In yet another round of sops, Finance Minister Jaswant Singh on Wednesday said the exemption on dividend distribution tax to open-ended equity-oriented scheme of mutual funds should continue for full year beyond March 2004.

Winding up the discussion on the interim budget in Lok Sabha, Singh also announced a Rs 8 per kg subsidy for tea growers for four months with immediate effect.

• Interim Budget 2004-05

In yet another pre-poll goodie, the Union Cabinet on Wednesday night approved raising the income limit for determining the 'creamy layer' (socially advanced) among OBCs to Rs 250,000 from the existing Rs 100,000.

A meeting of the Cabinet chaired by Prime Minister Atal Bihari Vajpayee approved the recommendations of the National Commission for Backward Classes which has been entrusted with the task of considering the issue of modification of the income criteria.

This would benefit the sons and daughters of persons belonging to Other Backward Classes and having annual income below Rs 250,000 and would not be covered under "creamy layer and would get the benefits of 27 per cent reservation in direct recruitment in civil posts and services, an official spokesman said after the meeting.

The Cabinet also approved continuation of the centrally sponsored scheme of post-matric scholarship for Scheduled Tribe students and regrouped the beneficiaries in four categories.

The scholarship provided in all recognised post-matriculation courses in recognised institutions would entail a total Central assistance of over Rs 596 crore during the Tenth Plan and would benefit over 600,000 ST students in 2003-04 and 819,000 ST students in 2006-07, the spokesman said.

Regarding long-term capital gains tax on equity, Singh said this should also be continued beyond March 1, 2004 for three years.

As both dividend distribution tax regime and exemption of long term capital gains tax on equity entail amendments to the Finance Act as they being direct tax measures, Singh promised to carry out necessary amendments with retrospective effect if voted back to power.

Singh also announced withdrawal of 8 per cent excise duty on wood particles and fibre board following representation from the industry.

Regarding service tax on tour operators, Singh said tax would be levied only on 10 per cent of the charges and the remaining 90 per cent would not attract tax.

In yet another measure to benefit small industrialists, Singh announced setting up of Sidbi Growth Fund with a corpus of Rs 100 crore (Rs 1 billion) to provide venture capital to small-scale sector particularly for pharma, biotech, software and other knowledge-based industries.

The fund would be operational from April, 2004 and the corpus would be progressively raised to Rs 500 crore (Rs 5 billion), Singh said.

The interim budget was later passed by the Lok Sabha.

The relevant appropriation Bills including the Vote-on-Account and the Finance Bill, 2004 were passed by a voice vote after the House rejected all opposition sponsored cut-motions.

Dissatisfied with the reply of the finance minister over revenue collection data and fiscal deficit, the entire opposition staged a walk out.

In view of assembly elections likely to be held in Maharashtra in near future, Singh declared that the Nagpur airport would be upgraded as International airport with immediate effect.

Along with the interim budget, he had announced a similar upgradation of Jaipur airport.

In a point-by-point rebuttal of allegations made by the leader of the Opposition Sonia Gandhi, Singh said the country's fiscal situation was not tottering as made out by Congress.

The facts are contrary to her views, Singh said reeling out statistics to say that the fiscal deficit has come down to a record 4.8 per cent of GDP as against 5.9 per cent last fiscal and 5.6 per cent targeted for this year.

He said this was a laudable achievement and was due to several factors including expenditure control, buoyancy in revenue and increased divestment proceeds.

"If this is not feel good and if she (Gandhi) is not feeling good, then the medicine is elsewhere," he said.

Singh said the non-plan expenditure growth was just two per cent as against 20 per cent last year and the increasing interest payments were only 5 per cent as against 6.5 per cent in the pervious year.

Regretting the attempt by the Opposition to spread despondency and despair, Singh said: "This negative defeatism in the ranks of opposition will be self-defeating."

He did not agree with Sonia Gandhi's assertion that the minimum support price on sugar has been reduced by the NDA government.

On the contrary, MSP on sugar has been raised from Rs 64.50 to Rs 73 per quintal. "Sugar is sweet, but politics of sugar is bitter," he said.

Contrary to opposition's view, the annual allocation for agriculture during last five years had gone up from Rs 4,752 crore to Rs 6,823 crore which, he said, was an increase of 49 per cent.

Likewise, the allocation for Sarva Shiksha Abhiyan has been raised from Rs 1,950 crore to Rs 3,057 crore this year.

Elaborating on the strong economic fundamentals and improved growth prospectus, Singh said he had underplayed the prospectus this year by announcing in the interim budget that GDP would grow by 7.5 to 8 per cent when several economists were of the view that it would be over 8 per cent.

Referring to agriculture credit, Singh said volume of credit had gone up from Rs 36,860 crore in 1998-99 to Rs 80,000 crore in 2003-04 which was a growth of over 100 per cent.

He said the government was committed to provide cheaper credit to farmers. While the industry got the credit at 4 to 5 per cent, the farmers were getting the credit at as high as 14 to 15 per cent rate of interest.

He said the government through several measure had brought it down to 9 per cent. In fact, State Bank of India and Central Bank have brought it down further to 8.75 per cent.

But the finance ministry is still not satisfied and propose to bring it down further.

On the movement of stock markets, Singh said there was no evidence on the basis of empirical data to suggest that the bubble would burst as made out by the Opposition members.

Govt rules out reduction in subsidy

Jaswant Singh said India would not act under the dictates of the United States to reduce food and fertiliser subsidy.

"We are not going to accept their (America's) advice," he said.

The NDA government was clear on the issue and there "should be no misgivings" in this regard, he asserted.

He said villages were the "soul" and "lifestyle" of India and their interests would be protected.

"There will be no reduction in subsidy that is given on  agricultural products like food and fertilisers and minimum support price mechanism, which is part of the subsidy system," Singh said when a member wanted to know government's stand on this issue in view of US prodding to end this regime.