Subsidy For GM Crops + Indian Budget 2007-08 + Econ Survey 2006-07

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In This NEWS Bulletin ********************************** 1. GM crops get a subsidy boost AGRI FUTURES TRADING - 2. Wheat futures ban sobers prices. What next? 3. FMC discontinues futures trade in rice and wheat 4. Duty on edible oil cut to ease inflation 5. Ban maize futures too: NECC BUDGET 2007-08 - 6. PC (finance minister) applies cosmetic brush on fading agrarian canvas

- Barring a few exceptions, most announcements are routine allocations for ongoing schemes 7. Regional Rural Banks (RRBs) asked to cash in on non-resident external deposit (NRE) money 8. schemes galore - High allocations, higher targets, but......will Chidambaram’s fortification measures be able to re-energise the agriculture sector's failing health? ECONOMIC SURVEY 06-07 9. Agriculture - Painting gray patches on a green frame 10. Special Economic Zones (SEZs) - Policies needed to rid farmers of their land woes - 63 notified SEZs have so far brought in investments worth over Rs 13,500 cr 11. Rural India to get 200 million phones by 2012 12. Buoyancy in commodities market to

continue 13. social sector - Picture’s rosy, but states need to pull up their socks - One of the major worries for the government is the poor employment scenario ACTION TAKEN REPORT ON BUDGET 2006-07 14. Chidambaram fails to deliver on many counts RAILWAY BUDGET 2007-08 15. Lalu fast-tracks Railways Inc ------------ GM crops get a subsidy boost http://www.financialexpress.com/fe_full_story.php?content_id=157253 ASHOK B SHARMA Posted online: Saturday, March 10, 2007 at 0000 hours IST NEW DELHI, MAR 9 : To promote genetically modified (GM) crops in the country, the government has announced a special subsidy package. The National Horticulture Board in its recent document has announced backed-ended capital investment subsidy for projects developing genetic modified organisms (GMOs) and bio-technology. The NHB has also proposed similar subsidy for high-density plantations, micro-propogation or tissue culture for mass production of “true-to types”, hi-tech cultivation under controlled climatic conditions like poly-houses, green houses and net-houses, rainfed production

through efficient water management techniques, nursery management for quality seed and planning material production, hybrid seed production, organic farming, hydroponics for year-round quality production and for use of plastics in horticulture. Priority areas have also been defined to include export-oriented units, projects in cooperative sectors, projects in Northeast, and those involving women entrepreneurs. No GM horticulture crops have so far been approved for commercial cultivation, while a number of them are in the pipeline. Exporters have expressed apprehensions that the introductions of GM food crops are likely to affect exports. Speaking to FE, executive director, Centre for International Trade in Agriculture Agro-based Industries (CITA), Vijay Sardana, said: “The government should formulate an uniform policy on genetic modified organisms, taking into consideration

their trade aspects. A public interest litigation is pending before the Supreme Court and the apex court has imposed a temporary ban on any fresh approval of GM crop trials. The commerce ministry has already asked the Genetic Engineering Approval Committee (GEAC) not to approve field trials of GM crops in agri export zones. All these point to the need for a clear-cut policy on genetic modified organisms.”------------------------------- Wheat futures ban sobers prices. What next? http://www.financialexpress.com/fe_full_story.php?content_id=156746 ASHOK B SHARMA Posted online : Monday, March 05, 2007 at 0000 hours IST NEW DELHI, MARCH 4: The decision of the Forward Markets Commission (FMC) to

impose a temporary ban on futures trading in wheat and rice last week has created a better impact in sobering prices than P Chidambaram’s Budgetary proposals, according to views expressed by experts. “The ban on futures trading in wheat and rice resulted in price drop for maize futures as well, though the spot prices at different markets reported hi-gh,” said the US Grains Market Reports (USGMR) for India. According to USGMR-India, the maize futures for March, 2007 was quoted at Rs 7740 a tonne, that for April at Rs 7830, that for May at Rs 7980 and Rs 8130 for June at Davangere, while the last week's spot prices in Madhya Pradesh firmed up to Rs 8,280 a tonne. Maize prices at different market yards averaged at Rs 7,250-Rs 7,350 in the previous week, indicating a week-on-week increase of 1% and about 24% increase over the previous year. Maize and

pulses are in shortage in the country and hence the rise in prices is of natural consequences. Imports of these two commodities have also become costlier due to firming up of global prices. But the poultry industry says “A similar ban on maize futures will end market manipulations, which is also responsible for price rise.” The worrying factor over the past few months had been the rising prices of agro commodities like wheat and rice which have witnessed a good harvest. A good wheat output is expected in the current season with a record increase area under the crop to over 28 million hectare and rice production is pegged at 90.13 million tonne. The farmer leader of the ruling Congress party, Krishan Bir Chaudhary had said, "Futures trading benefits only traders and corporates who manipulate prices and not the farmers who get the lowest price. Steps should also be taken to check hoarding in spot markets."

