At a meeting with the Confederation of Indian Industry in Mumbai on Thursday, Kelkar asked the apex body to present a detailed paper on the proposed stock-option scheme and tax exemptions on voluntary retirement schemes to make them more attractive.

Industrialists, led by Wockhardt chief Habil F Khorakiwala, pointed out that employees availing of the scheme would end up paying tax twice, first on the perquisites (difference between offer price and market price), and, secondly, on the capital gains during the sale of stock.

CII members cited examples of developed countries, including the US and Britain, where such schemes are taxed only once at the hands of the employees.

"Our basic objective is to promote ESOP, and we will try to remove the bottlenecks," Kelkar said inresponse.

The finance secretary also hinted that tax breaks might be allowed to make voluntary retirement schemes attractive. He agreed with CII members that employees should be eligible for tax breaks on VRS, or else, the schemes might not meet with much success. "VRS schemes, which are crucial for corporate restructuring, can be a success only if tax exemptions on capital receipts are tempting for employees," a Tata Steel official said.

"I fully agree that the VRS offers should be tempting for employees to make such it successful," Kelkar said, adding that companies should promote the scheme in order to downsize, as also to maintain administrative efficiency.

At an earlier seminar on restructuring of Indian companies, jointly organised by the Ficci and ICICI, Kelkar said that restructuring of the public sector and privatisation assumed "critical" importance in the overall framework of second-generation reforms.

"Without this exercise, it would be difficult to finetune the economy and help permeatethe fruits of liberalisation," Kelkar said.

He also laid emphasis on strengthening the capital market, and said a reduction in the cost of capital was only possible through a strong capital market.