It was not that Pranab Mukherjee mechanically passed the finance ministry baton to the prime minister earlier this week. The main contender to the President’s post gave Manmohan Singh a list of a whole gamut of unfinished ministry tasks to be executed to revive the sagging investor confidence and economic growth, facing tough headwinds.
Before stepping down as the finance minister on June 26, Mukherjee prepared a handover report for his successor. It listed some of the major steps the ministry had already taken under his regime, besides the measures he initiated but could not take to their conclusion.
The former finance minister handed over a note to Singh, highlighting the need to go for diesel decontrol, tax reforms, disinvestment, rationalisation of expenditure, hike in FDI limit in insurance and pension reforms as some of the key unfinished tasks.
“Reduction of subsidies, decontrol of diesel prices and other expenditure reforms, key financial sector Bills are some of the pending issues,” an official said.
Pending in various stages are Bills pertaining to the direct taxes code, goods and services tax, 49 per cent FDI cap in insurance, pension reforms, the narcotics law, benami transactions, prevention of money laundering, fiscal consolidation and Public Debt Management Agency of India. Industry is now expecting Singh to push all these reforms.
Interestingly, the ministry under Mukherjee itself brought to the Cabinet a proposal to retain the FDI limit in the insurance sector at the present 26 per cent, with some minor reforms. However, at a Cabinet meeting, Mukherjee announced deferment of the Bill. Later, the ministry wrote to the Cabinet Secretariat that the Bill be again taken up, this time with a hike in the FDI cap to 49 per cent.
And, pension reforms did not face as many hurdles from the Opposition as the Trinamool Congress, an ally of the ruling UPA.
The prime minister might also have to take a call on sending a tax notice to Vodafone. Mukherjee did not budge from his stand on retrospective amendments to the Income Tax Act till the end. However, the notice was not sent to the telecom major till his last day in office, as the ministry was taking legal opinion on the issue and did not want to give rise to another controversy by hurriedly taking a move.
Interestingly, Mukherjee was supposed to release the draft General Anti Avoidance Rule guidelines, which were hurriedly released by the finance ministry on June 28 (a day after the prime minister met top ministry officials), the official said. However, release of the guidelines was delayed due to some procedural issues, and Mukherjee had to leave it for the next finance minister to consider it.
Within 12 hours of the release of the draft guidelines, the prime minister’s office tried to dissociate Singh from the draft. It clarified that Singh will play his role when final guidelines will be issued, after considering feedback to the draft.
After Mukherjee’s name was announced as the UPA’s presidential candidate on June 15, the veteran politician told his officials not to bring files on any major policy decisions for his approval.
All the five departments in the finance ministry -- expenditure, economic affairs, disinvestment, revenue and financial services --were asked to compile a list of major pending decisions in their respective areas. There were, however, a few decisions Mukherjee wanted to take before putting in his papers. On June 20, the Presidential aspirant released the Guidance Paper on approach to service tax in the negative list. (It comes into effect from today.)
A day before he left, measures such as increase in FII limit in sovereign bonds and higher overseas borrowing limit were announced to boost foreign inflows. They, however, failed to amuse markets.
The day Mukherjee quit, a format for monitoring speedy implementation of major investment projects was developed. Also, eight FDI proposals of over Rs 100 crore were cleared. Further, he cleared central sales tax compensation for states even as this was considered a major roadblock in GST negotiations with states.
Mukherjee’s much-awaited June 26 meeting with the captains of industry, though, was cancelled.