The government has appointed an expert panel under the chairmanship of Abhijit Sen to study the impact of futures trading. The Prime Minister has also sought suggestions from state governments and many of them have suggested stringent measures against market manipulators. The Economy Survey 2006 referring to previous year's wheat imports said, “With firming up of global prices, the impact of duty-free import of wheat and pulses in rolling, the domestic prices back was limited.” Thus imports may not be a solution. Experts feel that the Budget, through excise duty, has a provision to control price rise, of some manufactured products, but more realistic solution is found in the rational freight formula in the Railway Budget as cheaper mode of transportation can have a major impact in sobering prices.--- FMC discontinues futures trade in rice and wheat Prices have already declined on fresh arrivals http://www.financialexpress.com/fe_full_story.php?content_id=156369 ASHOK B SHARMA Posted online : Thursday, March 01, 2007 at 0000 hours IST The decision by the Forward Markets Commission (FMC) to discontinue fresh futures contracts in wheat and rice, as announced by the finance minister in his Budget speech, is unlikely to trigger any volatility to the prices of these commodities in the domestic market. Futures and local spot prices of wheat have already softened because of improved inflows of new wheat in Gujarat and Madhya Pradesh, traders said. “The government has taken this step to keep high inflation rate under control. Prices have already softened because of fresh arrivals started in Gujarat and Madhya Pradesh,” a local trader said. “No new wheat and rice contracts will be launched till further notification. In respect of running contracts in these commodities, no new position can be taken. Only squaring up of positions shall be allowed,” said in a NCDEX circular issued on

its website. When contacted director of FMC Anupam Mishra declined to comment on the issue. “Banning and delisting of commodities contracts (on essential commodities) is no solution to contain inflation. Rather, strict regulations should be framed to curb unnecessary price fluctuations,” said Mr Naveen Mathur, head, Angel commodities. A floor trader said no fresh position can be taken and buyer or seller

will have to square off their positions in the contracts available for trading. Wheat contracts are actively traded on the NCDEX platform while rice contracts have not witnessed much of liquidity. Wheat March 2007 contracts on Wednesday were traded at Rs 975 per quintal, up by Rs 20 per cent over previous day. On the other hand, June and August 2007 contracts hit lower circuit on some liquidation. June

2007 contracts were down Rs 35 to close at Rs 883 per quintal and August 2007 contracts were also down Rs 28 to close at Rs 907 per quintal. Total open positions in all the contracts were around 66,690 tonne. Ready prices of wheat (Lokwan) at Vashi APMC market were down Rs 15-20 at Rs 1,060-1,130 per quintal on Wednesday. The decision to discontinue trade in wheat and rice follows immense pressure the government has been under from its allies who have been blaming the futures trade as a cause for higher agri commodity prices. ---------------- Duty

on edible oil cut to ease inflation Crude and refined vegetable oils have been exempted from additional CVD http://www.financialexpress.com/fe_full_story.php?content_id=156371 ASHOK B SHARMA Posted online : Thursday, March 01, 2007 at 0000 hours IST With a view to rein in inflation of prices of essential commodities, The Union Budget exempted crude and refined vegetable oils from 4% additional countervailing duty. The customs duty on both crude and refined sunflower oil has been reduced by 15 percentage points. The executive director of Vanaspati Manufacturers Association of India, Gurumoorthy welcomed the step, while the farmer leader-executive chairman of Bharat

Krishak Samaj, Krishan Bir Chaudhary criticised the move saying, “The finance minister is encouraging cheap imports at the expense of oilseed growers.” Among other items relating to the farmer sector, import duty on drip irrigation system, sprinklers and food processing machinery has been reduced from 7.5% to 5%. Import duty on pet food (for cats and dogs) has been reduced from 30% to 20%. The tax exemption limit for the small scale industries (SSIs)

has been raised from Rs 1 crore to Rs 1.5 crore. This would benefit many food processing units which are SSIs. Excise duty has been waived for all kinds of food mixes and biscuits having retail prices not exceeding Rs 50 per kg. Excise duty has been reduced for plywood from 16% to 8% and totally waived for bio-diesel, water purification devices operating on specified membrane-based technologies, domestic water filters not using electricity, water pipes of diameter not exceeding 200 mm. Specific rates of excise duty on cigarettes have been raised by about 5%. Excise duty (excluding cess) on non-machine made biris has raised

from Rs 7 to Rs 11 per thousand and that on machine-made biris has been raised from Rs 17 to Rs 24 per thousand. Excise duty exemption for 20 lakh unbranded biris will henceforth be regulated to avoid misuse of the provision. Excise duty on pan masala not containing tobacco has been reduced from 66% to 45%, while the tobacco-containing pan masala would continue with 66% excise duty. Excise duty exemption on pan masala units in the northeastern India has been withdrawn. ---------------------------- Ban maize futures too: NECC http://www.financialexpress.com/fe_full_story.php?content_id=156507 ASHOK B SHARMA Posted online : Friday, March 02, 2007 at 0000 hours IST NEW DELHI, MARCH 1: Following the ban on futures trading in wheat and rice, the poultry industry has urged the Union finance minister, P Chidambaram to immediately ban maize (corn) futures. The National Egg Co-ordination Committee (NECC), welcoming the ban on wheat and rice futures announced by the minister in his Budget

