India keen to reform subsidies, tax rules: Jaitley at Davos

23 Jan 2015


Finance minister Arun Jaitley, pursuing his government's agenda of wooing international investors, told the ongoing World Economic Forum (WEF) in Davos, Switzerland that the government was keen to rationalise subsidies and rebuilding the credibility of its tax structure.

Among other things, he suggested that the government may convene a joint session of parliament to get the insurance bill (allowing more foreign investment in the sector) passed if it is not cleared by the Rajya Sabha in the coming Budget session.

He clarified that subsidies would not be eliminated, but only rationalised.

Specifically on the burdensome oil subsidies, Jaitley on Thursday said more fuel subsidy reforms were on the anvil to cut the centre's fiscal deficit.

On the government's much-criticised resort to ordinances to pass difficult legislations, Jaitley said there is a law that if someone invests during the ordinance period, it will be irreversible.

''So we want investors to come in straight away. Those who come in before 31 March, they have a permanent entry,'' he said.

Speaking at two back-to-back events on the second day of his arrival at Davos, Jaitley said, ''As far as LPG is concerned, the first subsidy reform has started this month. From January 1, all subsidies with regards to cooking gas, now goes directly to bank accounts.

''In the next stage, we have to carve out families who are not entitled … kerosene is used both as fuel and also in dark areas in India [which lack reliable electricity supply]. But kerosene is also being misused in many areas. So the next area we intend tackling is kerosene,'' he said.

''Elimination of subsidies in India, a country where one-third of people are still living in poverty conditions, is not possible, it's not even desirable. But we have to rationalise our subsidies,'' he said peaking to investors at a breakfast meeting organised by CII along with Boston Consulting Group and another session devoted to India at the WEF.

Racing against time to convert various ordinances into law in the Parliament session that will be dominated by financial business, Jaitley expressed confidence that insurance bill will be passed in the Rajya Sabha because Congress is also in favour of it.

''If it is not approved, we will go for joint session of Parliament. If it is delayed beyond six months, we will go for joint session where we will have majority,'' he said.

Apparently referring to the controversial retrospective taxation of the previous government that spooked global investors, Jaitley said one major challenge was to re-build credibility of Indian taxation structure.

''I have publicly said I am against adversarial taxation. Currently I am in the process of making Budget and I have seen that I have not earned a single rupee from all those contentious cases. All I have got is bad image and no money,'' he said.

He was obviously referring to the disputes over tax on Vodafone and other foreign companies which the Income Tax Department lost in courts. But he did not mention that his government has so far made no serious move to repeal these laws.

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