The Text of The Budget Speech Delivered By
The Honourable Finance Minister
Bharat Mohan Adhikari
To The Cabinet on December 26 '1994
Rt. Honourable Speaker,
1. Honourable Members of the House are all aware that the Estimates of Revenue and Expenditure for each Fiscal Year (FY) are presented to Parliament in its Joint Session by order of His Majesty under Article 77, Section (I) of the constitution of the Kingdom of Nepal, 1990.
2. Such estimates could not be presented to the joint session because the House of Representatives was dissolved on July 11, 1994 and the Session of the Upper House also was called off the following day.
3. Under these circumstances, His Majesty as per Article 72, Section (1) of the Constitution of the Kingdom of Nepal, 1990 had decreed four separate Ordinances Appropriations, Finance, Raising National Debt and Credit and Guarantee.
4. Following these momentous events and the mid-term election, the present Eighth Session of the House is underway. As per Section 108 of the Rules of the House of Representatives, 1991, it has become mandatory to present the Bills to replace the Appropriation Ordinance, 1994 and the Finance Ordinance, 1994 with amendments and two other Ordinances .as they were.
5. Under the provision of Sub-Rule (2) of Rule 148 of the House of Representative, 1991, the Finance Minister is required to present the Appropriation Bill following discussions on annual estimates while Rule 155 requires that the Bill is presented to the House meeting immediately after the Annual Estimates had been submitted.
6. Accordingly, Rt. Honourable Speaker, before submitting the above mentioned Bills, please allow me now to present the total Estimates of Revenues and Expenditures for FY 1994/95.
Rt. Honourable Speaker,
7. It is a matter of pride for me to have the opportunity to present the Budget for FY 1994/95 to this august and sovereign House on behalf of the Communist Party of Nepal (United Marxist-Leninist) [CPN- (UML)] as a political party, which stands for fundamental change for the first time in the history of the Kingdom of Nepal. At this historic occasion, I find it very befitting first of all to pay very cordial tributes to all those martyrs who sacrificed their lives in the previous movements for the cause of national integrity, securing democracy, and freedom from social bondage, and also to those known and unknown ones who lost their lives to uphold Nepal's prestige and to free the people. I would also wish to recall at this moment tile great sacrifices of those who withstood years of harshness in prisons for the noble cause of the exploited and downtrodden people.
Rt. Honourable Speaker,
8. It is known to all that no political power which stood for the total cause of the weaker and deprived classes of people had the chance to be seated in administration prior to this in Nepal. Consequently, as there were no works undertaken favouring these classes of people in the past, their problems of livelihood became deplorable. A great majority of the people were deprived of the development results, which were achieved with extravagant use of meagre internal resources as well as of foreign aid worth billions of rupees. Poverty and unemployment increased rampantly; the standard of living worsened; and people endured pains. In the industrial and business fronts, dependency was on the rise because meaningful steps towards making the economy self-sustainable were lacking. Administrative organs were less transparent and lacking in their orientation towards people. Above all, democratic reforms and values were tripled and serving self-interest overruled national interest. As a result, great challenges of national integrity emerged. It was indeed high time that the people stood against these tendencies and rightly vote for the CPN (UML), which has never deviated from its continuous fight for national integrity and well being of the people. From the rostrum of this august House, Rt. Honourable Speaker, I want to assure all Nepalese that we will honour the promises we made in the Election Manifesto in accordance with democratic norms and values. Furthermore, we will focus all our efforts to put end to feudal exploitations and oppression and to build a very stable economy for the well being of the people.
9. Therefore, the development efforts of the CPN (UML) will be focused towards all round upliftment of resource less poor people put aside by the state. The large part of this group consists of rural and urban landless' and marginal small farmers, agricultural labourers, very small cottage industries entrepreneurs and Kamaiyas. Lower level public servants and teachers, native tribes, and the helpless, old and disabled are also in this group. Nevertheless, we have a responsibility towards the justice loving patriot and true democrats who underwent unlawful suppression and [2], whose voices were suppressed for decades.
Rt. Honourable Speaker,
10. While expressing aforementioned views, I have also in mind the important role that can be played by entrepreneurs, traders and businessmen in the upliftment of the country. This Government is confident that national entrepreneurs, traders and businessmen can contribute significantly towards the industrialization of the nation, to increase productivity, to improve: supply, and to create job opportunities. As such, this Government is equally committed to the development and protection of this group by creating a conducive environment.
Rt. Honourable Speaker,
11. There are countless challenges before us in giving anew direction to the economy that is in the national interest. On the one hand because we have come at the middle of the fiscal year and have to prepare a budget that incorporates our values, ideas, and commitments, there are many obstacles before us in preparing a budget that benefits a large group of people. On the other hand, I would also like to mention to this august House the fact that the CPN (UML) has also to concentrate towards reforming the economy passing through a crisis. Therefore, this budget could not be drawn as desired to fulfil the wants and aspirations of the people. I am confident that Honourable Members and respected people will bear with me in my compulsion. I am also confident that different political parties will assume their responsibilities and duties and support His Majesty's Government in facing the challenges of all round development and building of the nation to raise the declining living standards of the people.
12. I would now like to take permission to present to this august House a brief description of the economic situation when we assumed office. Honourable Members are aware of the fact that since the last three and half years, the nation was passing through a phase of slow economic growth, increasing unemployment, high price rise, increasing trade deficit, greater foreign debt burden and expanding poverty, This is also evident while studying the available data. In the last three years, real GDP could not increase satisfactorily. Only a marginal increase in per capita income was achieved amidst increasing income inequality. Meanwhile, the Consumer Price Index rose by about 40 percent. Unemployment and poverty expanded further due to the slow growth rate of the economy and the problem of inflation. The problem of livelihood of the people became more acute. Imports increased tremendously. Consequently, international trade deficit reached 16.8 percent of the GDP in FY.1993/94 as compared to 13.6 percent in FY 1990/91. In the import front, the rate of growth of consumable goods was higher than the capital goods. And, export increases of a few commodities were temporary and could not be sustained.
13. Even though the revenue increased slightly, development expenditure was very low and was not appropriately utilized. On aggregate, the rate of increase in regular expenditure was almost double that of development expenditure. This phenomenon seems to have adversely impacted the long-term development possibilities of the country. The share of industry and mining in the total development budget remained negligible. This led to adverse conditions in industry and mining sectors. Factories that were fully based on local raw material and labour and established with the support of foreign assistance were privatised, contrary to the national interest. Meanwhile, foreign debt reached Rs.102 billion on July 15, 1994 from Rs.60 billion in July 15, 1991.