speech has alleged that the government has taken no action to ban forward trading in maize, which is the most crucial ingredient of poultry feed. NECC said that ever since the futures trading was allowed in maize the prices in the domestic market increased by 100%, particularly due to manipulations and deliberate hoarding of stocks by speculative traders and multinational corporations. It further alleged

that the high prices of maize pushed up the input cost by over 50%. Appealing to the finance minister and the government to slap an immediate ban on maize futures trading, the NECC said, “Futures trading did not yield the desired benefits to the maize growing farmers nor did it benefit poultry farmers or consumers in general. The reasons and justifications to ban futures trading in wheat and rice are equally applicable to maize also.” ----------------------------- AGRI/RURAL ECONOMY big picture PC (finance minister) applies cosmetic brush on fading agrarian canvas Barring a few exceptions, most announcements are routine allocations for ongoing schemes http://www.financialexpress.com/fe_full_story.php?content_id=156299 ASHOK B SHARMA Posted online : Thursday, March 01, 2007 at 0000 hours IST "There is no dearth of schemes, there is no dearth of funds. What needs to be done is to deliver the intended outcomes," said Union finance minister P Chidambaram, while presenting the annual Budget for the year 2007-08 on Wednesday. The finance minister's admission underlies the fact that the government is aware of the problems faced by farmers, though not much has been done in this direction. Indicating that the benefits of fertiliser subsidy have not reached the farmers fully, Chidambaram said, "While fertilisers should indeed be subsidised, we must find an alternative method of delivering the subsidy directly to the farmer. The fertiliser industry has agreed to work with the department of fertilisers to conduct a study and find a solution. Based on the report, the government intends to implement a pilot programme in at least one district in each state in 2007-08". As

of now, India's total farm subsidy is below World Trade Organisation prescribed norms. No subsidy is given directly to farmers - be it food, horticulture or fertiliser subsidy. But the benefits need to reach the targeted beneficiaries directly. The pilot project of routing fertiliser subsidy directly to farmers in one select district may herald a new beginning and may form a part of the government's future policy. In his speech, Chidambaram also promised that his government would implement the much-awaited recommendations of the R Radhakrishna panel, which is looking into all aspects of agricultural indebtedness. The draft National Policy for Farmers, submitted by the National Commission

on Farmers (NCF), was also under consideration. It may be noted that NCF had suggested several remedies and had recommended that banks charge interest rate not exceeding 4% on loans to farmers. At present, the government extends 2% subvention to banks for loans to farmers, at 7% interest rate. New Dawn Ahead? • The pilot project of routing fertiliser subsidy directly to farmers may herald a new beginning in the sector • NCF's recommendation that banks charge interest rate not exceeding 4% on farm loans wasn’t heeded • Special Purpose Tea Fund and promise to extend such facility to other cash crops are welcome. However, the finance minister did not promise 4% interest rate on farmers' loans, neither did he increase the subvention rate to banks for realising NCF's recommendation. Rather, he fixed a target of Rs 225,000 crore for farm credit

under the existing dispensation, with a view to bringing in additional 5 million new farmers under the formal banking system. Several experts view that credit is not the means for resolving the present agrarian crisis. Had it been so, there could have been an end to farmers' suicides in Vidharbha after the implemention of the Prime Minister's multi-crore package. What is keenly awaited now is the R Radhakrishna committee's report. Even as the finance minister said that he had devoted over 15 minutes to agriculture in his Budget speech, and announced that, "I have made a number of proposals to improve the economic viability of farming and ensure that farmers earn a minimum net

income", no major new announcement was made. The only exceptions being the Special Purpose Tea Fund and the promise to extend such a facility to coffee, rubber, spices, cashew nut and coconut and revival of extension services and training of farmers in water management. The rest are routine increases in allocations under different ongoing programmes. Budget Barometer Will the belated thrust on agri change

the ground realities? Measures • National Rural Employment Guarantee Scheme will cover 330 districts. An allocation of Rs 12,000 cr has been made in Budget 2007-08 • Rural landless households to be brought under safety net by providing insurance—Aam Aadmi Bima Yojana • Committee headed by Plan Com member, Abhijit Sen, set up to look into the impact of futures trade in farm products on the price of essentials • Regional Rural Banks to open branches in 80 uncovered districts. 50 lakh farmers to be brought into the system next year with a farm credit target of Rs 2,25,000 crore • Allocation under the Accelerated Irrigation Benefit Programme increased from Rs 7,121 crore to Rs 11,000 crore • A 31.6% rise in the allocation for Bharat Nirman project —Rs 24,603 crore to be provided in 2007-08 against Rs 18,696 crore in 2006-07 • Government silent on food, fertiliser and oil subsidies inspite of recommendations by various • Gender budgeting with mandatory schemes benefiting women Implications • One of the flagship schemes of the UPA, NREGS is a demand-driven scheme and its extension will further augment rural employment • The unorganised sector, of which agricultural labour is a big component, will have some social security now • There would be no new contracts in wheat and rice in the futures market. This will check pressure on domestic prices in the short-term • With agricultural indebtedness rising, this move will help increase the economic viability of the sector and help farmers avail of farm credit • With additional 24 lakh hectares to be brought under irrigation, this move will help raise overall productivity • Higher allocation to Bharat Nirman will enhance irrigation potential, provide drinking water to about 73,000 habitations and create 15 lakh rural houses • Not willing to rock the boat by taking unpopular measures like raising LPG and petrol prices, at least until * Hopes to swing votes from ------ fund flows RRBs asked to cash in on NRE money RRBs allowed to accept non-resident, FCNR deposits, expand branch network http://www.financialexpress.com/fe_full_story.php?content_id=156301 ASHOK B SHARMA Posted online : Thursday, March 01, 2007 at 0000 hours IST With agriculture becoming a priority sector for the United Progressive Alliance, Union finance minister P Chidambaram has tried to keep this Budget focussed on the aam aadmi. And this reflects in his announcements on regional rural banks (RRBs). While aiming at a farm credit target of Rs 225,000 crore for 2007-08, he has underlined the need to effectively use RRBs for bringing in financial inclusion. RRBs, like any other scheduled commercial bank in the country, will now be allowed to accept non-resident external (NRE)/ Foreign Currency Non-Resident (FCNR) deposits. The government has

