With the NDA’s defeat in Bihar raising fears that the Centre’s legislative agenda would be “jammed” in Parliament, the government may bank on the executive to push through reform and policy measures — from rolling out the Goods and Services Tax (GST) in parts to getting the higher income group to give up cooking gas subsidy.
“Ministries will be asked to identify measures that can be quickly taken by the executive, what we call the low hanging fruits,” said a senior official, who did not wish to be named.
For starters, officials indicated that the Goods and Services Tax (GST), which has been stuck in Parliament, can be rolled out in parts without having to necessarily go through the legislative process. “A GST without the backing of a statute is not the best option. But even if we can move ahead with a GST which adds value to economic output, it will be worth the effort. This has not yet been discussed with the finance ministry,” the senior official said.
Senior officials said the focus leading up to the Budget would be on further opening up sectors for foreign direct investment, evolving a mechanism to handle stressed assets in the banking sector, ensuring strategic disinvestment in some PSUs and providing incentives to the private sector specifically for infrastructure projects.
Some of the short-term goals on the table, a senior official said, include getting those with a taxable annual income over Rs 10 lakh to give up their cooking gas subsidy, a stake sale in IDBI Bank and increasing FDI limits in key sectors such as media.
Another official said the government was not overly concerned about the political fallout of decisions being taken to clear up the “mess” in certain sectors.
“A case in point is the package to revive power distribution companies. In UDAY (Ujwal Discom Assurance Yojana), financial discipline will be enforced through alignment with state finances. This has a political cost, but in the long-term interest of growth, we have not shied away from doing it. Its implementation will be actively pursued,” the official said.
Officials said the government was also aware of the situation that construction companies executing projects for PSUs find themselves in. “There are estimates that about Rs 2 lakh crore is pending with various Central and state PSUs. Projects are stuck for not much fault of the companies who find that despite arbitration awards going in their favour, individual ministries contest in the higher courts. The projects remain stuck and their money too. We will talk to the ministries concerned,” the official added.
On the issue of stressed assets impacting the banking sector, another official said that a clean-up proposal was discussed by the government last May and a presentation made to the Prime Minister’s Office. “It was not pursued,” said the official.
The RBI did introduce a new strategic debt restructuring mechanism allowing banks to take over management of private companies that are unable to repay loans. “But there is realisation that something more fundamental needs to be done,” the official said.
Talking about proposals that may not be popular, the official said the move to do away with LPG subsidies for those earning over Rs 10 lakh a year was based on the tax department’s data. “There are just 25 lakh individuals with incomes over Rs 10 lakh. This is quite unbelievable, but if that be so, then this class of ‘super rich’ should not be getting gas subsidy,” the official said.
