Budget 2013: a missed opportunity

Finance minister's mool mantra—inclusive and sustainable development—may end up being empty words

By Sunita Narain
Published: Thursday 28 February 2013

Funds for water purification plants a symptom of hardware mindset

Budget 2013 is technology focused, but not problem solving. Finance Minister P Chidambaram says arsenic and fluoride in water is a serious concern and goes on to allocate Rs 1,400 crore for water purification plants. There is enough experience to show that these plants do not work in rural India, where there are problems of maintenance and electricity, leave alone capacity to pay for treated water. Instead, what has worked are programmes for rebuilding and cleaning surface water systems so that dependence on polluted groundwater goes down. The finance minister clearly does not understand water management, only the business of water.

Purchase of buses good news but killed by diesel policy

The Budget says it will support 10,000 new buses, especially for hill states. This is an important initiative. But the fact is that government gives with one hand and grabs much more with the other. The current policy is to increase diesel prices for the bulk sector by Rs 10 per litre. This has virtually killed all public bus companies. Ironically, the price hike for retail—private cars—is only Rs 0.50 paise. Double-speak is the name of the game.

Effective implementation of agriculture programmes needed

The good news is the increased allocation for agriculture, watershed development, but the need is for effective implementation.
The recognition that small and marginal farmers require investment in improved land productivity and water use is critical component of Budget. In the past five years (from 2007-08 to 2011-12), the country has spent some Rs 7,000 crore (against a target of Rs 10,000) crore for development of 15.13 million ha of land. But as the 12th Plan draft document suggests there is a strong case for reform in the implementation of the programme. It would have been good if the finance minister had demanded more effective working as he provided more money. The crippling drought in Maharashtra tells us that these funds are not used for what they are provided – that is building ecologically sustainable assets to regenerate village economies and provide water security. More money is not only the answer here.

Will investment drive ensure sustainable growth?

Sustainable and ecological growth is only a mantra, not a mandate
The “mool mantra” of Budget 2013 is inclusive and sustainable development says the finance minister. But the fact is that there are only empty words to suggest that development must be sustainable ecologically. There is no substance in the Budget, which tells us how the directions of growth will be environmentally sound. Instead, the finance minister talks about the Cabinet Committee on Investment, which has been set up to fast-track clearances. There is no indication in the speech that this drive for investment, will take cognizance of the needs for sustainability and will strengthen, not weaken the regulatory system that governs green clearances.

Waste management: skewed priority

Environment is reduced to waste technologies that don’t even work.
The finance minister says he will evolve a scheme to encourage cities to take up waste-to-energy projects in PPP mode. Clearly, this shows, his complete lack of understanding of the garbage that is drowning our cities. The fact is that waste-to-energy plants, however, much a good idea, have not worked in the country. These plants require good segregation; high calorific value of waste and careful monitoring to ensure that there is no emissions of dioxins and other toxins because of burning plastics. Not a single plant has worked in the country. Instead, what we need is waste management strategies, which encourage segregation, recycling and reuse. These approaches are beginning to work and what was needed was to incentivize municipalities that can waste, not build white-elephant waste plants. But clearly, that does not suit the technology-fixated mindset. Now these funds will push another round of bad projects, which will create more problems than solve them. In my view, the finance minister should have left the subject of environment alone as his understanding of what we need is outdated and myopic.

Generation based funds for wind power is the way ahead...

There was a fear that the finance minister would succumb to pressure from wind energy producers, particularly active in his home state of Tamil Nadu to reverse the policy to provide generation-based incentives. This has not happened and is good news. The earlier policy of capital based incentives lead to projects that installed windmills but did not often generate power.

..and low-interest money for renewable projects is good news

CSE had also demanded that India should consider setting up a competitor to the US EXIM bank, which provides low-interest loans, but mandates imports of solar equipment. There is a glimmer of the idea in the finance minister’s Budget speech 2013, as he says government will provide low-interest bearing funds from the National Clean Energy Fund to lend for viable renewable energy projects.

Reworking the criteria for backward districts is a much-needed reform but does not go far enough

The finance minister has said that it would be more relevant to use per-capita income, literacy and other development indicators for future planning and devolution of funds in the Backward Regions Grant Fund. It is also important to revise the conditions for grant making so that districts that perform well get incentives. Otherwise being and staying ‘backward’ remains the incentive.

Payment to states for keeping forests is missing once again; no incentive for green growth

At the moment the country has a provision to pay the “net present value” of forests while felling trees. In other words, we pay to cut. But there is no payment for standing forests. There is no payment for the ecosystem value of the standing resource. For the past many years, chief ministers have demanded that they be paid to protect forests. The 12th Finance Commission agreed that states must be paid for the maintenance of forests—some Rs 1,000 crore between 2005 and 2010. The amount was not substantial, but the principle was established. In 2010, the 13th Finance Commission reiterated the need to compensate states and enhanced the allocation to Rs 5,000 crore over the next five years. But still the money has not been provided. This is the core of the problem and this needs to be addressed urgently. Budget 2013 is a missed opportunity to fix this and build a movement for green development in the country.

SUV excise duty from 27 to 30 per cent is much-needed step but falls short on what it will achieve

The finance minister has rightly noted that SUV’s occupy greater road and parking space and should bear a higher tax. What he has missed is that these vehicles are also inefficient users of diesel fuel, which remains cheaper than petrol and highly polluting. While the higher excise duty is good, it is too small a step being taken by government to deal with the diselisation of private vehicles in the country. The fact is that government has raised diesel prices for bulk users by Rs 10 a litre, as compared to Rs 0.50 for retail users. In other words, public buses and railways, used by the very poor are being targeted in this policy, while the cars of the relatively and very rich get off lightly. This is not a policy initiative against SUVs, only small talk and indifferent steps.

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