Budget 2011:

Progressive, development-oriented

The following is the speech made by Minister of Economic Development Basil Rajapaksa during the Budget debate in Parliament.

I am happy to wind up the debate on the Budget on behalf of the Government. President Mahinda Rajapaksa in his first Budget after his second swearing-in showed the direction in which he would lead the country. I am also happy that the Tamil National Alliance (TNA) decided not to vote for the Budget, but support the Government’s resettlement program. Resettlement is in fact more difficult than settling anew! LTTE terrorists mined the land, blasted roads, culverts, anicuts and irrigation canals and destroyed schools. The Government imported demining machinery worth over Rs. 700 million apart from the colossal investment made on infrastructure development prior to the resettlement of displaced persons. The subsidies for these took a heavy toll on State coffers.

Under the Northern Rehabilitation emergency program of the Ministry of Economic Development, we have allocated Rs. 100 million for 30 mini irrigation projects - Kanakarayankulam Rs. 10 million, Mullikulam (Mannar) Rs. 38 million, Periyapachchi Rs. 60 million, Kattawana - Maradamadhu Rs. 65 million, Welimarathamulla anicut Rs. 90 million, Adampan Rs. 50 million, Tharumadu anicut Rs. 50 million, Kanagawahai (Kilinochchi) Rs. 25 million, Pudalumuttu Rs. 40 million, Kokavil (Mullaitivu) Rs. 20 million, Pannankaman Rs. 20 million, Malavi Rs. 45 million, and repairs to 10 irrigation canals and 10 ponds in Jaffna Rs. 50 million. In all, we have expended Rs. 1,385 million for irrigation works and Rs. 1,065 million for roads.

Similarly, we had allocated Rs. 1,535 million to promote drinking water schemes - Nedunkerny (Jaffna) Rs. 200 million, Adampan (Mannar) Rs. 195 million, Vettatalawita Rs. 195 million, Thevampity Rs. 170 million, Oddusudan (Mullaitivu) Rs. 100 million, Malawita Rs. 200 million, Pandiyakulam Rs. 200 million, Marthakery Rs. 25 million and Velvettithurai Rs. 250 million. Sums worth Rs. 204.7 million have been spent on 43 cooperative buildings, Rs. 1,672 million on 258 food, fertiliser and paddy storage buildings; agrarian and school buildings and other provincial office complexes were expanded, in addition to Rs. 99 million spent for peripheral roads. Under the Yali Pubudamu program, Rs. 585 million for Yoda Wewa and Rs. 2,437 million for a number of irrigation tanks in the Mannar district were allocated.

The Northern Province received Rs. 244,835 million under the overall northern development blueprint while of the foreign aid from the World Bank, Japan and Asian Development Bank Rs. 8,416 million was allocated to the North and the East in 2009. The other districts of the country received only Rs. 3,581 million. In 2010, Rs. 8,057 million had been allocated to the North and the East compared to Rs. 3,261 million for the other districts of the country.

Roads, electricity, water and telecommunications are essential components of national development which we have embarked upon. Of the five major roads starting from Mullaitivu town, three are being redeveloped. The remaining two roads will be redeveloped later.

As at May 19, Mullaitivu did not have any electricity. Today the facility is available to 18 percent of the population; in Kilinochchi and Vavuniya 66 percent - 75 percent have electricity, in Jaffna 60 percent - 72 percent and Mannar 37 percent - 52 percent. As at present 118 schemes have been completed at a cost of Rs. 826.2 million. President Rajapaksa initiated action to restore the electricity supply in the Northern Province.

Defence is given topmost priority in every democracy, without which development and stability are impossible. In a way, it is an important investment. For 30 years the country suffered due to terrorism and as such national security is very important. There is a perceptible improvement in the salaries of employees.

Capital expenditure

Let us draw our attention to capital expenditure. This expenditure is on the decline. The capital expenditure for 2009 is Rs. 30,533 million. It dropped to Rs. 14,451 million in 2010, while the provision for 2011 stands at Rs. 11,180 million. The deficit is around 50 percent - from Rs. 30,533 million to Rs. 11,180 million!