also extended the Securitisation and Reconstruction of Financial Assets and Enforcement of Securitisation of Interest (Sarfaesi) Act to loans advanced by these banks, in a bid to reduce their non-performing assets (NPAs). The total NRE/FCNR deposits during the current fiscal, according to the Reserve Bank of India (RBI) data, is estimated at $37,751 million while it stood at $35,134 million in 2005-06. The total NRE/FCNR deposit pie is set to further increase in the next fiscal, with most banks offering lucrative interest rates. According to the All India Regional Rural Bank Employees Association (AIRRBEA), the RRBs located in Gujarat, Kerala, Uttar Pradesh and Bihar would particularly benefit as a large number of rural residents from these areas travel outside the country in search of jobs. However, these banks may not be able to implement legal provisions relating to money laundering, like other scheduled commercial banks do. “But we would be looking at deposits primarily from residents of these areas and, therefore, identity may not be an issue,” Dilip Kumar Mukherjee, general secretary, AIRRBEA, said. The

finance minister also announced that the government would recapitalise the 40 regional rural banks with negative net worth. Earlier, the RRBs had urged the finance ministry to provide a one-time financial package of about Rs 2,000 crore to wipe out accummulated losses and thereby clean up their balance sheets. Meanwhile, the Budget proposes to establish two separate funds—the Financial Inclusion Fund and Financial Inclusion Technology Fund – with the National Bank for Agriculture and Rural Development (Nabard). The first would meet the cost of developmental and promotional interventions in rural areas,while the second would take care of technology adoption. Each fund would have a corpus of Rs 500 crore, the finance minister added. In addition, Nabard would also be allowed to issue rural bonds of Rs 5,000 crore primarily to refinance rural credit co-operatives. The government would stand as guarantor of these bonds, which will be eligible for tax exemptions. A weather-based crop insurance scheme is also to be started on a pilot basis, for which an allocation of Rs 100 crore will be made in the year 2007-08. As for the Rural Infrastructure Development Fund (RIDF), the corpus will be raised from Rs 10,000 crore to Rs 12,000 crore this year. The separate window opened for rural roads will continue with a corpus of Rs 4,000 crore - schemes galore High allocations, higher targets, but... ...will Chidambaram’s fortification measures be able to re-energise the agriculture sector's failing health? http://www.financialexpress.com/fe_full_story.php?content_id=156300 ASHOK B SHARMA Posted online : Thursday, March 01, 2007 at 0000 hours IST Even as the overall economy scaled new heights, agriculture grew at only 1.5% during October-December 2006-07. So, it came as no surprise when finance minister P Chidambaram declared that agriculture would be a priority sector in the United Progressive Alliance's Budget for 2007-08. At the same time, Chidambaram, riding high on the growth story, said he could not have given the required thrust to agriculture in this Budget. The FM, who devoted a good 15-20 minutes of his speech to the sector, said his government— to ensure better times for farmers—had proposed that Rs 225,000 crore be extended as farm credit and an additional 50 lakh farmers be brought under the banking system. “The target of Rs 175,000 crore set for 2006-07 will be exceeded comfortably and is likely to touch Rs 190,000 crore,” he added. Chidambaram proposed that a special plan be implemented for a period of three years in 31 districts, especially distressed ones, involving an outlay of Rs 16,979 crore. Of the said amount, about Rs 12,400 crore will be spent on water-related schemes only. A capital grant or concessional financing to double the production of certified seeds for pulses was also announced. To boost plantation crops, the Budget proposed a financial mechanism for coffee, rubber, spices, cashew and coconut, in

line with the Special Purpose Tea Fund. Allocation under the accelerated irrigation benefit programme was raised from Rs 7,121 crore to Rs 11,000 crore. In view of the growing demand for Rural Infrastructure Development Fund, the FM proposed to expand the fund's size to Rs 12,000 crore. Another big draw of this year's Budget proposals was the insurance cover for unorganised rural landless—the Aam Aadmi

