India Inc has strongly favoured divestment of government-owned companies saying the Budget should set a target of sell-off proceeds for 2004-05.

Responding to a questionnaire from PTI, industry bodies and corporates said they wanted tax breaks for India Inc to invest heavily on infrastructure and agriculture.

Indian industry also demanded a transparent policy in the budget to attract $15 billion FDI annually, as targeted in the Common Minimum Programme of the United Progressive Alliance.

On the contentious issue of divestment, apex industry chambers -- CII, FICCI and Assocham -- were unanimous that Finance Minister P Chidambaram should set a target amount for receipts from sell-off process.

"The government should go ahead with divestment of its shares and privatisation. The proceeds should go to a fund dedicated exclusively for socio-economic development of rural India. The divestment target should be at least Rs 25,000 crore (Rs 250 billion) per annum," FICCI said.

The CII left the decision to give up or dilute ownership in public sector units with the government, but said that "the decision to privatise or divest should not be driven by the need to raise revenue. The government needs to set a target for divestment."

"Budget should definitely have a divestment target, said Assocham.

Favouring privatisation of non-strategic profit-making PSUs, the PHDCCI said, "The government should address the vital issue of divestment as the rate of return on PSUs is below the opportunity costs of capital invested."

Expressing concern at the present sectoral caps on FDI and ambiguous policies, India Inc strongly pitched for a transparent regime to push up FDI in key sectors like infrastructure, retailing, insurance and telecom.

"FDI has to be raised to 5.0 per cent of GDP," FICCI said, adding that the government should hike the sectoral FDI cap in insurance (from 26 to 49 per cent), telecom (from 49 to 74 per cent) and allow 26 per cent FDI in retail sectors.

Asking the government to remove bureaucratic and administrative hurdles, the CII said: "With the exception of a few  strategic industries, the requirement to seek any form of permission for making investment should be removed."

Assocham asked government to create enabling environment, emphasis on infrastructure and concentrate on sectoral FDIs.

"There is a need for fast track and time bound clearance of FDI approvals and mechanisms for implementation. Ambiguity in policy and lack of unanimity between the Centre and states and the inevitable delay in project implementation persist at the state and operating levels," PHDCCI said.

Mumbai-based Indian Merchants Chambers said the FDI in retail and real estate should lead to asset creation, generation of jobs and technology improvement.

RPG Group Chairman Harsh Goenka said infrastructure was the main bottleneck in attracting FDI. "Retail industry in India is at a nascent stage of growth and the interest of foreign investors in retail will only take off once the market evolves," he added.

S K Khaitan of Khaitan Electricals Limited said there should not be any cap on FDI. "If foreign investors want to set up shops here and thereby generate employment, why should government bar them from doing so?" he added.

On measures to push up investment in industry, CII said Minimum Alternate Tax should be abolished and investment allowance of 25 per cent should be allowed.

FICCI said corporate tax rates should be reduced, investment allowance reintroduced, carry forward of losses and strengthening of development financing institutions to boost the manufacturing sector.

"Government must provide 100 per cent tax incentive for all infrastructure projects and minimal conditionalities attached," it said, referring to a massive $350 billion investment need for the core sector.

To push up investment in agriculture, CII said: "Weighted income tax deduction available to investments in R&D under Section 35 (2AB) should be extended to investments made in agricultural extension work," it said.

On increasing investments in infrastructure, the chamber suggested simplification of rules relating to joint venture partnerships, relaxation in depreciation provisions, a 5 per cent cess on passengers to create a Railway Development Fund, liberalisation of FDI in aviation, encouraging rural housing and power reforms.

Ficci said barriers to storage, transport, sale and exports of farm products should be removed along with repeal of Essential Commodities Act and Agriculture Produce and Marketing Act.

PHDCCI favoured continuation of tax breaks to boost investment in manufacturing as it did in the past.