The recurrent expenditure has decreased from Rs. 174,973 million in 2009 to Rs. 170,848. Compared to the GDP, it has registered a decline of 3.63 percent in 2009, 3.06 percent in 2010 and 2.71 percent is projected for 2011, 2.36 percent for 2012 and 2.07 percent for 2013.

Compared to the total budgetary provisions, the allocation for defence represents a reduction which cannot be brought down. It is pertinent to point out that the Defence Ministry provision includes bodies such as the Hambantota International Conference Hall, UDA Hambantota district office, Sri Lanka Coast Guard Department and several other government agencies.

The eight percent increase in electricity tariff applies to those consuming over 90 units. Of the 4,557,000 consumers 70 percent use less than 90 units, 1,100,000 use between 1-30 units, 1,300,000 between 31-60 units and 800,000 between 61-90 units per month. We always encourage people to protect the environment and save electricity. The increase in tariff does not affect small-scale and middle level industries. A slash of 25 percent in electricity rates has been effected as a concession to places of religious worship, government hospitals, schools, vocational training centres and universities. Our investment in electricity generation in the next two years will exceed Rs. 64 billion in our pledge to supply electricity to each residence and village.

Government organisations which suffered losses during the UNP regime have recorded a profit of Rs. 11,982 million. It increased to Rs. 20,000 billion in 2010.

The projected profit for 2011 is estimated at Rs. 26,039 million. The President re-vested in the Government several ventures such as Shell Gas, Insurance Corporation, Telecom and SriLankan Airlines, the national carrier, which will be made profitable.

Independent economy

The President during his recent swearing-in said that Sri Lanka should be developed as a true Sri Lanka. Ours is an independent economy with a national character. As in our foreign policy, our economy is also non-aligned.

We have received aid and loans from new foreign sources. The Mahinda Chinthana is our indigenous model! Though economic development is the pivot, national development is not complete without social development, political development and cultural and moral development!

Political freedom, media freedom, freedom of speech and universal franchise are integral components of national development. The Mahinda Chinthana gave pride of place to the individual to be followed by his family, village, country and eventually the world! Similarly, the Budget has given due regard to the aspirations of all sections of the population.

As far as the urban sector is concerned, the gap between the haves and the have-nots has reduced from .57 to .44. It is possible for us to increase the GDP by investing in two or three mega projects or setting up five or six blue-chip companies. On the contrary, our vision in keeping with the Mahinda Chinthana is to ensure development from the grassroots level, from the individual to family and village! The Budget has provided relief to the vital sectors such as agriculture and plantation, and for those engaged in paddy cultivation, tea, rubber, coconut, condiments, subsidiary crops, and fisheries and livestock as well.

The public servants, their counterparts in the private sector, and those in foreign employment too have been given adequate relief. In addition, three-wheeler drivers, self-employed persons, pensioners, members of the Security Forces, small and medium level entrepreneurs, professionals, expectant mothers, children, adults, women and the disabled too have been adequately benefited by the Budget.

Tea Smallholders have earned an income of Rs. 6,375 million in addition to the Government’s fertiliser subsidy of Rs. 1,000. Rubber production too has registered a considerable increase followed by a similar increase in income as well. The RSS smoked rubber and crepe rubber prices have gone up significantly. Compared to the previous Maha season, the 2009-2010 Maha season has produced 2.63 million metric tons of paddy, an increase of 10.3 percent.

Paddy cultivation

The Jaffna and Mannar districts have brought 4,424 ha and 2,741 ha under paddy cultivation. Under the giant tank scheme, 2,741 ha in Mannar will be expanded to 14,000 ha. The Eastern Province has cultivated paddy on 150,696 ha, an increase of 10 percent compared to the previous year’s 135,000 ha. Due to the use of fertiliser the harvest has increased from 4,421 kilograms to 4,583 kilograms per hectare. A harvest of 1,559 million tons is expected during the Yala season - an increase of 23 percent. We hope that 2010 will be the landmark year in which we could reach the highest ever target since Independence of 4,189 million tons - an increase of 14.7 percent.

