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Lok Sabha nod for two percent cuts in excise, service tax
February, 24th 2009

The Lok Sabha Tuesday approved 2-percent cuts in excise duty and service tax proposed by External Affairs Minister Pranab Mukherjee, who said resilience of the India economy which grew by an average of 9 percent annually in the last three years will help it overcome the current crisis.

Replying to the debate on the interim budget in the Lok Sabha, the lower house of parliament, Mukherjee said the government had taken steps in the past two months to lift the economy and that such steps will bear fruit soon.

He proposed that the 4 percent cut in central value-added tax (Cenvat), announced in December to 12 percent, be extended beyond March 31, while proposing that the excise duty be further reduced from 10 percent to 8 percent.

The foreign minister also proposed that naphtha imported to generate electricity be fully exempted from customs duty, and service tax on taxable services be cut from 12 percent to 10 percent.

In the case of cement, he proposed the excise duty at 8 percent ad valorem or a specific duty of Rs.230 per tonne, whichever was higher, resulting in a gain of Rs.3.50 per bag.

The house later passed by voice vote the interim budget, including the vote-on-account, to help fund the government expenditure till the regular budget is presented by the next government after elections, and passed by parliament.

I express satisfaction on our overall performance for five years, Mukherjee said, summing up the achievements of the United Progressive Alliance (UPA) government since it took office under Prime Minister Manmohan Singh May 22, 2004.

During his speech, the foreign minister - who had also tabled the interim budget, since Manmohan Singh, who holds the finance portfolio, is convalescing from a heart surgery - made comparisons with the achievements of the previous National Democratic Alliance (NDA) government.

Never in the history of this country we can find a period of three consecutive years of sustainable growth of 9 percent, he said, adding: And the allegation is we have destroyed the economy!

He said under the NDA regimes, which lasted six years till 2004, the average growth was 5.8 percent, while under the UPA regime, the overall gross domestic product (GDP) expanded by an average of 8.6 percent.

He said, on every count - fiscal deficit, revenue deficit, tax-to-GDP ratio, or the savings and investment rates - his government had turned out much better performance.

At the same time, the revised budgetary estimates during the past five years had always turned out a much better performance compared with what had been budgeted for, said Mukherjee, who was himself finance minister in the 1980s.

And you call it dismal performance?

The veteran politician said all this had been achieved despite the high average cost of crude oil in the past few years, when it even touched $147 per barrel last year, as opposed to $27 per barrel during the NDA government.

Let us have some self-confidence in ourselves, he said. I have expressed deep concern on the impact of the global meltdown. Any responsible finance minister has to express this concern, he said.

But I said I have confidence on the resilience of the Indian economy.

According to the foreign minister, it was because of parliamentary etiquettes that he did not unveil new measures in the interim budget, as he thought it fit for the next government to present a regular budget after elections.

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