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|March 1, 2001||Feedback|
Sinha seeks industry help in selling his reform package
A day after presenting a bold Budget, Finance Minister Yashwant Sinha Thursday sent out another strong signal about the government's resolve to hasten the second generation reforms, and speeding up the pace of the privatisation programme, not withstanding political opposition.
Addressing captains of the industry in New Delhi, Sinha said the government will go ahead with privatisation of PSUs irrespective of whether they were profit making or not and despite the ''political challenges and uninformed criticism''.
While laying down the divestment policy for the year, the government has not made a distinction between the profit making units and others.
''It is not relevant'', he said. ''Political parties might alter their stand. We are prepared to take any risk and do what we think is economically right'', Sinha added.
The finance minister was addressing members of the Federation of Indian Chambers of Commerce and Industry (FICCI) at a national seminar on the Union Budget 2001-2002 in which a galaxy of corporate chiefs were present.
He said he has repeatedly been asked since Wednesday what was the credibility of the government's statement that it will achieve the higher target of Rs 120 billion set in the Budget, when last years achievement was far short of the Rs 100 billion target for 2000-2001.
Having outlined a detailed road map for the second-generation reforms in his Budget, Sinha sought the industry's cooperation in meeting the challenges by shouldering a greater responsibility and the faith that has been reposed in them.
In particular, he asked them to show far sightedness in dealing with labour reforms suggested in the Budget.
''Don't leave me alone now'' he said. Later, he added that he was glad that the industry was happy with the Budget.
He asked the business community to show magnanimity in implementing labour reforms, especially the amendment to the Industrial Disputes Act.
To the industrialists' demand that the periodicity of retrenching contract labour be reduced to 15 days, he said it should remain within 60 days, as there is very little scope for lateral employment in the country.
The Budget has proposed amendment of the Industrial Disputes Act for bringing about the contract system.
The finance minister said, in profit making PSUs, the periodicity of retrenchment is 60 days while it was 45 days in the not-so profitable PSUs.
Sinha said he was aware of the protests and the opposition that was going to build up.
''These are very serious issues,'' he said and advised the industry to handle them properly so that the working class does not become needlessly suspicious of business.
Sinha said in the new insurance scheme being worked out for the organised sector, the employers would have to contribute. If a worker loses his job, under the scheme, he will be provided with an income for a year till he gets an alternate job or becomes self-employed, he said.
Sinha rejected the criticism that he was influenced by multinational organisations and domestic industrial associations while preparing the Budget.
He urged the industry to bury the differences and said the need of the hour is harmony. In fact, the polity is also very fractured.
Sinha said he was concerned with intergenerational equity.
''We, as a nation, must look beyond today, tomorrow and even a decade and into the distant future which is still hazy'', he added.
Talking about the Budget's suggestion to hike user charges, Sinha said there were vested interests involved in the current system of managing public utilities and people have got used to the concessional charges and free availability of services.
However, it has been observed that the people wanted quality services and were not so much concerned about cheap availability.
Therefore, there is tremendous responsibility of service providers for upgrading the quality of service, Sinha said.
''It is the objective of the government to put the determination of user charges outside the realm of political jurisdiction and make it purely based on economic logic'', he added.
To a suggestion from a corporate leader that a further cut in Bank Rate by the Reserve Bank of India would add to the feel good factor generated by the Budget, Mr Sinha said "I am a great believer in the autonomy of the Central Bank and after laying down the fiscal policies, I leave the rest to the Governor who can take account of the fiscal consolidation that has been attempted."
Defending the move to reduce the interest on small savings, the finance minister said, "Over a period of time, a huge subsidy has crept into the interest rate regime and this makes no economic sense. Why should the government subsidise interest rates?" he asked.
A committee has been appointed to look into the finer details and come out with ways and means of linking the interest rate on contractual savings to inflation, he said.
Regarding the single rate regime of CENVAT at 16 per cent, Sinha rejected demands for bringing down the rate of certain items such as packaged biscuits as it would go against the principle of uniform value addition taxation.
Currently, there are only four items left with eight per cent rate. These are Kerosene, LPG, cotton yarn and pump sets upto 10 HP, he said.
Describing the move to de-reserve four items for the small scale industry (SSI), Sinha said this was not against the SSIs but in the larger interest of the country. About ten years ago in many of these areas "we were far ahead of China but later slipped into the shadows".
"We have embarked on reforms so that we can become competitive and flourish", he added.
Sinha said fiscal consolidation was an important aspect of the Budget. After several years the fiscal deficit target of 5.1 per cent has been achieved for 2000-2001. He could have easily raised an additional Rs 250 to Rs 300 billion more from the market and gone in for a larger fiscal deficit.
This year's target is 4.7 per of the GDP, which involves reduction of 40 basis points.
"I could have said I will reduce it by 50 basis points but I want to be on the dot", he said.
Sinha asked the chambers to send in their suggestions, which could still be looked into. He agreed to a suggestion that more should be done than mere tax sops provided in the budget for long term development of the food processing sector.
When it was stated that he had done little for helping women entrepreneurs, Sinha quipped "women should learn to fight on the basis of equality and tax concessions were not the best way for development".
The captains of the industry widely welcomed the budget describing it as a 'landmark'. It has not only brought the feel good factor back but the "feel very good factor", they added.