Budget 2001: Full Coverage

Mr Sinha also spelt out the resolve of the government to decontrol sugar andfertiliser, review Essential Commodities Act, free movement and stocking offoodgrains, stick to the schedule of dismantling of the administered pricemechanism (APM) in the petroleum sector, increase user charges and downsizethe government.

Mr Sinha, while unveiling the Union Budget for 2001-02, also announcedrelaxation of regulations governing capital account convertibility andforeign investment.

The new rates for post office saving account (individual account) has beenfixed at 3.5 per cent, post office time deposit (one year) 7.5 per cent, twoyear eight per cent, for three year nine per cent, for five year nine percent. The interest rate for national savings scheme, 1992 is revised to nineper cent. The rate for the 15 years PPF is pegged at 9.5 per cent while thedeposit schemes for retiring Government PSU employees is fixed at 8.5 percent. With the new rate a kisan vikas patra will double in seven years andthree months. The maturity values for pre-mature encashment in NationalSavings Certificate and Kisan Vikas Patra have also being accordinglyreduced.

Referring to labour issues, Mr Sinha said that it was necessary to addressthe issue of rigidities in labour legislation as provisions of theIndustrial Disputes Act have made it "almost impossible for industrial firmsto exercise any labour flexibility." He added that the labour ministry wouldintroduce a legislation to amend the ID Act and Contract Labour Act. As perthe proposed amendments, industrial establishments employing more than 1,000workers (the existing limit is 100 workers) would be covered under chapterVB of the ID Act which stipulates that the establishments must obtain priorapproval of the government authority for effecting lay-off, retrenchment andclosure. The minister, however, has proposed that the separationcompensation be increased from 15 days to 45 days for every completed yearof service.

The government, he said, also proposed to repeal SICA and amend CompaniesAct in order to set up a National Company Law Tribunal.

Talking about structural reforms, Mr Sinha said that government would adhereto the March 2002 deadline of dismantling of APM in petroleum sector. In thefertiliser sector, he said, government would decontrol urea by April 1,2006. He added retention price scheme (RPS) will be replaced by a GroupConcession Scheme. Mr Sinha further said that the government was committedto complete decontrol of sugar. He added that as an step towards decontrolthe government would introduce futures/forward trading in sugar. He saidthat the retail price of sugar under PDS would be revised to Rs 13.25 per kgwith effect from Thursday.

To help the domestic drugs and pharmaceutical industry in meeting thechallenges of globalisation, Mr Sinha said that government wouldsubstantially reduce the span of price control. Indian companies have alsobeen permitted to list in foreign stock exchanges by sponsoring ADR/GDRissues against block share holding.

Foreign institutional investors (FIIs) are allowed to invest in a companyunder the portfolio investment route up to 24 per cent of the paid-upcapital of the company. This can be increased to 40 per cent with theapproval of the general body of the shareholders by a special resolution.

The finance minister has raised the limit to 49 per cent. Mr Sinha alsorelaxed the norms for foreign investment in the non-banking sector providedthe foreign investor brings in a minimum of $50 million. He further saidthat the FDI in the NBFCs would be put on the automatic route subject to RBIguidelines.

As part of the expenditure management exercise, the finance minister saidthat user charges for the services provided by the government would beincreased and fresh recruitment would be limited to 1 per cent of the totalcivilian staff. Employees in the surplus pool will also be offered anattractive VRS package. The minister also announced that standard licencefee on government accommodation would be enhanced and added that thefacility of LTC to Central employees will be suspended for 2 years for theremaining part of the four-year block period. The minister further said thatthose entering the Central government services after October 1, 2001 wouldreceive pension through a new pension programme based on definedcontributions.

With regard to agriculture sector, Mr Sinha said that the government wouldreview the operation of the Essential Commodities Act and remove many of therestrictions that have been imposed on the free inter-state movement offoodgrains and agriculture produce and also on the storage and stocking ofsuch commodities.