During the 2009-2010 Maha season maize, red onions and soya beans recorded a harvest of 127,761, 31,734 and 1,353 metric tons - an increase of 11.4 percent, 50.8 percent and 70 percent.

The potato and green chilies cultivation suffered a decline due to the non-receipt of seed potatoes in time and farmers giving up green chillie cultivation in favour of paddy cultivation.

The soya beans cultivation was rescued at the 11th hour since we made arrangements to purchase the harvest for Triposha. The sharp drop in the Kurakkan and black gram cultivation was offset by the Government’s incentives for farmers. At present black gram cultivation is flourishing in the North and Vavuniya.

The increase of the subsidy to Rs. 50,000 per hectare for tea smallholders, a recycling loan facility, incentives for plantation companies for replanting, redistribution of land among the planters for new planting, encouraging the Tea Research Institute to improve techniques, research on high quality tea production and increase of cess duty to Rs. 10 per kilogram of tea for export are some of the progressive measures in the Budget.

The drop in coconut prices last July and the overall decline in the industry have discouraged coconut cultivators. Rs. 200 million has been set aside to counter the blight which took a heavy toll on coconut cultivations in the South. It is now opportune to rehabilitate the coconut industry while promoting alternative cultivations.

Several measures have been taken to upgrade rubber cultivation in the country. New planting in Moneragala, Vavuniya and the Mullaitivu districts, the increase of the subsidy for replanting, a further subsidy of 50 percent to improve cultivation, and the increase of the Rubber Control Department’s position from Rs. 500 million to Rs. 750 million are some of the steps taken to improve the industry. The President has launched a program to upgrade seed farms.

Seed farm development

The implementation of a three-year seed farm development program at a cost of Rs. 700 million, the Agriculture Department’s project to work with the private sector to expand the seed farms, a five-year tax holiday for investment in seed farms, improvement of quality seeds and the fertiliser subsidy are salient features of the Government’s commitment to ameliorate the agriculture sector. Due to the increased investment, the fisheries sector in 2010 recorded an increase of 171,100 metric tons - an increase of 10.5 percent compared to the previous year.

The fishing industry in the North and the East is also in progress. Action has been taken to increase the harvest in the Northern and Eastern Provinces by 50 percent. The Budget in providing relief to the fisherfolk, has done away with levies such as registration fees and repair charges. The Budget has proposed to provide loans at a seven percent concessionary interest rate to encourage inland fishing. Facilitating long-term loans and a five-year tax holiday are other measures proposed. We have set apart Rs. 300 million for the Tourist Development Authority to upgrade the tourist industry in traditional fishing villages.

We have also taken steps to herald a self-sufficient domestic economy, which could in turn ensure a nutritious meal to the beneficiaries. Relief has also been provided to 400,000 milk farmers under the expansion program of the Livestock Department service network.

The President took the initiative to improve the standard of living of around 1.3 million public servants when others attempted to reduce the strength of the public service. This Budget too has provided adequate relief to the public servants such as a five percent salary increase benefiting 1.3 million, and an increase of Rs. 600 from January, which works out to an overall increase of a minimum of Rs. 1,250.

Some could even draw as much as Rs. 3,000 per month. Around 800,000 public servants will benefit from the removal of salary anomalies to be implemented in July.

University lecturers have been assured an allowance of 25 percent. We will extend duty free concessions to around 30,000 professional and management personnel to import vehicles. Ten thousand graduates will be recruited and employment opportunities would be expanded in State banks and other financial and management institutions. Over 1,300 nurses would be recruited to the Security Forces.

Relief for employees

The Budget has also provided relief to 4.5 million private sector and corporation sector employees. The pension scheme for the private sector has made it more attractive to prospective job seekers. The relief provided in the Budget is diverse. The exemption of those earning less than Rs. 50,000 in monthly income from tax which benefits around 200,000 middle level income earners, limiting PAYE Tax to Rs. 600,000 per year, increasing the income tax limit from Rs. 300,000 to Rs. 500,000, exemption from tax on interest benefiting over 4,000,000 including pensioners, exemption of EPF benefits of 50,000 corporation and private sector employees from tax are other progressive measures in the Budget.