Rt. Honourable Speaker, 14. Now, I would like to present a brief description of the economic situation of the first four months of the current fiscal year.
15. As per the Government's financial transaction based on the cash flow of the first four months of the current fiscal year, total expenditure increased by 13.8 percent to Rs.7,740.6 million and total revenue increased by 35.3 percent to Rs.7,307.3 million as compared to the same period of the last fiscal year. In the first four months of the previous year, regular expenditure increased by 9.2 percent while in the same period of the current year it increased tremendously to 63.7 percent and reached at Rs.5,295.1 million. I would like to inform Honourable members that though Rs.320 million was allocated for the recently concluded mid- term election, it has come to our notice that, the total expenditure stood at Rs.630 million. Hence, the mid- term election has proved to be an expensive exercise for a poor country 1ike Nepal.
16. Development expenditure meant for increasing long run productivity, declined by 36.7 percent in the first four months of FY 1994/95 whereas it had increased by 6.1 percent during the same period in the previous FY. This sharp fall in the development expenditure is partly the reason for the limited budget deficit of Rs.433.3 million during this period.
17. Total exports declined by 17.5 percent in the first four months of the year compared to the corresponding period in the previous year. On the other hand, total imports rose by 28.3 percent. As a result, trade deficit rose steeply by 71.9 percent to a level that the economy can hardly sustain.
18. Export of woollen carpet, which accounted for more than 50 percent of total exports, has been declining since last year. Available statistics show that compared to first four months of last fiscal year, exports of this item reclined by 36 percent during the same period this year. Similarly, exports of other major items such as lentils and Niger seeds also plummeted dramatically. Also, the exports of readymade garments are expected to decline. All these factors are expected to be reflected in the current account deficit of the current fiscal year.
19. Rise in liquidity in the monetary sector has adversely affected both the price situation and the current account balance. Similarly, the mobilization of savings in the financial sector has bogged down because the rate of interest on bank savings is well below the rate of inflation. The big difference in savings and lending rates of the banks has affected adversely both the depositors and borrowers. In addition, banking services have been gradually slipping out of the reach of the rural masses.
20. During the first four months of the current fiscal year, worsened supply caused by the decline in agricultural production and gradual expansion in the money supply exerted inflationary pressure in the economy. During the period, the average price rise was 8.9 percent compared to 8.4 percent in the same period last year. Because of disruptions in production, containment of rising prices will be an even bigger challenge for His Majesty's Government.
Rt. Honourable Chairman,
21. The drought and floods experienced in the country affected the monsoon crop of the current fiscal year. As a result, agricultural Gross domestic Product is estimated to decrease by 1.0 percent as compared to a 7.7 percent increase in the last fiscal year. Given the current trends, non- agricultural GDP is unlikely to exceed 5.4 percent as compared to 6.5 percent growth during the last year despite the government's various policy measures and their implementation. As such, the growth rate of GDP during the current year is estimated to be at 2.8 percent as compared to previous year's revised estimate of 6.9 percent. I humbly assure this august House that His Majesty's Government is seriously committed to finding a remedy to the problem of low growth rate and also to giving impetus to the economy.
Conceptual Focus of the Proposed Budget Concerning Development
Rt. Honourable Speaker,
22. I have already explained the numerous problems we have faced in preparing, in the middle of the fiscal year, a budget oriented to match our commitments. Despite all these problems, I have tried my best to gear this budget along our commitments and to reflect our firm beliefs concerning development. These beliefs are oriented towards the aim of accelerating the rate of economic growth through gradual improvements in past policies that had adversely impacted national Interest and the livelihood of the common people; our objective is alleviation of poverty through appropriate relief measures and ultimately building a strong national economy. We are well aware of the defects and the possibilities of adverse impact on sustainable economic development of unnecessary protectionism. An atmosphere of fair competition will be created to achieve the objective of increasing economic efficiency and give an impetus to the economy by optimally utilizing scarce resources. Well-balanced economic reform programs will be implemented to fulfil these objectives. While designing this budget, I have been careful not to disturb the overall fiscal balance as this may cause unfavourable impact on our development Process.
23. Unless the tax elasticity is increased by raising the ratio of direct taxes, it will be difficult to lead the nation towards self sustainability and provide stability to the development process. The present tax system will be reviewed and made more transparent, simple, and progressive. The tax system will be restructured faking into account various suggestions. I have proposed measures on taxes that are designed to promote national industry and enterprises in a short period of time and allow low-income group to be exempt from tax burden.
24. Our development efforts will be hindered if concentrating it on projects with immediate returns does not increase the efficacy of public investment. With this in view, steps will be taken immediately to re-prioritise the development projects and programs. Absorptive capacity of foreign aid will be enhanced, and such policy for foreign aid will be adopted by which it will be mobilized to meet the needs of the nation and the priority sectors as decided by the government. Except for those public enterprises which run at profit and which have to be run by the government on the ground of social justice, the public enterprises that are unnecessary economic burden on the government will be handed over to the private sector, but national interest will be taken into account in doing so. In the privatisation process, priority will be given to participation of national investors, staff, and workers of public enterprises. National entrepreneurship will be specially encouraged, and the government for promoting industrialization will undertake necessary measures. Special attention will be given to export promotion, thereby reducing the deficits in trade and current accounts. Encouragement will be given to such foreign investment that supports the nation through transfer of technology, employment generation, and increases in productivity. Repatriation of profits from such foreign investment will be guaranteed. Priority will be given to such programs which provide relief measures to the people, control prices and generate employment, and rural development will be made the basis for overall development of the nation, Programs will be expedited for resolving the problems relating to environmental balance, pollution control, and supply of drinking water and electricity. Special programs will be implemented for the upliftment of backward areas and deprived groups.