Bima Yojana'. The scheme, to be launched by Life Insurance Corporation, will provide death and disability insurance of Rs 200 per year, per person. The Centre and states will bear 50% of the premium, he said. Irrigation, another dark area in the sector's growth, will get a leg-up with the promise of an additional irrigation potential of 900,000 hectares, for which the outlay for 2007-08 has been hiked to

Rs 11,000 crore. For groundwater recharge, he announced 100% subsidy for small and marginal farmers and 50% for other farmers. A sum of Rs 4,000 crore was allocated for rural roads. On farm indebtedness, which has been the main reason for the unabated farmer suicides in many districts, Chidambaram said the Government would take suitable action, based on the reccommendations of the R Radhakrishna committee report which was in its final stages. Expressing concern over the stagnation in production of pulses, prices of which are skyrocketing, he said there will be sharper focus on scaling up the production of breeder, foundation and certified seeds. According to the revised estimates, fertiliser subsidies will rise to Rs 22,452 crore against Rs 17,253 crore in 2006-07. The FM also said that a study

would be conducted to find an alternative method of delivering subsidy to the farmers directly. Based on this study, a pilot programme would be implemented in at least one district in each state in 2007-08. ------------------------- ECONOMIC SURVEY 06-07 Agriculture Painting gray patches on a green frame Only 2.7% growth in the farm sector during 2006-07 is a cause for concern http://www.financialexpress.com/fe_full_story.php?content_id=156206 ASHOK B SHARMA Posted online : Wednesday, February 28, 2007 at 0000 hours IST The Economy Survey for 2006-07 has hinted at restructuring of the minimum support prices (MSPs) for various crops and suggested targeting subsidies sharply to small and marginal farmers and farm labour, routing credit to the rural poor through self-help groups (SHGs) and supporting changing lifestyle food. ‘‘There could be a potential contradiction between a remunerative price for the farmer and a fair price

for the consumer in the short run. The reconciliation of such a contradiction ought not to be in terms of an expensive compromise of fiscal rectitude,’’ it said. Admitting the bright short-term prospects for the farm sector, the survey blamed low investment, imbalance in fertiliser use, low seed replacement rate, a distorted incentive system and low post-harvest value addition to be ‘‘a drag on the sector's performance.’’ The recent spurt of activity in food processing and integration of the supply chain from the farm gate to the consumer's plate has the potential of redressing some of the root causes such as low investment, poor quality seeds and a little post-harvesting processing, it

said. For a durable solution to the current rising trend in prices, it suggested increasing productivity and production of pulses, wheat, rice and oilseeds. The survey said growth of agriculture at only 2.7% in 2006-07, on a high base of 6% in the previous year, ‘‘is a cause of concern.’’ Shortcomings • Low investment, low seed replacement rate to be a drag on the sector's performance • Develop area-specific wheat varieties to suit the water-abundant eastern regions • Poor supply side management responsible for rise in prices of

primary commodities The survey observed plateauing of yields in wheat and pulses. It called for a breakthrough in pulses. It stressed the need for developing area-specific wheat varieties, particularly to suit the water-abundant eastern regions of the country. It also suggested micro-irrigation and use of micro-nutrients. The survey blamed poor supply side management in agriculture as cause for

rise in prices of primary commodities. It also said that price rise in the country "is triggered by rapid rise in prices of primary articles all over the world." However, it said, "Finding immediate answers to price inflation induced by commodity-specific supply shortfall is difficult." "With a firming up of international prices, the impact of duty-free import of wheat and pulses in rolling the domestic prices back was limited. But such imports improved domestic market discipline," the survey admitted. It

supported the recent tightening up of regulations in wheat, sugar and pulses futures ------------------ ECONOMIC SURVEY 06-07 SEZs - Special

Economic Zones Policies needed to rid farmers of their land woes 63 notified SEZs have so far brought in investments worth over Rs 13,500 cr http://www.financialexpress.com/fe_full_story.php?content_id=156201 ASHOK B SHARMA Posted online : Wednesday, February 28, 2007 at 0000 hours IST As the unrest over acquisition of land for special economic zones (SEZ) in various states continues, the Economic Survey says apprehensions over the lack of adequate compensation for land acquired and the government's revenue losses could be allayed by proper policies. SEZs may generate little fresh activities, as there may be relocation of industries to take advantage of tax concessions. It is also largely doubted that

large-scale land acquisition by real estate developers may lead to displacement of farmers on meagre compensation. Besides, acquisition of prime agriculture land have serious implications for food security and uneven growth can aggravate regional inequalities. The survey says the debate over SEZs illustrates the considerations to be taken into account in forming policies. Noting that SEZs are viewed as instruments to enhance the acceptability and credibility of the transformation process, attract domestic and foreign investment, and generally, to open up the economy, the survey says, “With its genesis in the export processing zones, the SEZs in India seek to promote the value-addition component in exports, generate employment and mobilise foreign exchange.” According to the commerce ministry, the 63 notified SEZs have so far brought in investments worth over Rs 13,500 crore and generated employment for over 18,000 people. A total of 237

