Bullish FM receives bear hug

Reforms safe under CMP: Chidambaram

In an attempt to perk up the stock markets, Finance Minister P Chidambaram would visit Mumbai early next week to meet foreign institutional investors, the Securities and Exchange Board of India and captains of the industry to clear their lingering doubts on the United Progressive Alliance's common minimum programme.

Defending the CMP, Chidambaram told mediapersons, the programme was a reaffirmation of the binding commitment to economic reforms taken since 1991.

The cess would be applied based on the "doctrine of proportionality", he said, adding, "any burden will fall only on the persons who can bear it."

Chidambaram also said that double taxation avoidance agreements were here to stay. "DTAAs are well-established instruments in virtually every country in the world. The point is, if a case of misuse arises, it should be stopped," he said, adding, there was no reason to apprehend that DTAAs would go. The ministry had uncovered misuse in one or two cases, and that too by Indian companies, he said.

Clarifying the CMP's stand on power reforms where it called for deferring the unbundling of state electricity boards beyond June 10, Chidambaram said certain provisions of the Electricity Act, 2003, needed a review.

"Pending review, we are postponing the unbundling in SEBs," he said. After addressing the apprehensions in the Act, the unbundling of SEBs would happen, he said.

The ministry sought to distinguish between unbundling of SEBs and privatising distribution. Citing the example of Maharashtra, he said, "There are SEBs. There are also private distributors of power. Unbundling of SEBs is not a prerequisite for privatisation of distribution," he reiterated.

He pointed out that FDI would be encouraged in the core sectors. Although the CMP did not specify the civil aviation sector, Chidambaram said, "I would assume that airports and airlines are included."

The country could absorb $10-12 billion FDI or about two to three times it currently got, he said. FDI would be encouraged in the infrastructure and high-technology sectors, he added.

Denying that a lid was put on labour reforms, Chidambaram quoted the CMP as categorically stating that some changes in labour laws were required.

"These will be undertaken after consultation with the trade unions and industry," he said.

According to the minister, massive public investment in agriculture, manufacturing and infrastructure sectors, and fiscal consolidation were not irreconcilable objectives.

"The FRBM mandates us to wipe out revenue deficit. This done, the fiscal deficit becomes easily manageable. Every country has a small fiscal deficit," he said.

There was tax buoyancy and tax administration was more efficient that it was 10 years ago, he said.

Chidambaram said the public sector would mainly comprise navratnas, public sector banks, LIC, GIC and companies which make profits in an open, global and competitive environment.

"The government will own them, but will give them full managerial and commercial autonomy. They will be free to raise resources in the capital market which will offer new investment avenues to retail investors," he said.

He said, the disinvestment department would be part of the Finance Ministry. "I will implement the policy in the CMP. Any privatisation will be transparent and undertaken after consultations. The loss-making PSUs will be sold off or closed," Chidambaram said.

FM-speak

• No cess on people who can't bear it
• Double taxation avoidance agreements are here to stay
• Unbundling of SEBs postponed, not rejected
• Fiscal consolidation & massive investment not irreconcilable
• India can absorb 2-3 times FDI it currently gets