25. Now, I would like to ask for permission of the House to highlight in brief these concepts.
A. Increase in Production, Improvement in Supply Management, Price Control, and Relief Measures
26. Improvement in supply management, price control and relief measures for the public cannot be thought of without taking into consideration increases in the production of public goods used by the masses. Imports that are influenced by many external factors cannot provide continuity in supply. So, we want to safeguard the public from the negative impact from price rise and provide them relief by increasing national productivity and by strengthening supply management. For this, concrete policies & in the fields of agriculture, industry, among others, will be adopted, and attention will be concentrated on reducing the negative impact on agricultural productivity. Agro- forest industries will be promoted. Supply will be made more reliable and orderly so that people with low income can be relieved with easy access to specific goods and services. In order to do away with feudal land ownership and to distribute land justifiably, a commission on land reform will be set up. The Sajha and cooperatives will be rehabilitated and expanded from their present state of redundancies so that agricultural produce can be marketed and consumer's goods can be supplied smoothly. With a view to strengthen supply management and to stabilize price, enterprises like the Nepal Food Corporation and the Nepal Oil Corporation will be strengthened and made efficient. Programs will be undertaken to expand the food storage capacity to control artificial shortage and unexpected price rise. Besides, other measures including intervention in the market through supply management will also be applied. The present practice of exposing consumers to traders' whims will be discouraged. Listing of prices for domestically produced goods will be made mandatory Prices of goods and services considered as daily necessities will be lowered to give relief to low income people, Regular monitoring of the market prices will be pursued. Money supply will be limited so as to avoid negative impact on prices. The present high rates of taxes on daily necessities consumed by the general public will be reduced to provide relief measures to the public.
27. In view of the hardship that marginal and small farmers are facing, with the sharp rise in land tax, drastic reduction in land tax has been envisaged. Land tax will be exempted totally in drought-affected areas, and special programs will be implemented in such areas.
28. The banking sector will be mobilized so that the low-income groups can benefit from grants for capital and interest extended to the banking sector. Such facilities will be provided especially to the farmers in the drought affected areas. B. Making Villages the Focal Point of Public Development Programs 29. Our development policy has been centre-oriented even though a major portion of the population lives in villages. Consequently, the economic and social condition of the people has become very fragile and pitiable. Employment and income opportunities are confined only to cities. Because of this, villages are becoming gradually less attractive thus, forcing rural people to migrate to cities. Consequently, cities are becoming crowded, and the prospects of development of villages has been dimming and rural areas are becoming more and more plight and unattractive. Therefore, His Majesty's Government will select rural areas as a platform from where the campaign of poverty alleviation and development of the nation will be initiated. Rural oriented development policies and programs of the country will be framed with local participation. For this, a "Build Your Village Yourself" shall be launched as a campaign. This program will be translated into practice in accordance with the principle of decentralization. I am confident to receive cooperation from national and foreign non-governmental organizations as well as all political parties, and national consciousness to successfully advance this program which has been initiated with the aim of bringing people together in development, raising their awareness toward development, and uplifting their living standard.
30. Through this program rural people will be promised a leading role in i4entifying problems, and preparing, implementing, and operating projects. His Majesty's Government will provide Jump sum funds to the Village Development Committee through Local Development Officers from the central budget. In addition to this, necessary technical assistance as well as construction materials will be made available for the successful implementation of the projects. In order to prevent misuse of funds, local level committees comprising of the chairman and vice-chairman of the Village Development Committee, elected representatives of recognized national parties, and local electoral, shall be constituted for the implementation and monitoring of the such program. It is believed that these arrangements will help mobilize local representative participation, improve the democratic system and decentralization, discouraged financial irregularities and misuse, and widen the basis for national consensus. In order to ensure proper use of this type of activities, a public audit system will be encouraged. Likewise, submission of statements of expenditure to the Local Development Officers (LDO's) and auditing of the funds through LDOs shall be made mandatory. Rural programs include education, transportation, drinking water, health, afforestati9ll and irrigation, income-generation and employment promoting activities. The Village Development Committee will be provided funds in an instalment basis. The second and final instalment will be disbursed based on work performance. 31. An arrangement will be made to award national prize to Village Development Committee, which effectively mobilizes manpower and implements projects successfully. In addition to "Build Your Village Yourself' program, model village and small town development program will be given momentum. Similarly, coordination will be initiated between local entity and non-governmental organization in order to bring more comprehensiveness in local development activities and implement programs effectively. C. Identification of People below Poverty Level, Implementation of Special Programs of Poverty Alleviation, and Accord High Priority to Income Generating Employment Activities
32. Growing poverty and unemployment problems are the most challenging and serious concern to us. The old thinking that the fruits of development can permeate the lowest levels of people and region with the achievement of high economic growth rate has proved to be wrong. Accordingly, the one-sided approach of undertaking all development activities by the governments has also turned out to be a failure. In a resource constrained country like Nepal where growth rate of labour force is high and a large proportion of the labour force is dependent on agriculture, special programs on poverty alleviation and employment generation that involve people themselves for the task of development have to be implemented. By doing so, it is our belief that exploited and tortured people can be relieved and their socio-economic status could be lifted up. And, we will implement poverty alleviation and employment creating programs with active participation of the public, private, and communities in a coordinated manner. In this context, we want to move forward by eliminating semi-feudalistic exploitation, torture, and unequal distribution of land holdings. This helps improve agricultural production and raise productivity and thereby enormous income and employment opportunities can be generated. Because of this, the purchasing power of the largest section of the people based on agriculture will be increased and, increased demand for industrial goods and services will promote industries. In addition to this, this phenomenon creates people's enthusiasm and new awareness of development. Every Nepali citizen will have an opportunity for his/her personality development. It also helps to create an equitable society while eradicating exploitation, discrimination and injustice. So, we will immediately start this program. At the same time, special programs on poverty alleviation will be implemented as a campaign. For this purpose, special programs of identifying people below poverty levels and alleviating poverty will be launched.
33. As the problem of poverty is getting complex due to a overwhelming majority of marginal farmers and high population growth rate, a high level commission for landless has been already constituted which will conduct special programs for the resettlement of landless people. I am confident that this will help in poverty eradication. The institution of bonded labour called the Kamaiyas, which has been in existence in Mid-Western and Far-Western regions as a legacy of medieval age will be launched to provide access of the downtrodden people to education, health, drinking water and others. 34. As committed by us, secondary education will be made free from next fiscal year. Special programs on women development will be launched widely in order to safeguard the rights and welfare of socially neglected women and also to make them economically self-reliant. Additional scholarships will be made available for backward people and women. Similarly, a special program of poverty alleviation will be carried out directly for the benefit of targeted group of people.
