Govts election sops to cost exchequer Rs 82,000 crore

Written by fe Bureau | New Delhi | Updated: Mar 1 2009, 05:25am hrs
Within 10 days of finance minister Pranab Mukherjee refraining from announcing any big-ticket measures in the interim Budget due to the restraints of Constitutional propriety, the UPA government, gearing up for general elections, has unveiled a slew of fiscal sops and populist schemes.

Further, the ministry of petroleum and natural gas is contemplating a cut of Rs 2 on diesel prices, a move which would help bring down inflation.

The measures that are wide ranging from a 2% cut in excise duty and service tax to the launch of a new scheme for child welfare are expected to cost the government exchequer another Rs 82,000 crore. The sudden rush to announce these schemes comes not only because of the global slowdown but also because the Election Commission is expected to announce dates for the general elections by next week. Once the dates are announced, the government would be gagged and bound by the Election Commissions code of conduct.

While the third fiscal package announced by Mukherjee this week would soothe India Inc, the minister is hopeful of pleasing the middle-class by bringing down prices of consumer durables. The tax sops dont come cheap. While the service tax cut would cost Rs 13,000 crore, excise duty reduction would lead to Rs 8,500 crore revenue losses and customs duty sops another Rs 6,500 crore. Meanwhile, bringing cheer to the over 50 lakh central government employees and 38 lakh pensioners, the Cabinet Committee on Economic Affairs in its meeting on Thursday cleared nearly 60 proposals and hiked dearness allowance by 6% to 22%. The move is estimated to cost the government exchequer another Rs 6,020 crore.

For the aam aadmi too, the UPA government has brought a bag of goodies. To ensure that the states are able to spur infrastructure development and employment generation, they have been allowed to borrow an additional 0.5% of the gross state domestic product in 2009-10 as well. This would mean that state governments would have an additional Rs 30,000 crore to spend next fiscal.

Another sop aimed at the common man includes a mega-low cost housing scheme to be implemented by state governments. The CCEA in its meeting approved a plan to allow states to construct 10 lakh affordable houses. The project has been allocated Rs 5,000 crore over the next four years.

Among other schemes cleared by the CCEA is an allocation of additional Rs 11,000 crore to the Jawaharlal Nehru National Urban Renewal Mission. Of this Rs 6,000 crore have been allocated to Urban Infrastructure and Governance scheme while Rs 5,000 crore have been granted to the Urban Infrastructure Scheme in small and medium towns.

The government has also decided to launch a centrally sponsored scheme of Integrated Child Protection Scheme during the 11 th Five year Plan with an allocation of Rs 1,073 crore. The scheme would contribute to the improvement in the well being of children in difficult circumstances, as well as to the reduction of vulnerability to situations and actions that lead to abuse, neglect, exploitation, abandonment and separation of children.

However, the UPA government is not the only one to hand out such goodwill-earning schemes in hopes of luring votes. Its predecessor, the NDA government led by Atal Bihari Vajpayee, too, had handed out similar sops, in the interim Budget presented by the then finance minister Jaswant Singh.

Pre-poll bonanzaHow it all adds up

2% cut in excise duty and service tax and customs duty sops Rs 28,000 crore

The service tax cut will cost Rs 13,000 crore, excise duty reduction will lead to Rs 8,500 crore of revenue losses and customs duty sops another Rs 6,500 crore

Hike in dearness allowance by 6% to 22% Rs 6,020 crore

Cabinet Committee on Economic Affairs cleared nearly 60 proposals in its meeting

Affordable housing scheme to construct 10 lakh housesRs 5,000 crore

The sop aimed at the common man; includes a mega low-cost housing scheme, to be implemented by state governments

Increased allocation to JNNURMRs 11,000 crore

Of the total Rs 6,000 crore has been allocated to Urban Infrastructure and governance scheme while Rs 5,000 crore has been granted to the Urban Infrastructure Scheme in Small and Medium Towns

Integrated Child Protection scheme Rs 1,072 crore

The scheme will contribute to the improvement in the well being of children in difficult circumstances, as well as to the reduction of vulnerability to situations and actions that lead to abuse, neglect, exploitation, abandonment and separation of children

States to borrow an extra 0.5% of their GSDPRs 30,000 crore