proposals have received formal approval, while 164 have obtained clearance in principle from the Board of Approval. An empowered group of ministers meeting, chaired by Pranab Mukherjee on January 22, had failed to take a decision on 21 crucial issues. --------------------------- ECONOMIC SURVEY 06-07 telecom Rural India to get 200 million phones by 2012 5 million telecom rs are being added each month http://www.financialexpress.com/fe_full_story.php?content_id=156202 ASHOK B SHARMA Posted online : Wednesday, February 28, 2007 at 0000 hours IST Underlining that the country's telecom sector has been one of the biggest success stories of market-oriented

reforms, the Economic Survey projects that by the end of 2012, 650 million phone connections will be in place. Of this, 66 million will be wired connections and 584 million wireless. The Survey foresees 200 million rural phone connections, which will take rural tele-density to 25% from the present 1.7%. At present, the number of telephone connections stand at 196 million and are expected to be 200 million by this month. The survey also suggests that broadband connections be made available on demand without any speed restrictions and wants health centres, schools and panchayats connected. It has projected the number of broadband and Internet rs to reach 20 million and 40 million, respectively, by 2010. The number of Internet rs grew at 25%, while the number of broadband users grew only to 1.32 million in 2005-06 from 0.18 million. With the country emerging as the fastest growing telecom market globally,

tele-density increased to 16.8% in December. Five million rs are being added each month. By the end of 2007, the number of telephone connections is expected to be 250 million. Growth of wireless services has been phenomenal, with the number of rs increasing at a compound annual growth rate of above 90% a year since 2003. The share of wireless phones has increased from 24.3% in March 2003 to 78.77% in December 2006. Improved affordability of wireless phones has made the universal access objective more feasible, the survey notes.The survey sees FDI as crucial to generating the huge funds that are required for rapid telecom network expansion.------------------------------ ECONOMIC

SURVEY 06-07 commodities Buoyancy in commodities market to continue http://www.financialexpress.com/fe_full_story.php?content_id=156222 ASHOK B SHARMA Posted online : Wednesday, February 28, 2007 at 0000 hours IST The buoyancy in the commodity markets is expected to continue in 2007-08, witnessing larger volume and value of commodities traded, according to the Economic Survey 2006-07 released on Tuesday. Gold and crude oil account for the major part of the total transactions in futures market at present but, other commodities, particularly agricultural commodities, are expected to gain importance helping their price discovery process and thereby providing an opportunity for farmers, traders and consumers to obtain

a reasonable price. The proposed amendments to the Forward Contracts (Regulation Act), 1952 are expected to strengthen the regulatory aspects and ensure orderly conditions in the commodity futures market, report said. “The commodity exchanges which have seen consistent increase in turnovers for the last few years may remain vibrant in 2007-08,” the survey said. The growth in the commodity derivatives trading witnessed in 2005-06 continued during 2006-07. The total volume of trade increased from 21.55 lakh crore in 2005-06 to Rs 27.39 lakh crore in 2006-07 (till December 2006). The daily average volume of trade in the commodity exchanges in December 2006 was Rs 12,000 crores. In the fortnight ended on December 31, 2006, gold silver and copper recorded the highest volumes of trade in MCX, while in NMCE, pepper, rubber and raw jute, and in NCDEX, guarseed, chana and soya oil had the highest volumes of trade.

As compared to 59 commodities in January 2005, 94 commodities were traded in commodities futures market as of December 2006. - ECONOMIC SURVEY 06-07 social sector Picture’s rosy, but states need to pull up their socks One of the major worries for the government is the poor employment scenario http://www.financialexpress.com/fe_full_story.php?content_id=156208 ASHOK B SHARMA Posted online : Wednesday, February 28, 2007 at 0000 hours

IST As the Congress took a major drubbing in Assembly elections in Punjab and Uttrakhand, the government is readying itself with specific social sector plans, indicates the Economic Survey. The government wants to ride on the economic buoyancy and high growth to boost employment. It bets on increased manufacturing activities for this. This comes on the backdrop of the government's insistence that goals of the economic growth should be inclusive. Reiterating that resource mobilisation alone will not be the solution, the survey has also called upon state governments to play an active role in implementing social sector programmes and achieve time-bound physical targets in health, education and employment, as these sectors fall primarily under state government. Expenditure on social sectors, as proportion of total expenditure, after decreasing from 21.4% in 2001-02 to 19.7% in 2003-04, increased to 22.2% in 2006-07. The

corresponding increases in share of total expenditure for education and health were from 9.7% to 10.6%, and from 4.4% to 5.1%, respectively. Trumpeting the government's achievements in the social sector, the survey says Centre's expenditure on social services, including rural development, has increased consistently by over 380%, from Rs 18,240 crore in 1995-96 to Rs 87,607 crore in 2006-07. Poverty ratio at the national level was 27.8% in 2004-05, on the basis of uniform recall period, against 36% in 1993-94. The MRP-based poverty ratio is 22% in 2004-05, compared with 26.1% in 1999-2000. The Ups And Downs • Govt wants to ride on the economic buoyancy and high growth to boost employment• Annual employment growth decelerated from 1.20% in 1983-94, to 0.38% in 94-2004• This deceleration happened despite an employment growth in the private sector However, one of the major worrying factor for the government is the

