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Published: March 7, 2011 01:00 IST | Updated: March 7, 2011 02:51 IST March 7, 2011

Corporate socialism's 2G orgy

P. Sainath

The Union budget writes off Rs.240 crore in corporate income tax every single day on average
— the same amount leaves India each day in illicit fund flows to foreign banks.

In six years from 2005-06, the Government of India wrote off corporate income tax worth
Rs.3,74,937 crore — more than twice the 2G fraud — in successive Union budgets. The figure
has grown every single year for which data are available. Corporate income tax written off in
2005-06 was Rs.34,618 crore. In the current budget, it is Rs.88,263 crore — an increase of 155
per cent. That is, the nation presently writes off over Rs.240 crore a day on average in corporate
income tax. Oddly, that is also the daily average of illicit fund flows from India to foreign banks,
according to a report of the Washington-based think tank, Global Financial Integrity.

The Rs.88,263 crore covers only corporate income tax write-offs. The figure does not include
revenue foregone from higher exemption limits for wider sections of the public. Nor higher
exemptions for senior citizens or (as in past budgets) for women. Just income tax for the big boys
of the corporate world.

Pranab Mukherjee's latest budget, while writing off this gigantic sum for corporates, slashes
thousands of crores from agriculture. As R. Ramakumar of the Tata Institute of Social Sciences
(TISS) points out, the revenue expenditure on that sector “is to fall in absolute terms by Rs.5,568
crore. Within agriculture, the largest fall is to be in crop husbandry, with an absolute cut of
Rs.4,477 crore.” Which probably signals the death of extension services, amongst other things, in
the sector. In fact, “within economic services, the largest cuts are to be in Agriculture and Allied
Services.”

Even Kapil Sibal cannot defend the revenue losses as notional. For the simple reason that each
budget sums up these numbers clearly in tables within a section called „Statement of Revenue
Foregone.' If we add to this corporate karza maafi, revenue foregone in customs and excise duty
— also very largely benefiting the corporate world and better off sections of society — the
amounts are stunning. What, for instance, are some of the major items on which revenue is
foregone in customs duty? Try diamonds and gold. Not quite aam aadmi or aurat items. This
accounts for the largest chunk of all customs revenue foregone in the current budget. That is, for
Rs.48,798 crore. Or well over half of what it takes to run a universal PDS system each year. In
three years preceding this one, the customs write-off on gold, diamonds and jewellery totalled
Rs.95,675 crore.

Of course, this being India, every plunder of public money for private profit is a pro-poor
measure. You can hear the argument already: the huge bonanza for the gold and diamond crowd
was only to save the jobs of poor workers in the midst of a global economic crisis. Touching.
Only it didn't save a single job in Surat or elsewhere. Many Oriya workers in that industry
returned home jobless to Ganjam from Surat as the sector tanked. A few other workers took their
own lives in desperation. Also, the indulgence for industry predates the 2008 crisis. Industry in
Maharashtra gained massively from the Centre's Corporate Socialism. Yet, in three years before
the 2008 crisis, workers in the State lost their jobs at an average of 1,800 a day.

Returning to the budget: There's also the head of „machinery' with its own huge customs duty
concessions. That includes surely, the crores of rupees of sophisticated medical equipment
imported by large corporate hospitals with almost no duty levied on it. The claim of providing 30
per cent of their beds free of charge to the poor — something that has never once happened — is
an excuse to dole out these „benefits' (amongst others) to that multi-billion rupee industry. Total
revenue foregone on customs duty in the present budget: Rs.1,74,418 crore. (Which does not
include export credit-related numbers).

With excise, of course, comes the standard claim that revenues foregone on excise duty translate
into lower prices for consumers. There is no evidence provided at all that this has actually
happened. Not in the budget, not elsewhere. (Sounds more like the argument now making the
rounds in some Tamil Nadu villages that nothing was looted in the 2G scam — that's the money
translating into cheaper calls for the public). What is clearly visible is that the write-offs on
excise directly benefit industry and business. Any indirect „passing on' to consumers is a
speculative claim, not proven. Revenue foregone on account of excise duty in this budget:
Rs.1,98,291 crore. Clearly more than the highest estimate of the 2G scam losses. (The preceding
year: Rs.1,69,121 crore).

Also fascinating is that the same classes benefit in multiple ways from all three write-offs. But
how much does revenue foregone under corporate income tax, excise and customs duty add up to
across the years? We have baldly stated budget figures for six years starting 2005-06, when the
total was Rs.2,29,108 crore. To the current budget where it is more than double that sum at
Rs.4,60,972 crore. Add up the figures since 2005-06 and the grand total is Rs.21,25,023 crore.
Or close to half a trillion U.S. dollars. That is not merely 12 times the 2G scam losses. It is equal
to or bigger than the Rs.21 lakh crore sum that Global Financial Integrity tells us has been
siphoned out of this country and illegally stashed away in foreign banks since 1948 ($ 462
billion). Only, this loot has happened in six years starting 2005-06. The current budget figure for
these three heads is 101 per cent higher than it was in 2005-06 (see Table).

Unlike the illicit fund flows, this plunder has a fig leaf of legality. Unlike those flows, it is not
the sum of many individual crimes. It is government policy. It is in the Union budget. And it is
the largest conceivable transfer of wealth and resources to the wealthy and the corporate world
that the media never look at. Oddly, the budget itself recognises how regressive this trend is. Last
year's budget noted: “The amount of revenue foregone continues to increase year after year. As a
percentage of aggregate tax collection, revenue foregone remains high and shows an increasing
trend as far as corporate income tax is considered for the financial year 2008-09. In case of
indirect taxes, the trend shows a significant increase for the financial years 2009-10 due to a
reduction in customs and excise duties. Therefore, to reverse this trend, an expansion in the tax
base is called for.”

Rewind a year further. The 2009-10 budget says the same thing in almost identical words. Only
the last line is different: “Therefore it is necessary to reverse this trend to sustain the high tax
buoyancy.” In the current budget, the paragraph is absent.

This is the government that has no money for a universal PDS or even an enhanced one. That
cuts anyway meagre food subsidies from the largest hungry population in the planet. That, at a
time of rising prices and a great food crisis. In a period when its own economic survey shows us
that the daily average net per capita availability of foodgrain for the five year period 2005-09 is
actually lower than it was in 1955-59 — half-a-century ago.