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Comments on the “Vote on Account”

Chidambaram

Comments on the “Vote on Account” presented by Hon’ble Finance Minister Shri P. Chidambaram on 17th February 2014.

The salient features of the “Interim budget” can be summarised as :-

1) Reduction of Excise Duty to the extend 2 to 4%

Impact:-

i) This will enhance growth in manufacturing

ii) Power equipment, engineering companies to see rise in profit

iii) Construction cost will decrease as the cost of major material like cement, Steel etc will come down.

 

2) Infrastructure spending raised 8.6%

Plan outlay for coal ministry raised 15%, power ministry records 12% rise in budgetary allocation; shipping allocation cut by 2%

 

In the interim Budget for 2014-15, Finance Minister P Chidambaram has raised allocation towards the infrastructuresector by as much as 8.6 per cent. The government will allocate Rs 1,81,134 crore to the sector, comprising power, coal, roads, civil aviation, ports and railways, against Rs 1,66,756 crore in 2013-14.
During 2013-14, the government spent about Rs 20,000 crore less than what was allocated towards the sector.
For 2014-15, the Plan outlay for the coal ministry has been raised 15 per cent, while the power ministry recorded a 12 per cent rise in budgetary allocation.
Allocation towards the shipping and ports sectors was cut two per cent.
“In 2012-13 and in nine months of this financial year, 29,350 Mw of power capacity, 3,928 km of national highways, 39,144 km of rural roads, 3,343 km of new railway tracks and capacity of 217.5 million tonnes a year in our ports have been created to give a big boost to infrastructure,” Chidambaram said in his Budget speech.
The finance minister announced a marginal cut in spending towards civil aviation, while raising the allocation towards the roads sector five per cent, as less than 500 km of road projects were awarded in 2013-14.
Public-private partnerships (PPPs) have been given a renewed push. “We need massive investment in infrastructure and that needs to be mobilised through PPPs. Budgetary support to Indian Railways has been increased from Rs 26,000 crore to Rs 29,000 crore. The railways will have to mobilise huge resources through market borrowing and public-private partnerships,” Chidambaram said.
In 2014-15, the government will add four ultra-mega solar power projects, with a capacity of about 500 Mw each, as well as 1,684 Mw, of grid-connected solar power under the National Solar Mission.

 

It is estimated overall, the infrastructure sector will require investment of $1 trillion in the 12th five-year Plan.
The government plans to carry out financial restructuring of power distribution companies; it is also setting up a road regulator to address issues in the sector. Additionally, a Rail Tariff Authority is being set up.
“The government has re-emphasised the focus on infrastructure and this could be a starting point for the next government. We need more thrust for the infrastructure sector and the present government has set the agenda for the full Budget,” said Vishwas Udgirkar, senior director, Deloitte Touche Tomatsu.

 

3) Other schemes where Construction involved.

 

  • Pradhan Mantri Gram Sadak Yojana: Budget expenditure has grown only by around 10 per cent from Rs 7,884 crore in FY12-13 to Rs 8,685 crore in FY13-14. Budget allocation is only Rs 4,529 crore for FY14-15.

 

  • Indira Awas Yojana: This rural housing programme has seen Plan expenditure in Budget 2013-14 come down from Rs 13,665 crore to Rs 11,865 crore (revised estimates), a drop of 13.1 per cent.

 

  • The subsidy for Rajiv Gandhi Grameen Vidyutikaran Yojana, the rural electrification programme, has come down drastically to Rs 2,868 crore in FY13-14, as against Budget Estimate of Rs 4,041 crore.

 

  • The revised estimate for the National Rural Drinking Water Programme in Budget 2013-14 has come down to Rs 8,730 crore as against Budget Estimate of Rs 9,900 crore. The actual expenditure for Budget 2012-13 was Rs 10,489 crore.

 

  • Rural telephony programme has seen rural teledensity grow from 15.11 per cent in 2009 to 32.99 per cent in 2011. The target is to reach rural teledensity of 40 per cent by end-2014.

 

 

 

 

4) Thrust on solar power

 

Four ultra mega solar power projects, each with a capacity of 500 Mw, are proposed to be taken up in 2014-15. After exceeding the target and achieving 1,684 Mw of grid-connected solar power, the National Solar Mission entered the second phase on April 1, 2013.

 

 

5) More money for skill development

 

Rs 1,000 crore allocated to the National Skill Monetary Reward Scheme will be transferred to the NSD Trust and another sum of Rs 1,000 crore will be given next year to enable the Trust to scale up the programme of the National Skill Development Corporation rapidly. The National Skill Certification and Monetary Reward Scheme was launched in August 2013. At last count, 204 job roles had been finalised, 168,043 youth had enrolled and 77,710 had completed their training.

 

Overall it is a positive budget which had reduced “Current Account Deficit” (CAD). It is a growth oriented budget with economic consolidation as the main motto.

 
 

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