The President has set aside one billion rupees as initial capital for the proposed pension fund for over 1.6 million of expatriate workers who remit foreign exchange to the country. The Budget has provided considerable relief to those self-employed. The removal of VAT on leasing vehicles such as three-wheelers, lorries and private coaches helps improve the prospects for self-employment. It has brought direct relief to over 550,000 people engaged in the transport service. The customs duty on spare parts too has been withdrawn as a measure of relief.

Steps have also been taken to introduce an instant loan scheme through the People’s Bank and Samurdhi Bank to improve the lot of pavement hawkers. The setting up of a self-employment bureau, appointment of special offices to each Divisional Secretariat to provide solutions to problems confronting small-scale traders, tax exemption of three-wheelers, and vehicles transporting agricultural commodities, establishment of a Citizens Pension and Insurance Fund to which fishermen, farmers and the self-employed could contribute, are the other people-friendly Budgetary proposals.

Special attention has been paid to the potential in floriculture, including ornamental plants. The Botanical Gardens have launched a Rs. 100 million project to train local women in floriculture.

Pensioners’ lot

The pensioners’ lot too has been improved. Each pensioner will receive an increase of Rs. 250 from next month as pension while those who had retired prior to 2003 will be entitled to Rs. 750, which total Rs. 1,000. Pensioners who retired between 2003 and 2006 will receive an additional Rs. 250, and the earlier Rs. 250 making a total of Rs. 500. There are 450,000 Government pensioners, and every pensioner will receive an increase of Rs. 1,000 per month from January while those who retired between 2003 and 2006 will be entitled to Rs. 500.

To improve the economic status of soldier families Rs. 3,000 million has been provided for three years. A sum of Rs. 100,000 will be awarded to the third child born to soldier families. The removal of debit tax, reducing VAT from 20 percent to 12 percent, lowering tax on profit from 35 percent to 28 percent and the relief extended to bakery owners and those in the tourist industry are other relief measures included in the Budget.

Constraints such as taxes on the gem and jewellery industry and garment industry have since been withdrawn.

Software has been exempted from VAT and Nation Building Tax. A sum of Rs. 50 million has been provided to give relief for professionals, artistes, media personnel and sportsmen whose role is considered significant in the context of national development. The Budget has proposed to set up a National Sports Development Fund and set aside 10 percent of the revenue earned from income from lotteries and tourist hotel room charges to promote sports.

The provision for expanding the Thriposha program and improving the ‘nutrition pack’ for expectant mothers has been increased from Rs. 1,100 million to Rs. 1,500 million. A sum of Rs. 200 million has been allocated to upgrade pre-schools in village areas to benefit over 200,000 students. Benefits will also accrue to over 600,000 adults and wage earners of around 600,000 Samurdhi families with the grant of one billion rupees to enhance the monthly assistance for adults, differently-abled persons and those rendered helpless due to terrorism.

Wonder of Asia

We will invest in ports, airports, highways and power generation projects to make Sri Lanka the Wonder of Asia.

Steps have also been taken to improve knowledge via upgrading the level of pre-schools and 1,000 primary schools, developing English language skills, increasing facilities for universities, upgrading a few local universities to international standard and granting a 25 percent salary increase for university lecturers.

We have allocated Rs. 30,000 million for the fertiliser subsidy, Rs. 2,050 million for nutrition packs, Rs. 250 million to provide a glass of milk to students, Rs. 2,400 million for school textbooks, Rs. 1,595 million for school uniforms, Rs. 1,400 million for season tickets, Rs. 9,300 million for the Samurdhi subsidy and Rs. 2,892 million for public assistance. We have also provided Rs. 12,500 million for the disabled war heroes. For the first time we succeeded in restricting the Budget deficit to 6.8 percent of the GDP.

All these worthy tasks could be accomplished because our gallant Security Forces heralded peace throughout the country. Therefore on behalf of the Government, I thank the Defence Secretary Gotabaya Rajapaksa and the Security Forces and the media.

I also wish to thank those who stood by the Government despite misleading disinformation campaigns and voted President Mahinda Rajapaksa and this Government to office with an unprecedented majority vote.

Translated by K.D.M. Kittanpahuwa