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Monday, October 8, 2012

FM promises new fisc plan, tax law changes

Rules Out Complete Withdrawal Of Food, Fuel & Fertilizer Subsidies, Pushes For GST

New Delhi: Finance minister P Chidambaram on Monday announced the government's intent to draw up a "credible and feasible" fiscal plan, speed up amendments to controversial tax provisions to address investor concerns and push goods and services tax, as part of a fresh set of measures to shore up economic activity. 

    While ruling out complete withdrawal of food, fuel and fertilizer subsidies, Chidambaram told the annual Economic Editors' conference that the fiscal plan, which will be based on a report by the Vijay Kelkar committee, will look at rationalizing subsidies that could result in further price revision, besides better delivery through means such as direct cash transfers. The plan to be announced shortly will lay the roadmap for lower fiscal and revenue deficits over the next five years, with a beginning to be made this year itself, a move that is being closely watched by the markets and ratings agencies. "It is our intention to take steps in this direction so that subsidies are transferred to the beneficiaries directly, quickly and efficiently. I also visualize huge savings in the subsidies bill," Chidambaram said. 
    Already, the government has raised diesel price by Rs 5 a litre and capped the availability of subsidized cooking gas as part of its efforts to rein in expenditure, although subsidized fuel is still expected to leave a Rs 1.67 lakh crore hole on the books of state-owned oil marketing companies. There may be a further increase in diesel price since oil firms are losing Rs 11.65 a litre by selling diesel be
low the prevailing international price. While subsidies may address some of the expenditure-related concerns, Chidambaram said he was hopeful of garnering Rs 40,000 crore from 2G spectrum and Rs 30,000 crore from disinvestment, which is expected to kick off with the stake sale in Rashtriya Ispat Nigam Ltd. A large subsidy bill is one of the biggest concerns for ratings agencies, which have threatened to downgrade India to junk grade if the government does not take immediate steps to reverse the trend. 
    Similarly, to address investor concerns over GAAR and retrospective tax law changes, Chidambaram indicated that the government may not wait until the budget for any amendments and will push the changes as early as possible. At the same time, he said a 
final view was yet to be taken as the revenue department was examining the recommendations of the Parthasarthi Shome committee. 
    He also said that based on the feedback from foreign institutional investors, whom he met in Mumbai on Saturday, the government will initiate further steps. Apart from the direct tax amendments, the minister said that getting the Opposition on board for several important legislative changes was going to be a key part of his plan. While promising to meet political parties to seek support for increasing the foreign investment ceiling in insurance from 26% to 49%, Chidambaram said he will meet Bihar deputy chief minister Sushil Kumar Modi on October 22 to resolve issues related to the implementation of goods and services tax. 

PC CURE FOR ECONOMY 

Govt expects to finalise fresh Direct Tax Code as early as possible 
All subsidies can't be eliminated 
Govt to take measured steps to transfer subsidies 
directly to beneficiaries. 
Visualises huge savings in the subsidies bill 
To meet state FMs on GST. Early resolution of GST issues is expected 
Disinvestment process will be kicked off with RINL 
stake sale this month 
Hopes to meet Rs 30,000 crore disinvestment target and raise Rs 40,000 crore from spectrum auction 
To meet opposition parties for passage of the Insurance, Pension Bills 
Govt to introduce Insurance Bill in Winter Session 
Expects growth to be better than 5.5% in the next few quarters 
Will address issues raised by FIIs


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