35. It is evident that poverty alleviation is not possible without the creation of employment opportunities in a massive scale. However, unemployment is getting worse, both in rural and urban areas due to factors like existing agricultural production relations, increased urbanization, lack of skill training, confusion in development concept, and Government's inactive role. At present, educated unemployment is an additional challenge before us. Because of this, a big chunk of unemployed manpower migrates to foreign countries and unknown destinations, become landless people, get employed in foreign countries as watchman, gateman and manual labourers, and floundering here and there in towns and villages. The CPN-UML Government is very sensitive towards unemployment and is committed to do something about it. Therefore, to create massive employment opportunities, programs like construction of medium and small irrigation, construction of roads, bridges, culverts will be launched. Similarly, literacy campaign, cooperatives, low level technical training, rural and urban banking and credit, welfare centre for old age people, education for off springs of martyrs and for downtrodden and intelligent children, a forestation and forest conservation, women's skill development, weekly market places, compulsory child education and cottage and small industries will be initiated. All these programs will be implemented in an organized and coordinated manner.
36, In order to provide employment opportunities for the increasing labour-force of the country, a policy aimed at promoting domestic labour-force in the government's developmental activities and construction will be adopted. Labour training and supply centres will be established in each district whereby the situation concerning unemployed labour-force will be evaluated continuously and institutional arrangements will also be made to create alternative employment opportunities via appropriate training programs. Programs aimed at expanding the technical as well as skill-oriented training will be implemented immediately along with the identification of the demand and supply situation in the labour market. Studies will be carried out to see the possibilities for overseas labour demand. Based on these studies, short-term technical training will be given to unemployed youths. A policy geared towards exploring the employment opportunities abroad under government initiation will be adopted. To this end, an arrangement will be made to provide short-term skill-oriented training in Kathmandu shortly. Rural Banks will be opened in the mid and Mid- Western zones. Similarly, programs being implemented by other banks for targeted groups will be made more comprehensive and effective with a focus on the upliftment of the living standards of vulnerable groups. In order to contain the incidence of increasing unemployment, an employment bank will be established and special programs aimed at creating income and employment will be implemented. This will mainly benefit the educated-unemployed. Arrangements will be made to establish an Urban Development Bank to assist with the systematic development of the municipal areas. Present cooperative and credit organization will be activated and a Bill for Cooperative Savings and Credit Institution will be presented to the house with a view to better manage the savings and credit organizations established in informal sector. Furthermore, a separate Bill will be presented for the establishment of development banks to generate income and employment opportunities in Cottage and Small Industry sector. These measures will facilitate expansion of financial sector geared towards creating new jobs.
D. Maximum Utilization of Public Resources, Elimination of Delays, Irregularities and Low-quality Works in Project Implementation
37. Both internal and external resources have historically been employed to govern the country and implement developmental activities. However, proper attention has not given for the optimum utilization through sect oral allocation. This has been the case for low return on investments made in various sectors. Implementing projects, which are technically unviable and having low rates of return, take additional time for completion, face escalated costs during implementation, and are not long lasting, are some of the examples of having not paid proper attention in the utilization of resources. These sorts of public-sector investment activities have neither benefited the people nor quickened the pace of development, but instead benefited individuals involved in such projects. We want to establish a system where resources available for development can be fully utilized eliminating misappropriation and misuse of public resources meant for development projects and programs.
38. Another weakness of Nepal's development administration is time overrun on the completion of projects or deflection during implementation. Consequently, deterioration of the completed portion of the project continues, while on the other hand, cost overrun of the project surpasses greatly its original total estimate. A large amount of resources has been wasted in projects, deflected before completion. It is because of this slow pace of project implementation that assistance received from bilateral as well as international institutions are not being utilized to the full extent. Our government intends to have complete control on such undesirable tendencies in development administration. Other aspects of weaknesses in development administration has been the low quality of completed development projects, where maintenance works are necessitated immediately after their completion, non durability, and not being operational in their full capacity. This government is committed to eliminate such weaknesses observed during project implementation. It is obvious that such deeply rooted undesirable tendencies; inconsistencies and responsibilities are misappropriating public properties in a wide scale. It adds to the burden of debt to the l1atlon and deprives the people expected benefits. His Majesty's Government wants to control corruption and miss-utilization of means and resources in the country in the name of development, immediately and effectively. To this end, the government will introduce an effective system where cost estimation shall be closely scrutinized, its implementation shall be regularly supervised, monitored and evaluated and public auditing shall be carried out at the outset of its execution. A system shall be established to award personnel doing good work and punish those prove guilty. Provision of a responsible institution shall be made for quality inspection of completed projects. A system to make audit reports public on financial matters and quality of some important projects shall be introduced. Likewise, commissions generated from public works contracts under foreign aid shall be deposited in government treasury and shall be used for development works. Arrangement of commission by-law shall be made for this purpose decentralization process.
41. Appropriate attention will be given to rehabilitate sick industries by identifying their problems. Based on the country's requirements and social justice, Government will initiate a policy of establishing industry on its own or as joint ventures. Attracting foreign investments that generate employment, income, and promote transfer and extension of technology will accelerate the industrialization process. F. Taking Effective Steps to Correct Imbalances and Distortions in the Area of Foreign Trade
42. Numerous imbalances and distortions exist in the area of Nepal' s foreign trade. The fact that the nation's total export is equivalent to only about one third of imports proves the formidable situation of trade imbalance. It will be desirable to promote the imports of capital goods, petroleum products, chemical fertilizer, industrial machineries and raw materials which are indispensable ~or development. However country exists trade policy has promoted foreign dependency by neglecting domestic. Products as well as those, which have enough possibility for expanding production. Instead, unrestricted import of luxury goods has been encouraged.
43. No serious and effective steps have been taken in an effort to promote export. There are no other significant items other than woollen carpets and readymade garments for export to third country. Export trade itself is in crisis, as there now stand a number of problems in the production and export of these items. The Government, therefore, is very sensitive toward this crisis and is fully committed to resolve them. The Government will launch concrete and effective steps that bring improvement in this situation by commodity-wise and country-wise diversification of trade. Actions will be initiated, soon toward comprehensive improvement in export policy. Special initiatives will also be taken to promote exports to India. Service charge that is levied on export will be gradually reduced. In addition, a fund will be established for export promotion. Promoting import-substituting industries will gradually reduce import. Import of luxury goods will be discouraged through changes in customs rates.