dwindling employment growth. In the organised sector, public and private combined, it declined during the nineties. Annual employment growth in establishments covered by labour ministry dipped from 1.20% in 1983-1994 to 0.38% per annum in 1994-2004. This deceleration happened in spite of an acceleration in annual employment growth in the private sector from 0.44% to 0.61% during the reference periods, as this acceleration was not enough to make up for the corresponding decline in the public sector. However, the latter decline was mainly due to a decrease in employment in public sector establishments, whereas the private sector showed acceleration in the pace of employment growth, from 0.44% to 0.61% annually. ------------------------ ACTION TAKEN REPORT ON BUDGET 2006-07 Chidambaram fails to deliver on many counts Many promises in last Budget on infrastructure,

education and health, besides agriculture sector, not kept ASHOK B SHARMA Posted online : Wednesday, February 28, 2007 at 0000 hours IST NEW DELHI, FEB 27: Promises, promises. And not all of these made by finance minister P Chidambaram in his 2006-07 Budget speech have been kept, including those on improving infrastructure, education, health, as well as transforming financial and agri sectors. Chidambaram had promised to make substantial progress in the infrastructure sector, particularly where it concerns roads and ports. However, this was not to be. The National Highways Development Programme came to a standstill till September due to differences over setting up of a public private partnership appraisal committee. Furthermore, work on highways began in right earnest only in October when the Cabinet approved NHDP phases V and VI. Due to the delay in land acquisition and law and order problems in certain states,

only 94% of the golden quadrilateral was completed till January this year, as against the targeted 96% by June 2006. The UPA's flagship programme for rural infrastructure development, Bharat Nirman, also drew flak for being non-sustainable. While the budgetary support for Bharat Nirman was Rs 1,74,000 crore, only Rs 18,696 crore was sanctioned for the fiscal. To address this problem, the government has now opened a separate window—Rural Infrastructure Development Fund of Rs 4,000 crore. Shipping and ports sector too stayed out of the action in the fiscal, mainly due to a deadlock between the Planning Commission and the ministry over the MCA for ports. As a result, hopes of getting private participation for about 10 projects this year is largely unfulfilled. Even as the UPA government is in the terminal year of the Tenth Plan, agriculture sector has registered only a miniscule 2.7% growth in 2006-07. As per the budgetary proposals,

the government had set up a Central Institute of Horticulture in Nagaland and a National Fisheries Development Board. But, setting up of a National Rainfed Area Authority (NRAA) , as promised by Prime Minister Manmohan Singh two years ago, had a delayed start due to political considerations as to who should head this body. There was an improvement in credit disbursal to farmers __ at nearly 7% rate of interest, as against the previous 16%. But the National Commission on Farmers has suggested that the rate of interest on farm loans needs to be further reduced to 4%. While a constitutional amendment Bill was introduced in the Lok Sabha in May for empowering the cooperatives, a bill for regulating microfinance institutions is yet to be tabled in the Parliament. In Budget2006-07, Chidambaram had promised to introduce several bills to make the financial sector more efficient for sustaining the high growth rate and thereby send the right signals to

India Inc. Action taken Report • National Highway Development Programme came to a standstill till September due to differences over setting up a PPP appraisal committee. • Bharat Nirman for rural infrastructure development drew flak for being non-sustainable. • Budgetary support for Bharat Nirman was Rs 1,74,000 cr, but only Rs 18,696 crore was sanctioned for the fiscal. • Ports stayed out of the action due to a deadlock between the planning commission and the ministry over the MCA for ports. • Agriculture sector has registered only a miniscule 2.7% growth in 2006-07. • Setting up of a National Rainfed Area Authority was delayed due to political considerations as to who should head it. • Bill for regulating microfinance institutions is yet to be tabled in Parliament. • Banking Regulation Act, though listed for consideration in the winter session of Parliament, was not taken up. • Govt also failed to meet the targets set in

the Budget for 2006-07, particularly, in Sarva Siksha Abhiyan. • As against the Budget target of creating 5 lakh classrooms and appointing 1.5 lakh teachers, so far, only 2 lakh classrooms have been built and 75,000 teachers appointed. • National Rural Health Mission has also not performed well. In East Singhbhum dist of Jharkhand there are only 9 PHCs against desired number of 70. • According to feedback from Uttar Pradesh about National Rural Employment Guarantee Scheme , it has been found that the awareness level about it is very low. In the insurance sector, there are four Acts which, he said, would be amended. These are the Insurance Act, which also deals with the foreign direct investment level of the insurance companies, IRDA Act, LIC Act and GIBNA Act. Chidambaram had also expressed hope that the pending Pension Fund Regulatory and Development Authority Bill would get Parliament approval in thisfiscal. In the banking sector, bills to amend

the Banking RegulationAct, RBI Act, SBI Act, SBI (Subsidiaries Banks) Act were to be tabled.That apart, the finance minister had also promised to introduce the micro finance bill in 2006-07. As of now, only two of the nine bills have got Parliament approval. These are the bills to amend RBI Act and SBI Act, passed in June 2006 and December 2006, respectively. These were, undoubtedly, steps taken in the right direction, but the finance minister's failure to bring in a comprehensive amendment in the insurance sector and pension reforms has become a cause of worry. In addition, the Banking Regulation Act, though being listed for consideration in the winter session of Parliament was not taken up bythe government. The BR Act needs to be amended not only to remove the 10% voting rights cap for foreign stakeholders in Indian private sector banks, but also to allow private sector banks to issue preference shares which may be required to meet the Basel

