FM Arun Jaitley: Steps for subsidy reform soon

Written by fe Bureau | New Delhi | Updated: Aug 31 2014, 06:28am hrs
ArunUnion finance minister Arun Jaitley with MoS Nirmala Sitharaman addressing the media, in New Delhi on Saturday. (PTI)
Heartened by the latest economic data that showed the countrys gross domestic product (GDP) expanded at the fastest rate of 5.7% since the last quarter of FY12 in April-June this year, finance minister Arun Jaitley said on Saturday he was now more confident of meeting the fiscal deficit target of 4.1% of GDP for FY15 than when the Budget for the year was made. He said the Expenditure Management Commission headed by Bimal Jalan would give a report on subsidy rationalisation expeditiously so that a good beginning can be made in the current year.

Addressing the media, the minister termed the Supreme Courts decision of declaring all 218 captive coal block allocations between 1993 and 2010 as illegal and arbitrary as a silver lining. He said it would lead to fairer methods for allocations of natural resources, but stressed that we cant allow the fate of these blocks to hang in mid-air.

These blocks, he asserted, would need to be utilised for the purpose they had been allocated, which is power generation. While the court is slated to pronounce whether and how these blocks would be de-allocated/re-allocated, the government had earlier made it clear that if these are de-allocated, alternative means of coal supply to power producer would be explored.

Listing out steps taken by the Narendra Modi government to regain investor confidence, the long-term impact of which would be felt gradually, Jaitley said he saw a positive attitude by some main opposition parties towards the insurance bill, which seeks to raise the foreign investment cap in the capital-starved sector to 49%. He added that he was reasonably confident that the bill, now being vetted by a select committee, could be passed in the winter session of Parliament.

Earlier, finance secretary Arvind Mayaram, said the recent data did point to revival of growth. He expressed the hope that an ambitious disinvestment agenda for the year could yield even higher revenues than budgeted. As per the FY15 budget, the government expects to garner proceeds of R43,425 crore from stake sales in 11 state-owned companies, and at least R15,000 crore from sale of residual stake in Hindustan Zinc and Balco, both private firms. As reported by FE earlier, the disinvestment departments internal estimates suggest that the combined target of R58,425 crore could be outstripped by about R13,000-15,000 crore.

Jaitley was unambiguous in his preference for an earlier reduction in policy rates by the Reserve Bank of India. When asked when exactly he would want the RBI to cut rates, he said, Left to myself, very soon... I hope those who decide (the RBI) also hear (us).

Jaitley said inflation continued to be a cause for concern, although he said some growth in inflation cohabited with higher economic growth. Headline WPI Inflation, after remaining persistent around 7-9% in FY13, was showing signs of moderation, the government said, citing the figure of 5.19% in July, 2014. Rating agency Moodys said last week that Indias sovereign rating was constrained by persistently high inflation that was weighing on an otherwise promising economic recovery. Inflation has trended downwards, although there was a slight uptick last month,Mayaram said.

Jaitley said the fiscal deficit targetset by his predecessor P Chidambaramwhich he termed a daunting challenge in the budget speech, now looked certainly achievable. The ministers comments came despite the deficit in April-July being three-fourth of the estimate for the whole year, which he dismissed as traditionally being somewhat unrepresentative of the state of government finances, given the huge tax refund obligations from the previous quarters and the fact that advance tax collections would barely begin in Q1 of any fiscal. Pertinently, the first-quarter fiscal deficit was marginally less than the same in the corresponding period of the previous fiscal. Jaitley said the price of diesel would move in tandem with the market once the under-recovery on the fuel is eliminated.

He said the Centre would try and honour the commitment made to states on central sales tax (CST) compensation, adding that he was speaking to chief ministers and finance ministers of some states who had raised some objections to the structure of the Goods and Services Tax to arrive at a workable formula. If too many items are kept out of GST, then its objectives may not be met, he said.