G. Control 0f Revenue Leakage, Removal of Procedural Complexity and Improvement as well as Change in Tax Structure
44. The growth rate of Government expenditure is accelerating due to the expansion in Government activities and programs, price increase, and change in foreign exchange rate. However, the growth rate of internal revenue mobilization, and particularly that of tax revenue is lagging far behind the growth rate of expenditure. As such, the contribution of revenue surplus to development is declining and dependency on internal and external1oan is increasing. In this situation, we do not have alternative to emphasize internal revenue mobilization: Even under this situation, there is no official estimation as to how much is the Nepal's total tax revenue potential. Nevertheless, it becomes evident, while considering the ratio of tax revenue to national production, that tax collection has been insignificant in comparison with tax potential. While little attention is being paid to revenue collection, equal weaknesses in tax related laws, rules, procedures and administration have caused huge leakages in revenue. The fact that taxpayers have not been able to pay taxes due to legal and procedural difficulties is obvious. Such problems are more prevalent particularly in the area of direct taxation. Due to this; our dependency on indirect tax has been very high, and its impact on low-income group is very high. His Government is committed to mobilize revenue in accordance with tax paying capacity of the people by changing revenue structures and administrative procedure. For this, the Government will, by reviewing laws, rules and administrative procedures related to tax, take firm measures to establish new structure of tax system. Hold steps will be taken to eliminate the revenue collection irregularities. A Tax Settlement Commission shall be set up to deal with tax arrears.
Rt. Honourable Speaker;
45. As I mentioned earlier, it is extremely difficult to implement policies and programs related to the commitments made in the manifesto of the CPN (UML) through this budget for the current fiscal year. On the one hand, of the total budget allocated through the Appropriation Ordinance, the budget for six months has been already spent. On the other, of the total budget of Rs.320 million exclusively allocated for mid- term poll to Election Commission, total expenses are estimated to have reached Rs.630 million. This has put tremendous pressure on regular expenditure. Similarly, amounts allocated for development programs has become insufficient and as demand is rising, additional resources are required to meet these demands. Due to time constraints, a comprehensive review of the budget could not be carried out although it is apparent that several programs launched in the past are unproductive. Therefore, the current budget has remained unchanged to a greater extent. As per the new concepts of development, I have followed, a principle of allocating some additional programs on the budget for the remaining period of the current FY. 46. A solid and effective basis will be adopted by undertaking a comprehensive review of the existing budget system, appropriation, expenditure pattern etc, from coming FY 1995/96. I have realized that there is an urgent need to take corrective actions on expenditure patterns so as to make to more effective. Therefore, I would like to inform the Honourable members that economy in expenditures would be observed immediately by way of new techniques. Due attention will be paid to observe the economy while- making expenditures by controlling pilferage on development budget. Because the present budget system is not appropriate, scientific, transparent, and there is a clear lack of accountability, it has been unable to deliver direct benefits to the people despite the undeniable fact that expenditure have been ever increasing. Therefore, the budget system will be made more scientific by reforming it. As His Majesty's Government believes that there must be people's participation on the implementation and monitoring of projects and programs, a system of evaluation by the people will be started on the budget allocated for public utilities. I hope to receive full cooperation from all sectors towards the proper utilization of national resources by strengthening the fiscal and administrative discipline.
Rt. Honourable Speaker,
47. Now, kindly allow me to propose a total expenditure of 4:2,690.611 million for the current FY including the expenditures incurred through the Ordinance of 1994/95. Of this total, Rs.19,789.822 has been earmarked for regular expenditure and Rs.22,900.789 million for development expenditure. In comparison to the revised estimate for the FY 1993/94, in FY 1994/95 regular expenditure has increased by 51.6 percent and, development expenditure by 6.6 percent. Some of the main reasons of this increase in regular expenditure are expenditure on recently concluded election beyond the limit, already raised allowances in the foreign services, and expenditure already incurred on travel expenses of the VIP and delegates. In pursuance of the government policy of raising investment in education has added expenditure. Furthermore; the proposed (allowance) facilities to HMG personnel has also been added to regular expenditure. Let me allow informing this august House that increase in some items of regular expenditure and decrease in some items of development expenditures. This is because some of the traditional development expenditure items amounting to Rs.3,520 millions have been shifted to regular expenditures through the Ordinance of 1994/95.
48. As the present Council of Ministers has the provision of Deputy Prime Minister, expenditure has been earmarked for the operation of that secretariat through the provisions in regular expenditure. Of the total regular expenditure, the largest portion goes to debt servicing (31.7%), followed by social services (23%), general administration (10.8%), and defence (9.8%). By expenditure headings, 24.5% goes to salary and allowances and 18.4% to subsidies.
49. Out of the total expenditures, R$. 70.7 million has been earmarked for administrative reforms. This amount will be utilized particularly in revenue administration strengthening programs.
50. A sum of Rs.152.5 million has been allocated to financial administration and planning. This amount wilt be utilized to strengthen evaluation and monitoring of development plans; to bring timely reform in financial administration; and to carry out feasibility studies of Agro-Science and technology university and agro-forestry industries. A separate monitoring unit will be established to maintain records of studies conducted on various projects and policies and implement them gradually; to conduct studies on the usefulness, effectiveness of grants and loans; and long term implications of the growth of such liabilities in the economy. An effective system to coordinate projects and programs being implemented by' national and international Non Governmental Organizations (NGOs) is felt necessary. Moreover, development of an integrated inventory (documentation) of foreign and local resources is another urgent requirement. Hence, monitoring and evaluation of resource mobilization on the basis of such documentation will be initiated from the current Fiscal Year. Works will also be initiated toward making data a realistic and reliable tool for the national policy development and planning exercises. Priority is also accorded to identify the population below the poverty line. Expenditure is earmarked separately for this purpose.
51. Rs.5,530 million has been earmarked for the Education and Social Welfare Sector. For primary education, a sum of Rs.1,964.1 million has been allocated to meet the salary and allowances of primary school's teachers and to meet operating costs. In secondary education, up to class nine education will be provided free of change from the coming academic year. A sum of Rs.638.9 million has been allocated to University Grant Commission. A sum of 815.7 million has been earmarked to bear the additional liabilities of 1,206 teachers in 603 secondary schools run by the private sector form their own resources. Preliminary works will be started to make primary education compulsory. Similarly, works on curriculum development and textbook writing will be started in order to provide primary education in mother tongue. Government will accord priority to increase the quality and expansion of vocational education. Accordingly, feasibility studies will be undertaken to see the possibility of establishing such technical education and vocational training colleges at regional level and Agriculture Science and Technology University. Similarly, preliminary works will be carried out to establish universities, one each in Eastern and Western zones. A sum of Rs.52.8 million has been allocated to make 554,000 adults literate for which 11,000 teachers and the government will train 200 trainers. It would help reduce illiteracy and thereby contribute to create additional employment opportunities. An amount has also been allocated for the archaeological preservation and excavation.
