‘Cut in food subsidy shows lack of willingness to enact meaningful food security legislation'

The Communist Party of India (Marxist) on Monday said the Union budget failed to address the serious problems affecting the people and the economy, and charged the government with abandoning the aam aadmi agenda in pursuit of aggressive neo-liberal policies.

The party's Polit Bureau said that the budget proposals come at a time when people are suffering due to high inflation and the relentless rise of food and fuel prices.

“In this backdrop, the massive Rs.20,000-crore cut in major subsidies for 2011-12 on fuel, fertilizers and food, from what was spent in 2010-11 [revised estimates], comes as a rude shock,” it said.

The Polit Bureau said that the Rs.27-crore cut in food subsidy showed the government's lack of willingness to enact meaningful food security legislation.

It said that the Centre's “anti-people” character found reflection in Finance Minister Pranab Mukherjee's refusal to reduce excise and customs duties on petroleum products and in moving away from the ad-valorem duty structure, coupled with the cut on fuel subsidy by Rs.15,000 crore. All these indicated an increase in fuel prices in the days to come, it added.

‘Smokescreen'

The party said that the direct cash transfer programme was a “smokescreen” for this subsidy cut and pointed out that the current below the poverty line lists excluded large sections of the poor.

“Direct cash transfers to a small section of beneficiaries cannot substitute for the subsidised provision of essential commodities like food and fuel,” it said.

The tax proposals are a “regressive taxation regime” which would enrich the rich while burdening ordinary citizens As per the Statement of Revenue Foregone, total tax concessions reached over Rs.5 lakh crore in 2010-11, with corporate tax exemptions totalling over Rs.88,000 crore.

“The tax-GDP [Gross Domestic Product] ratio, which reached almost 12 per cent in 2007-08, has declined since then to around 10 per cent in the current budget. At a time when income inequalities are rising fast, a decline in the tax-GDP ratio shows the waning commitment towards redistributive policies and a throwback to trickle down economics,” it said.

The party said that while no concrete steps had been taken to unearth the huge sums of black money stashed away in offshore tax havens, the government planned to sign more Double Taxation Avoidance Treaties instead of plugging loopholes in such channels.

With resource mobilisation taking a back-seat, it said that Plan expenditure as per cent of the GDP in 2011-12 would decrease from what was spent last year, adding that spending for the social sector would fall in real terms.

Despite problems in agriculture growth, the party said that budget provisions had been cut and that the allocations for the welfare of women, minorities, Dalits and tribals were thoroughly inadequate.

It said the announcement of impending legislation directed at liberalising sensitive financial sectors such as insurance, banking and pension funds was meant to appease foreign finance capital.

Further liberalisation of rules for Indian mutual funds-accessing foreign investors would also facilitate the flow of speculative finance into the economy. Greater inflows of such speculative finance at a time when India's current account deficit was widening did not augur well for the health of the economy, it added.

‘Crony capitalism'

CPI national secretary D. Raja said the budget was in line with the Congress-led UPA government's determination to build crony capitalism. He said financial sector liberalisation was the main thrust by bringing Foreign Direct Investment into the banking and insurance sector and by disinvestment of the public sector.

“Direct cash transfer of kerosene, LPG and fertilizer to the poor is an untested exercise in India; it is a dangerous one. Small and marginal farmers will not be able to take advantage. Lowering of the interest rate on farm loans is only for those who are able to pay,” Mr. Raja added.

Echoing similar views, All-India Forward Bloc general secretary Debabrata Biswas said the budget did not have any concrete proposals to contain food inflation.