Poor get 'Free Lunches', Rich get 'Free Monthly Ration'

Published: Saturday, Feb 16,2013, 10:49 IST
Indian Armed Forces, subsidised monthly ration, Free Monthly Ration, Boost Tax Mopup, Prune subsidies,

In the run up to Budget 2013, I hear it every day. Subsidies are doles to the poor, must be curbed. There are no 'free lunches'. While social security for a majority of India's population is being considered as 'free lunches', none of the TV panelists (and newspaper writers) ever talk of 'free monthly ration' that the industry is being given year after year. The only difference is that the doles to rich are not called subsidies, these are 'incentives for growth'. Subsidies have become the bad word, and incentive is lapped up.

"Boost Tax Mopup, Prune subsidies" screams a front page headline in The Economic Times (Jan 14, 2013). There is hardly a day when you don't see similar stories and arguments splashed all over the front page and the comments page. TV shows are repeatedly and nauseatingly holding discussions which invariably run down subsidies to the poor. This reminds me of Mitt Romney's claim that 47 per cent American don't pay taxes, and therefore he implied that the Republican's don't need to worry about them. No wonder, he lost to Obama.

While the total budget expenditure in 2012-13 was Rs 14.9 lakh crore, the subsidies have risen to Rs 1.78 lakh crore, and the clamour is for pruning the subsidies to reduce the fiscal deficit. Bulk of these subsidies go to food, fertiliser and petroleum. In the past few months, the govt has steadily withdrawn from providing petroleum subsidies by decontrolling petrol and lately by partially decontrolling diesel. Subsidised LPG supplies have also been curtailed. Kerosene subsidies remain. In case of food and fertiliser, all kinds of permutations and combinations are being proposed, including direct cash transfer.

Rail fares have been hiked. The Govt is expecting to realise Rs 6,600-cr every year from increased rail fares. So in a way, all "free lunches", as most economists and consultancy firm executives who appear on TV regularly say, are being gradually withdrawn.

But when it comes to industry, it is not only bread and butter but the entire monthly ration that is being provided free. The only difference, as I said earlier, is that these doles are not through the subsidies head, but 'incentive for growth,' which is a very clever way of camouflaging the dirty subsidies the rich get. Let me begin by citing the latest exemption. Mr C Rangarajan, the chief economic advisor to Prime Minister has recently proposed that the super-rich in India should be taxed at a higher rate -- 40 per cent, against the present norm of 30 per cent.  All hell broke loose the moment he said this. India Inc and Business TV channels plus the newspaper writers have launched an orchestrated campaign to see that the super-rich are not brought under a high tax slab. And then, you of course have the NRI economists joining the chorus, most of them write columns in Indian papers, and chant the Corporate mantra unabashedly.

Raising the income tax limit for the super-rich will bring in Rs 22,000-cr revenue every year.

A few days back, the stock market went up because the Govt deferred the introduction of GAAR to 2016. This move alone would have curbed the inflow of dirty money (and often bloody money) coming from the tax haven of Mauritius. The FICCI chairman, the CII chairman, and everyone else was elated that GAAR has been deferred. In other words, they rejoice over continuing tax exemption to the FII investments flowing in. I am sure, if implemented, this move alone would have mopped up anything exceeding Rs 50,000-cr. But since it is a part of the monthly free ration to the rich, the Govt had to bend.

In any case, it is the rich who circumvent tax laws to escape paying the legitimate taxes. Out of the 3.5 crore people who pay taxes, only 14.6 lakh have shown an income exceeding Rs 10 lakh/year (Unrealistic tax realisation.Economic Times, Dec 19, 2012. http://bit.ly/XuM9wF) Now this is certainly a gross understatement. But has there been any serious effort in recovering the taxes that are due from the rich? Well, your guess is as good as mine. There never would be any serious attempt to mop up tax revenue from where it is due. After all, the rich must continue to get their free ration.

On top of it, In 2012 Budget, under the 'revenue foregone' category, India Inc got a tax exemption, call it 'incentive for growth' of Rs 5.29 lakh crore, good enough to wipe out the entire fiscal deficit that Chidambaram keeps on crying about. This is in addition to all that is doled out to industries in the Budget itself. Since 2004-05, the 'revenue foregone' adds to more than Rs 27-lakh crore. And yet, the exports have not risen, the manufacturing sector is down, and the industry continues to slog. But despite the industrial stagnation and downturn that is visible all these years, the Corporates are sitting over a huge cash pile. By March 2012, Indian Inc had hoarded a cash surplus of Rs 9-lakh crore. So, it is quite obvious, that the free monthly ration is adding on to the bottom line of the companies.

Add to the tax exemptions, usurping of natural resources, including forests, mineral resources, water and land, aided and abetted by the Govt. The land grab that is taking place, and the manner in which laws are being formulated to benefit the industry, is also a covert subsidy. I have been saying for long that the industry actually thrives on subsidies. It is only that we don't want to see these subsidies or we are paid not to demystify these subsidies. Most of us are beneficiaries of the same system that subsidises the rich, and obviously we wouldn't like to cut the hand that feeds us.

All this is in the name of encouraging entrepreneurship. If the industrialists are entrepreneurs, isn't the farmer, the artisan, the petty shopkeeper and for that the struggling aaa aadmi also an entrepreneur? How come that he doesn't need any support, and it is only the rich would deserve to live on State exchequer?

Even the Armed Forces have discontinued the system of providing subsidised monthly ration to the families of the serving soldiers. When will this business of giving "Free Monthly Ration" to the rich, stop?

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