52. In the Social Welfare Sector, allocation has been made Rs.600 per head per annum to 10 students of backward communities of each district to enable them to purchase educatioJ1 materials, Budgetary provision has also been made to provide opportunities for education from class 8 to the children of Deuki and Bhand communities in boarding schools of Kathmandu and to provide scholarships to the martyr's children to pursue their graduation.
Budget allocation is also made for the upliftment of Deuki, Raute, Mushar, Jhangar, Dom, Dusad, Praja, Sattar, Dhimal and others. This will be used to launch educational program for these people from the coming fiscal year. In addition, funds have been allocated for the scholarship scheme for poor and intelligent students.
53. A special program will be prepared in this fiscal year to provide vocational training and fellowships to the blind, disabled and beggars. Necessary funds have been allocated to provide Rs.100 to 1,875 disabled poor persons, 25 persons from each district as a disability pension. Steps will also be taken to ensure a minimum of livelihood to poor and helpless senior citizens as a part of state obligations towards them. Such a program for the time being will be launched on pilot basis in 5 districts to benefit senior citizens aged 75 years and above. This scheme will be extended to all districts of the Kingdom based on the experience achieved.
54. With a view to promote and encourage works of literature and arts, necessity budget arrangements have been made to award Rs.10,000 to five distinguished litterateurs and artists from each development region.
55. It is our duty .to keep alive the memories of contributions of late national leaders Madan Bhandari and Jeev Raj Ashrit. A sum of Rs.5.0 million has been earmarked for this fiscal year for the "Madan-Ashrit Institution" already established in their memory.
56. A sum of Rs.2,070 million has been earmarked for the Health sector. Healthy life is one of the basic infrastructures of development. His Majesty's Government will initiate its program to extend freely primary health services down to the villages. For this purpose, an additional 700 new sub- health posts will be established in this fiscal year. In order to extend the health facilities to the people, arrangement has been made for the special treatment at the local level by a mobile team of specialists on an experimental basis; Besides this, banks will be encouraged to extend credit facilities for the opening up of drug stores in villages, Free distribution system of medicine will be improved. Necessity arrangements have been made for the effective operation of regular ongoing health activities.
57. A sum of Rs.1,635.9 million has been earmarked for the Drinking Water sector. Several drinking water projects have not been beneficial nor effective in the villages. In this context, priority will be given to drinking water projects as demanded by the people in villages. Emphasis will be given for the supply of drinking water from deep well to be dug out by using local labours and technology. Additional feasibility studies will be undertaken in this fiscal year to identify the potential sources of drinking water in villages and implement project across the country. This will further help implement extensive drinking water project from the coming fiscal year. His Majesty's Government will give high priority to Kodku-Khola Water Supply Project to resolve drinking water problem of the Kathmandu Valley. The targeted population is not getting regular supply of drinking water in the absence of water source conservation and other problems in spite of target fixed for the distribution of pipes to certain percentage of population. Steps will be taken to conserve water sources. Proper attention will be given to protect the water source in the Kathmandu Valley.
Rt. Honourable Speaker,
58. A sum of Rs.2,651 mi\lion has been allocated for the Local Development. We are committed to translate the principles of decentralization into practice. I have mentioned earlier that a special program of "Build Your Village Yourself" will be implemented as a campaign for the local development geared to the needs and aspiration of the local people in which they will volunteer to participate. A sum of Rs.0.3 million will be provided to each Village Development Committee directly through the Local Development Officer for this program for the remaining period of the current fiscal year. I have proposed a total budget of Rs.1,200 million for this program. I want to inform all Honourable Members that this amount will be gradually increased on the basis of the satisfactory performance in the coming years. I am confident that this program will help us in our efforts for rural development, employment generation, and upliftment of living standards of the people. In addition, a total of Rs.51.25 million has been allocated for the purpose of development works to be implemented under the guidance of Honourable Members for which each constituency will be provided Rs.250,000 through the District Development Fund during the current FY. The District Development Committee will arrange the accounting and auditing.
59. Women -development programs are now in operation in 200 Village Development Committees. During the current fiscal year, this program will be extended to an additional 64 Village Development Committees. In addition to this, women production credit will be made more extensive from this year. Necessary institutional improvements will be made to operate this program for the upliftment of backward and wage- earning women.
60. Waste problem in the Kathmandu city is worsening. It is a matter of common knowledge that waste and pollution problems are intensifying due to the lack of capable and effective management. This problem can be resolved with proper coordination between local entities and His Majesty's Government. Special attention will be given to make Kathmandu healthy, pollution free, and attractive for tourists. A separate program will be launched to remove wastes and to convert it into fertilizer and other form of energy. I have made provision of Rs.160 million for this program. I would also like to inform Honourable Members that a separate master plan would be prepared and implemented to solve the problem of pollution and waste in Bagmati River.
61. Special program will be implemented in order to provide income-earning opportunities under the Praja and other native communities development program by including Raute, Mushahar, Jhangar, Dom, Dusad, Chepang, Satar, Dhimal and such other communities. For this, I have provisioned Rs.20 million. 62. Keeping in mind the procedural complexities and difficulties faced by the people in settling various works under the municipalities, their attention will be drawn toward improving their management efficiency. They will also be motivated to prepare master plans and implement municipal development program accordingly. Currently ongoing remote area development and the programs relating to local development will be implemented in a more effective manner. 63. Toward other social services, I have allocated Rs.774.7 million. Increasing population pressure and poverty remain as major obstacles for organized urbanization and healthy housing management. Due to the lack of opportunities in rural area, tendency to come to the city for employment and education is increasing. To discourage such tendency and to provide added momentum for the development of rural areas, 15-model village development program will be implemented in five development regions. Additionally, with a view to provide added support for rural development, works will be initiated by implementing program of rural development through small town market development. I have paid special attention toward mobilizing people's participation through providing additional resources for market management between big towns and villages, settlement development, infrastructure creation, and service expansion. Under the Kamaiya settlement program, I have allocated Rs.10 million for their organized settlement. Works will be initiated during the current fiscal year to implement employee-housing program by utilizing idle money lying with the Employee Provident Fund. Work will also be initiated to make housing arrangements for Honourable members.