II norms. The government failed to introduce the micro finance bill, aimed at providing a formal statutory framework for the promotion, development and regulation of the micro finance sector. The bill is expected to be introduced in the Budget session. The UPA government has also failed to meet the targets set in the Budget for 2006-07, particularly in its much talked about Sarva Siksha Abhiyan. As against the Budget target of creating 5 lakh classrooms and appointing 1.5 lakh teachers, only 2 lakh classrooms have been built and 75,000 teachers appointed so far.Nearly 19% of schools in the country are still single-teacher schools. This is despite the finance ministry having allocated 40% more funds (Rs 10,041 crore for 2006-07) for the programme, compared with Rs 7,156 crore in 2005-06. However, government statistics claim that by the end of December 2006, the government has spent and accounted for 70% of its annual allocation (Rs 10,041 crore).

The National Rural Health Mission, which was launched in 2005, has also not performed well. A case in point is East Singhbhum district of Jharkhand, where there are only 9 PHCs against the desired number of 70. The National Rural Employment Guarantee Scheme has just completed a year. Yet, according to feedback received from UP districts, it has been found that the awareness level about the programme is very low. Also, the absence of proper guidelines on wages and work hours under the employment programme have led to differences among labourers.---- RAILWAY BUDGET 2007-08 Lalu fast-tracks Railways Inc ASHOK B SHARMA Posted online : Tuesday, February 27, 2007 at 0000 hours IST NEW DELHI, FEB 26: Railway minister Lalu Prasad on Monday silenced critics by putting the Railways firmly on the fast track with an estimated cash surplus of Rs 20,063 crore in the current fiscal, up 55% from the previous fiscal, and Rs 5,363 crore more than the Budget estimate. The operating ratio, estimated to be 78.7% in 2006-07, reveals that the Railways

has become far more efficient today. It spends less than 79 paise to earn a rupee, compared with 91 paise in 2004-05. Presenting his fourth Budget in Parliament, Lalu Prasad said, “With this record growth, we have joined the select club of railways in the world who are actually making a profit.” Gross traffic receipts for the current fiscal are expected to jump 16% to Rs 63,220 crore, largely on the back of a 16.5% increase in freight earnings to Rs 42,299 crore. Passenger fares, which account for a fourth of the Railways’ revenues, are likely to grow 15% to Rs 17,400 crore. For 2007-08, the Railways’ Plan outlay has seen a major increase of 32% to Rs 31,000 crore. And to give Lalu credit, a bulk of it, or 56% of the Plan, is estimated to be funded through internal resources. Rail Budget 2007-08 saw further rationalisation of freight as well as more incentive schemes. Freight for diesel, petrol and ammonia has been

lowered by 5% and for iron ore and limestone by 6%. New schemes such as commodity-based tariff and commercial wharfage and demurrage policies have also been introduced. The increased plan size and the record surplus will be used mainly to increase the carrying capacity of wagons and augmenting rail infrastructure. “An increase of 10% in wagon productivity would lead to an annual incremental earnings of Rs 4,000 crore for the Railways,” Prasad said. In a first-of-its-kind endeavour, he has invited private players to design wagons with higher carrying capacity. He said freight discounts would be offered to those who share their designs with the Railways. The Budget, however, remained silent on the dedicated freight corridor. While the minister promised that construction of the corridor would begin in the coming fiscal, he did not come out with any definite plans. On the passenger side, Lalu Prasad once again reduced

fares 2-8% across the board giving low-cost airlines a run for their money. He put AC I and AC II-tier fares under dynamic pricing. Under the scheme, peak season AC I fares will be cut 3% and in the lean season, 6%. Similarly, for AC II-tier, the busy season reduction is 2% and the lean season reduction, 4%. 20k crCash surplus• Railways’ profits for 2006-07 have jumped 36% against last fiscal • The high surplus allows Lalu to fund almost 56% of the annual Plan 78.7%Operating ratio• The best ever. It shows Lalu will spend less than 79 paise to earn Re 1• Railways spent almost 91 paise to earn Re 1 in 2004-05, the year Lalu took charge• Net revenue on capital employed jumped to 20% from less than 10% two years ago• Wagon turnaround in 4 days now against a week three years ago has helped cut costs 4-8 %Passenger fare cut• Dynamic pricing model for passenger fares introduced for the first time

• Fare cut will help build volumes and hike passenger earnings 15% to Rs 20,075 crore Freight rejigged• Freight cut 5% on diesel, petrol and ammonia, 21% congestion charge on iron ore introduced Other measures• Triple-stack container trains• Eight more Garib Raths• Dedicated freight corridors to gather steam• Rail Chair at IIM-Ahmedabad ------

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