However, meeting Finance Ministry officials is not enough, given the “information overload”. There are more than 2,000 regional industry associations, 30 apex chambers, 136 small-scale associations recognised by the SSI Board. Each of them sends representations of 10-200 pages. FICCI’s essay for Budget 2002 for instance was 194 pages and that of CII 169 pages, including 33 slides. As one official reveals, “Between October and January the Finance Ministry and administrative ministries receive over 10,000 pages of representations. Barely one-tenth of the pages actually get read.”

The paper trail is enormous. Every memo sent to the Finance Ministry is also sent to the revenue secretary, secretary economic affairs, the economic adviser and member (budget). Since almost 90 per cent of the cases have revenue implications the trail leads from the revenue secretary to member budget (cbdt or cbec depending on the issue). Thereafter it is sent to the Tax Research Unit (TRU). Till a month back, Joint Secretary T.R. Rastogi who heads the tru held 15 meetings a day and was the most sought after person for the industry.
Of course, if you tried hard enough you could get your stuff read. But how do you manage to get it included? Through party functionaries, MPs, pressure groups and industry friendly ministers. One of the highlights of this year’s budget is expected to be a move to allow special economic zones (SEZs) to operate as offshore financial centres so as to attract investment. The brainchild of Positra sez’s Nikhil Gandhi, the proposal has the backing of two Union ministers and one chief minister. The proposal to exempt aircraft and spare parts from import duty and slash duty on aviation fuel is being touted as a must for Indian Airlines and lobbied for by two private airlines has the support of 40 MPs, two Union ministers and two secretaries.

Cover Story: Budget Lobbying

HEAD TO HEAD Counter-lobbying caused by clash of interests SWADESHI vs VIDESHI: Indian companies want import duties to stay while foreign companies want them to go. Like Videocon vs LG in picture tubes. BIG vs SMALL: Small manufacturers want SSI reservation to stay while big firms want it removed. Like Dynamic Shirts vs ColorPlus in garments. CLASH OF TECHNOLOGIES: Differential taxation. Tisco’s integrated steel plant gets concessions on coal imports, but Ispat’s corex tech doesn’t. SECTORAL DISCRIMINATION: Some sectors get sops. Like Infosys can import IT equipment duty free while broadcaster Star India has to pay duty. PRODUCER vs USER: Capital goods producers like BHEL want higher custom duties though users like BSES want cheaper access to imports.

These may come through since it is only the government which would be losing something. Often there is more than the government on the losing side. One man’s sop is usually another man’s loss. Last year, the steel industry lobbied for reduction in duties on coal and nickel (critical inputs for steel). It convinced everyone right down to the tru. Come budget there was no change. Reason: the affected party, a leading copper manufacturer, managed to convince the pmo that this wasn’t in national interest. This year, the steel industry plans to plug that gap too. But there is no assurance. Another battle is waging this year. An mnc lobby is trying to convince the Government to exempt lng from import duty by dubbing it the cleanest fuel. Ranged against it is the coal, naptha and other fuels lobby.

Sometimes things can change even after the budget. Last year, after small garment makers came out of the ssi cocoon, a 16 per cent excise was slapped on them in the budget. But bjp bigwig Madan Lal Khurana intervened. A small note was inserted in the budget before it was passed in May that reinducted garment makers into the ssi fold and allowed 90 per cent of them exemption from the new levy.

The budget is also a good time to view the Janus-faced stance of industries vis-a-vis reforms. The automobile sector—among the most vocal sections with campaigners like Bajaj, Hyundai, Mahindra & Mahindra and Telco—has successfully lobbied to prevent an increase in duties and anti-dumping measures on steel. It is also currently lobbying for lowering of duties on import of auto components to bring down their costs. Domestic component makers are opposing the move but obviously lack clout. However when it comes to the import of vehicles, this lobby is in the forefront to block any lowering of duties.

Increasingly, thanks to the new paradigm of the wto, tussles have also acquired a desi vs videshi hue. For two years the Scotch Whisky Association and wine importers have been complaining that although quantitative restrictions have been withdrawn tariffs—cumulatively at between 464 per cent and 706 per cent—are very high. In Gandhi’s India it is not easy for any government to be seen easing liquor consumption, especially if it is videshi liquor. But the foreigners are hopeful. After all, three envoys—from Britain, France and the EU—have met the finance minister on this. The Indian lobby is gung-ho too. Their argument: duty is high only for cheap stuff, the Indian liquor industry shells out Rs 600 crore to the Centre and Rs 18,000 crore to the states every year. Most importantly, they have a key chief minister on their side.

This is again just one instance of the swadeshi vs videshi battle. Although US Ambassador Robert Blackwill’s broadside was the only publicised essay, the Finance Ministry has had visitors from several countries representing the interests of their transnationals. For instance, a senior official reveals that nearly six embassies have petitioned the Finance Ministry for the removal of the differentiation between Indian and foreign companies which results in higher rates of corporate taxes for these MNCs.

Among the lobbyists it is the transnational army that is the most well prepared, both in terms of presentation and perception management. Armed with reports by mnc consultancies, the report of the prime minister’s advisory council and other government papers, envoys have been tugging at the Finance Ministry to slash tariffs, alter, relax or change investment limits to enable their companies an entry into the one billion-strong market. A senior official in the Planning Commission sees nothing wrong though. “If India is to become competitive in exports and enhance foreign direct investment it will have to review the protection afforded to the domestic industry.”

You would think that makes sense but somehow the Indian political economy is loath to accept sane counsel. Which is what makes lobbying so important and tediously secretive.
Clearly, there is a strong case for transparency. A way forward is to follow Andhra Pradesh Chief Minister N. Chandrababu Naidu who has put his budget proposals on the Net. But for that industrialists have to stop expecting the government to be a profit guarantee corporation. More importantly, the system will need to let go. Will this happen? Kalantri provides a nugget in response: “We have over 278 laws covering just direct taxes when even a country like Ethiopia has just 78.”

It will take quite some time to reach Ethiopia’s levels. Till then lobbyists and the budget circus will roll on.

—with Malini Goyal