Rt. Honourable Speaker,
64. Peasants are not having the opportunity to improve their living standards through increased productivity of agricultural sector in proportion to investment in it. There exist numerous problems in areas of production cost and price, agricultural market arrangement, and agricultural occupation diversification. Due to the reason that peasants are not getting market in many areas, they are facing numerous obstacles in crop diversification and yield increases. To solve various problems existing in agricultural sector, development of rural market place and agriculture related industry, development of peasant and consumer organization, diversification of Agro-based industries, rabbit and bee keeping, sericulture, and herbal plantation programs will be implemented in an effective manner. Programs will be centred on works of enhancing peasant's living standard by enlarging employment and income earning opportunities. I have allocated Rs.2,843.1 million for the agricultural sector.
65. Peasant has to face big problems during the current fiscal year due to drought in some areas. For an immediate solution to the problem, an integrated program of irrigation, seeds, fertilizer, and agricultural credit facility will be implemented. For this, I have set aside Rs.10 million.
66. As a majority of the peasant community are in rural areas and are mired in poverty, system will be initiated for the preparation and implementation of district level agricultural development on the basis of peasants need, feasibility of particular locality, and peasant's participation. Farmer's group will be formed and appropriate programs launched to make them more skilled and efficient for direct benefit of the group concerned.
67. The cooperative organization has a leading role in the development of the rural economy. As such, these organizations will be developed and expanded by launching co-operative movement as a campaign and a policy involving such organization in purchasing local production and catering goods and services as per local needs easily. For this purpose appropriate amendment in existing laws and will be incorporated. Similarly, tax exemptions procedures will be made easier.
68. A sum of Rs.2,843.1 million has been appropriated for irrigation. The agriculture sector in still dependent on the monsoon despite of large investment in irrigation. It has been suffering time and again by droughts and floods. A lot of problems have come across while implementing big irrigation project. Therefore, such projects would be reviewed and completed soon. The policy of giving priority to small and medium irrigation program will also be carried forward. From the very beginning of the program, a policy of inviting farmers' participation and involving users in operation and maintenance will be adhered. A budgetary provision has been made in order to expand the community shallow tube-well program as well as to make available loans to farmers for irrigation programs. A sum of Rs.90 million has been set aside for people's participatory river training program.
69. A sum of Rs.274.3 million has been appropriated for Land Reform and Survey. Cadastral Survey program which in now going on regular basis will be conducted with a target of completing it in the coming year. A Land Reform Commission will be constituted to provide suggestions to His Majesty's Government after evaluating on dual-ownerships and various matters related with land.
70. For the Forest and Soil-Conservation Program, a total of Rs.916.7 million has been set aside. It is common knowledge that the forest area is gradually shrinking; landslides are more frequent; and sources of drinking water are drying up. These are all manifestations of deteriorating environmental balance. Our policy, therefore, is to increase the level of awareness among the people about the importance of forest and soil conservation so that they volunteer to take part in conservation activities undertaken by the Government. Specific programs during the current year will include a forestation on areas of right-of-way of national highways and other public land extensively. To strike a balance between supply of forest products and proper utilization, forestry development programs will be launched while ongoing programs relating to forestry and botanical research and national parks and wildlife will continue.
71. The Industry and Mining Sector will be allocated Rs.547.5 million. The policy will be geared towards catering to the domestic market as well as potential export markets through the maximum use of local labour, skill and raw materials, and make a significant headway in the industrialization process. Special attention will be given to establishing new industries and to the development of cottage and small industries; vocational and skill development training courses will be conducted extensively. Steps will be taken to ensure that precious stones and other minerals are exported in processed form alone. Feasibility study of the Narapani Limestone Deposit at Arghakhanchi District will be done in this fiscal year and, if found feasible, steps towards establishing a cement factory will be undertaken. Likewise, mineral based industries in other areas will be prioritised as and when they are found feasible. Joint collaboration opportunities with foreign investors will be kept open in areas consistent with the national interest particularly in mineral industries. Appropriate attention will be given to the development of capital market for mobilization of resources required for this sector.
72. To make Nepal products competitive in international markets, the quality and standards of these products will be upgraded through wider coverage and effectiveness of the standard Certification Program. This, I believe, will help solve the problems encountered in export promotion. The industrial sector has an important role to play in curbing environmental pollution. Hence, the industries will be encouraged to install pollution control devices. The sick industries, which are facing problems, will be assisted in their rehabilitation for which I have made appropriate allocation in this budget.
Rt. Honourable Speaker,
73. I have earmarked Rs.1,353.8 million for communications in this fiscal year. Our policy is to expand and broadcast the radio and television programs by making them education oriented. Accordingly, production of such programs has already started. Our party has been emphasizing time and again the need for broadcasting services to be directed to all and not to any particular party or individual. Accordingly, the communication sector will be made fair, educational and people-oriented. Transmission of television services will be extended to cover the entire country. Special postal services will be started from this fiscal year in collaboration with the village development committees to make postal services available for home delivery. Strengthening the Nepal Telecommunication Corporation and making it available to every village development committee will meet the growing demand for telephones.
74. I have allocated Rs.3,751.4 million to the transport sector. As roads have been the basis of physical infrastructure for development, other sectors cannot flourish without its improvement and extension. Increasing investment in this sector is necessary in order to facilitate easy and reliable movement of people and transport of products as well. Repair and maintenance of existing infrastructures also has necessitated increased investment in this sector. As roads have an important role, it is natural to have growing demand for roads project. In order to expand economic activities and to resolve the intricate settlement problem, construction of an arterial highway throughout the middle hill areas has become utmost important. Hence a feasibility study survey will be carried out in this fiscal year to operate projects by including them in the master plan of an arterial highway. Besides, high priority will be given for the construction of highway connecting district headquarters. Similarly, budget has also been set aside for road projects, which are demanded by districts and are to be implemented through people's participation.
75. Mahendra Highway, the construction of which was initiated thirty-three years ago, has not yet been fully completed for transportation. So, proper attention will be given for the immediate completion of the highway by constructing bridges beyond Karnali River.
76. On the air transport side, special attention will be given to installation of communication and navigational aid equipment and manpower training for the airport construction and safety of air transport. As air service and its extension help to foster tourism and also facilitate the people of remote areas, it is imperative to give attention for its development. Taking into account tourism development, a feasibility study will be undertaken for the construction of another international airport outside Kathmandu. Similarly, feasibility studies of water way and railway will be carried out to identify potential alternative means of transportation. Feasibility study on the East- West Railway along the Terai, which was undertaken long ago, will be reviewed, and preliminary work, on the Mechi-Mahakali Railway along the Terai belt will be commenced from this fiscal year. Besides, for the strengthening of Janakpur Railway, a loan of Rs.15.0 million has been allocated to the Nepal Transport Corporation.
