India will have a knowledgeable and pragmatic President who is well-versed in constitutional procedures and practices, and who was, until his nomination as a candidate by the ruling coalition, an active politician and senior Union Minister.

Mukherjee will be a President who could just as easily have been prime minister. There have been presidents who have come straight from the Union Council of Ministers, but none has carried the political weight and executive experience of this man from small-town Bengal. We have little doubt he will dignify the office he is about to step into and leave little room for narrow partisanship.

Unlike Pratibha Patil, who was out of active politics long before she became president, APJ Abdul Kalam, who was a genuinely nonpolitical person in the best sense of the term, and KR Narayanan, Shanker Dayal Sharma and R Venkataraman, who served as vice president before they entered Rashtrapati Bhavan, Mukherjee is making the switch from active politics and governance to the office of President in next to no time.

From the moment Mukherjee’s name was formally proposed by the UPA for the presidency, there was little doubt that the veteran Congress leader would sail through even in the event of a contest. As such, the result of the presidential poll between Mukherjee and Purno A. Sangma, who was backed by some regional parties and the BJP and some of its NDA allies carries no surprise. Given Mukherjee’s standing in public life, everyone expects him to be correct and proper in discharging his duties.

Undoubtedly, the former federal minister for finance, defense and external affairs has not only been one of the country's most important policy-makers in recent times but also that his long career in Government has allowed him to gain a deep understanding of the functioning of the Indian polity. This — an invaluable trait in today's era of coalition politics and tenuous political ties — naturally made Mukherjee the perfect choice as a firefighter of the UPA regime. Over the years, particularly in its second term, as the Congress-led UPA slid into an inert state of policy paralysis, becoming a sitting duck for the Opposition, it was Mukherjee who reached out to the critics, addressed their concerns and built the much-needed consensus.

It is hoped that Mukherjee will keep his promise to the nation and preserve, protect and defend the Constitution. Good luck Mr President!