FM rules out curbing FII inflows

Finance Minister P Chidambaram today ruled out taxing, capping or curbing FII inflows but added that the government would continue to monitor them.

The issue of taxing FII inflows came up after Reserve Bank of India Governor YV Reddy yesterday indicated inflows were a major reason for volatility in the capital market and that their quantity and quality should be regulated.

"Every government manages capital flows. We are also watching capital flows into the country but this does not mean curbing, capping or taxing FII inflows," Chidambaram said on the sidelines of a seminar on water management here.

Reddy had also said price-based measures such as taxes could be examined though their effectiveness was arguable. However, Reddy, late in the night, clarified that he did not mean that FII inflows should be taxed.

"The RBI governor has clarified that his statement was misunderstood. We have spoken with each other. Our thinking process is same," Chidambaram said.

In a separate development, Chidambaram said the Cabinet would shortly approve the national programme for restoration of water bodies. The programme was announced by him in the last Budget, but was yet to take off.

The government would be approaching the World Bank and other agencies after the Cabinet's approval. The programme involves launching a scheme to repair, renovate and restore water bodies that are directly linked to agriculture. The ministry of water resources has identified 15 districts for launching pilot projects under the programme.

"A pilot project will be launched either this month or early next month," Chidambaram said at a national workshop on water resources.

The government had planned to spend Rs 100 crore on pilot projects during the current year but a Cabinet clearance was yet to come.

Once the pilot projects are completed and validated, the government will launch the National Water Resources Development Project and complete it over a period of seven to 10 years.

Water Resources Secretary VK Duggal said only those projects would be taken up which are technically and economically viable. "If it is felt that getting water from other source is cheaper than reviving the water body, then we will do it."

The World Bank has already promised about a $1 billion annually to India for water projects for the next four years, its country director Michael Carter said. The bank is willing to fund hydro-electric, irrigation and other "last-mile" water projects where returns are high.

Water Resource Minister Priya Ranjan Dasmunshi said the government is focusing on completing major and medium-sized water projects in a time-bound manner. This, apart from the tsunami-related projects.

"After the tsunami, there's a demand for building sea walls in the vulnerable coastal areas," he said.

Duggal said an estimated Rs 50-60 crore would be needed for restoring drinking water supply in the tsunami-hit areas. The technical reports on the work required is expected by January 25.