77. For power, Rs.2,872.9 million has been allocated. Arrangement has been made by HMG/N to launch special measures through the Nepal Electricity Authority to control leakage and to supply power in a regular way by saving power consumption with the use of electrical equipment of low voltage. The policy of the government is to complete soon the on-going power projects, to implement immediately the feasible projects, and to extend the alternative energy programs. Keeping in view the problems of power supply, feasibility studies of small and middle size power projects will be carried out in the remaining six months period in this fiscal year, and feasible projects will be brought into implementation from the next fiscal year. Immediate steps will be taken for the implementation of Kaligandaki 'A' Power Project. I have made the provision of additional budget for the commissioning of Jhimruk Hydro Power Project and for the construction of an approach road to Khimti Hydro Power Project. Small hydel projects as well as programs relating to alternative energy development and rural electrification will be launched as joint ventures of HMG/N, the Nepal Electricity Authority, the Agriculture Development Bank and private sector. Compilation of data and their analysis that help for the development of water resources will be continued. Regular services of hydrological centre will be carried out.
78. In the development budget, I have allocated Rs.226.2 million for tourism development. Tourism has been helping a great deal in earning foreign exchange regularly and in enhancing employment opportunities. As there is potentiality for further extension of this industry, priority will be given for the development of this sector. Identifying new areas for tourist attraction will expand tourism areas. Diplomatic missions also will be mobilized in a way that helps tourism development.
79. With a view to relieve people in the low-income bracket from price rise; fair price shops will be opened in collaboration with consumer's cooperatives and authorized dealers, starting with Kathmandu. With a view to make available essential daily consumable goods to low income people in fair prices by introducing Ration Card System, an analysis will be carried out on its economic and managerial impact in the current fiscal year. Rs.160 million will be provided to the Nepal Food Corporation in the form of interest subsidy to control sudden price increases occasionally observed in the market to insure a regular supply of essential goods and avoid uncontrolled rise of prices even in the situation market intervention by strengthening stocks mechanism.
Rt. Honourable Speaker,
80. The Department of Labour will be made especially active in order to arrange skill-oriented training and to create additional employment opportunities in a massive scale through identifying increasing unemployment problems. I have allocated Rs.80 million for these programs. Under this program, as per necessity, labour information and training centre will be established in different districts and will be given the tasks to update unemployment situation, to make an arrangement of skill oriented training, and to create alternative employment opportunities. In addition to this, training programs will be implemented to educate unemployed by establishing a short-term skill-oriented training centre in Kathmandu shortly. It will conduct short-term training on the basis of the type of skill demanded abroad and the Government, in its fore step, will make arrangement to seek employment abroad for trained youths. Employment opportunities will be increased in irrigation and other construction works by further expanding'\food for work program.
81. Rs.10 million has been allocated to assist in uplifting targeted groups by implementing special programs of poverty alleviation.
82. The government will accord high priority in identifying problems currently observed in export promotion in the trade front. A sum of Rs.60 million has been earmarked to provide immediate relief for export promotion.
83. Salary increments have not been affected, for civil servants for the last three years. But inflation has gone up considerably during this period. Because of limited resources, the Government is not in opposition to raise the salary and benefits sufficiently for their livelihood. Even then, I have arranged a dearness allowance of Rs.300 per month to civil servants, Royal Nepal Army, Police and teachers to be effective from mid-December 1994. It will provide some relief to them from the rising inflation. 84. Of the total expenditures of Rs.42,690.6 million I have presented for F .Y 1993/94, Rs.23,851.9 million will come from existing revenue and Rs.4,462.4 million will come from foreign aid in grant, Rs.11,336.2 million will come from foreign loans and Rs.3,040.0 will be deficit financing.
Rt. Honourable speaker,
85. Now, I present the revenue proposal for FY 1994/95.
86. In this regard, I would like to inform Honourable members the tax policy of the Government of the CPN (UML) as mentioned in its election manifesto. The tax policy to be adopted by the Government will, accordingly, be directed by the following objectives:
1. To relieve low-income people from tax burden,
2. To increase contributions of direct tax in revenue mobilization,
3. To mobilize maximum revenue from low tax rates by broadening tax base of both direct and indirect taxes,
4. To fix the rates of indirect taxes allowing basic local industries to flourish,
5. To fix the rates of direct taxes allowing savings and investments to be encouraged,
6. To implement tax related laws and rules strictly and impartially,
7. To eliminate possible irregularities in the area of revenue collection by making the collection process transparent and less cumbersome, and
8. To encourage tax administration in order to develop professional efficiency.
87. Anomalies that exist in our tax system cannot be removed in a short period of time and solely through the medium of the budget prepared in the middle of the fiscal year. I would like to inform this House that effort has been made in this budget to guide tax policy toward the above-mentioned directions.
88, While our country, in totality, is poor and backward, large investments made by public sector for the past many years led to a build-up of sources of income and accumulation of wealth with a limited group of society. The fact that our tax revenue is overly dependent on indirect taxes compared to direct taxes is a glaring example of this characteristic. Such a tax policy is inequitable; therefore, His Majesty's Government intends to bring about necessary changes and modification in the present tax system.
89. The role played by the current tax policy has been least conducive to fostering industry and trade within the country, My efforts, therefore, has been directed towards lessening tax burden on national industry and trade and increasing it by some degree on imports. I have also kept in view the interest of the people of lower income brackets while changing the tax rates applicable to goods and services they consume. I would also like all the Honourable members of the House to note that the tax proposal. I will submit for the next fiscal year will include restructuring or the tax system mainly to gear up investment, open up more opportunities of income and employment, expand national industry and trade, and pave the way for the country towards self-sustainability with additional relief to the deprived people.
Rt. Honourable Speaker,
90. I now present the direct tax proposals.
91. In keeping with our commitment for gradually augmenting the proportional contribution of the direct tax to the overall internal revenue, I have made certain changes in its structure. Bringing changes in the existing tax system in the middle of the fiscal year gives rise to many complications impinging on legal, administration and social justice. In my proposals I have been very careful not to give rise to such issues. Presently, the income tax on interest earned up to Rs.700 on savings deposit is not deducted in advance whereas such earnings over and above Rs.700, inclusive of Rs.700, is subject to advance deduction at the time of annual payment. This is a burden to small savers aside from the burden of bookkeeping for the commercial banks. Hence, from now on, the annual payment of interest up to Rs.1,000 from savings deposit 'will not be subject to advance income tax deduction.