No back-door entry for defaulting promoters: FM Nirmala Sitharaman

Statement comes in response to concerns over haircuts in insolvency cases

Defaulting promoters were not allowed to bid for their own insolvent companies so that they did not get to take control of these companies at lower prices through the back door, Finance Minister Nirmala Sitharaman said on Thursday. The statement, during a discussion on the Finance Bill in the Rajya Sabha, came in response to concerns raised by some members over haircuts in insolvency cases.

In her Budget speech on July 23, Sitharaman had proposed an integrated technology platform for all stakeholders in debt resolution — the Insolvency and Bankruptcy Board of India (IBBI), lenders, and tribunals — for quick, uniform and efficient rescue of distressed companies. The Budget process was completed on Thursday with the passage of the Finance Bill in the Rajya Sabha.

 

In line with the Interim Budget presented in February, the July Budget maintained capital expenditure, as indicated earlier, at Rs 11.11 trillion, Sitharaman said. Private sector investment was increasing since the pandemic, rising to Rs 6.1 trillion in FY23 from Rs 4.9 trillion in FY22, she said. High-frequency indicators in manufacturing, such as the Purchasing Managers’ Index, had been expanding for three years, in contrast with the United Progressive Alliance (UPA) era, when manufacturing activity contracted for eight consecutive months in 2013. The production-linked incentive scheme for 13 sunrise sectors was bearing results, especially in telecom, she added.

“In agricultures & allied sectors, we have not reduced but given more. Compared with Rs 1.44 trillion allocated last year, this time it is Rs 1.52 trillion,” she said. “In a nutshell, the Budget balances several overriding imperatives — growth, employment, capital investment and fiscal consolidation. We have tried to balance them.”

On altering the long-term capital gains (LTCG) regime, Sitharaman said: “We received a lot of presentation after our Budget, particularly for LTCG without indexation at 12.5 per cent. Having heard a lot of inputs, we brought an amendment and changed it. The current tax proposal gives taxpayers an option for LTCG on real estate acquired before July 23.”

Responding to concerns around household savings, she said: “Small savings alone are not the portfolio. People have found different portfolios which are helping them. Financial household savings today have to include other portfolios which are available to small families.”

Further, the FM said the government’s approach since 2021 had been of progressively exempting all life-saving drugs, which were particularly imported for personal use, from duties.

On improving the tax system, she said the Central Board of Direct Taxes was working on income-tax refunds in a systematic manner. “We have consistently improved our performance in the last three years. The average processing time has been reduced from 93 days in 2013-14 to 10 days in 2023-24.”

She also clarified that the securities transaction tax was not so much for revenue considerations but to bring those spending big amounts within the tax net.

On goods and services tax (GST) on medical insurance, the minister asked protesting members in the House if they had asked their state representatives to push the GST Council to take up the matter. “The GST Council is a constitutional body that has taken a call. Now calling a decision by a constitutional body “daylight robbery” is wrong.” Mentioning the Delhi liquor policy case, she asked how much loss the exchequer incurred due to the “faulty policy”.