Borrowings not to hit interest rates

"There is enough liquidity in the system. One does not see a problem in borrowing," Economic Affairs Secretary Rakesh Mohan told reporters on the sidelines of a Confederation of Indian Industry seminar on Budget 2005-06.

"Given the liquidity, one does not see that kind of pressure on interest rate (because of higher market borrowings)," Mohan said.

When asked whether the government could borrow less than the budget projection, he said, "It may happen (borrowings less than budgeted). It happened last year (2004-05)."

The government's gross market borrowings through dated securities in 2005-06, excluding those under the Market Stabilisation Scheme, are estimated at Rs 13,900 crore.

Mohan said borrowings by the special purpose vehicle for infrastructure would not affect the government's fiscal deficit because it would only be a contingent liability.

Speaking at the post-Budget meeting, finance ministry officials said the Budget would have a trigger effect in raising the purchasing power, which would create more demand in the economy resulting in higher production and profitability for the corporate sector.

Parthasarathi Shome, adviser to finance minister, said the empowered committee of state finance ministers would deliberate the roadmap for giving powers to states to tax certain services. He also said as and when required the Centre would prepare a negative list, on which service tax would not be levied.

Revenue Secretary KM Chandrasekhar said the government had removed most anomalies in the indirect tax framework and would remain whatever remained. He said the government, in consultation with industry, would work out the details of the large taxpayers' unit for payment of excise Customs and corporation tax as a single window trade facilitation measure.

He added that there were a few administrative issues since the three taxes had to be paid at different locations and the timing of payment also varied. Besides, the information technology set-up also had to be integrated. Chandrasekhar said unit would be functional during the course of the year.

In addition, the Customs set up at ports is also proposed to be be revamped to reduce the time spent in clearing consignments. He said the revenue department was also proposed to be restructured to make it more focussed and tax-payer friendly. Meanwhile, CII will be meeting ministry officials to bring in the required changes in the tax.

"There are certain specifics in the tax which are irrational. We will meet the officials to delete such anomalies," N Srinivasan, director general of CII said.