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No tax hike in this Budget: Chidambaram

January 14, 2006 17:40 IST

Ruling out any hike in tax rates in the coming Budget, Finance Minister P Chidambaram has said the United Progressive Alliance government was moving towards consensus with Left parties to open up the retail sector and promised to divest a small portion of government equity in three or four non-Navratna Public Sector Undertakings by March 31.

"I think the tax rates are reasonable. I am not going to increase any rate. I am going to improve the tax administration," he said, while emphasising that the retail sector would be opened up to FDI and the dialogue with Left parties in this regard was on course.

"I can't promise a date but we will begin to see consensus on opening up the retail sector in a selective manner. The consensus is in favour of opening up retail sector and the question is in which part of retail sector will you allow it (FDI)," Chidambaram told Karan Thapar in an interview for CNN-IBN channel.

"FDI will come. It is already coming in cash and carry sector. It has come in the wholesale sector. Retail is the next step. It will come. We are looking at several options. I think the Commerce Minister (Kamal Nath) has spoken about it. Single brand is one option. Metro cities is another

option. These options are being discussed."

The government needed to find a large number of jobs in farm, non-farm, in manufacturing sector and in the low-endeavour services sector, he said emphasizing, "that is why we are arguing for opening up the retail sector."

However, he made it clear he was not promising anything at this stage on retail in FDI and that he would persuade Left Parties on this issue.

Elaborating on taxes, Chidambaram said the effective tax rates were low in this country because of numerous exemptions.

The UPA government has given tax breaks and imposed new taxes. But overall this government has left more money in the pockets of taxpayers and consumers. "There will always be more money in the pockets of consumers."

He discounted the view that the experience of newly introduced Fringe Benefit Tax was 'traumatic' and emphasized that the FBT was here to stay even though it could be simplified by revisiting certain glitches.

On divestment, Chidambaram said that his government has reached an agreement with Left Parties that cash-rich Navratna PSUs would be kept out. In non-Navratnas, government could divest small portions of equity to raise funds and put it in the National Investment Fund.

"What is important is are we able to identify three or four companies to begin the divestment this year. The answer is Yes," he said, adding that divestment is a continuous programme until we build a huge fund. He declined to give names of the PSUs that are likely to divested this year, saying "We don't announce these decisions. These are price sensitive decisions."

Chidambaram did not subscribe to the view that the Left Parties were against pushing reforms, particularly opening up of the retail sector and divestment.

"I think it is too drastic a conclusion that they don't agree with me. They agree with me. But they want limitations placed. We are trying to tell them that these limitations, while it will be good from our point of view, may inhibit the investors."

He said CPI(M) General Secretary Prakash Karat was "pretty open minded. I get the impression that one can engage Prakash and bring him around. But he has compulsions (from some of his colleagues and trade unions) that he has to reflect."

Turning to fiscal deficits and economic growth prospects, Chidambaram expressed confidence that the government will meet the fiscal deficit targets this year and achieve over 7 per cent growth, which was considered to be good performance on the back of high growth of 6.9 per cent in the previous year.

The pause button in achieving Fiscal Responsibility and Budget Management Act targets was pressed only on achieving revenue deficits and not on the fiscal deficit, he said.

"Last year, we pressed (the pause button) on the revenue deficit because of the extra devolution of resources to States as a result of the recommendations of the 12th Finance Commission," he added.

"That has been explained in one whole paragraph of the budget speech. This year, I have said we are obliged to adhere to the FRBM discipline and am going to make every effort to achieve FRBM targets," Chidambaram said.

The country would measure us by growth rate, infrastructure, delivery of services. "The man in my village is not worried about fiscal deficits. He is worried about drinking water, sanitation, roads."

Stressing that the time overruns and cost overruns were causing the deficits, Chidambaram said there were not enough concerns about these in the country. But he cited the examples of Delhi Metro and Hyderabad Airport which were adhering to time schedules and said proper implementation of projects was a top priority of the Government on which much needed to be done.

"I think there is greater awareness that projects must be implemented on time," he said, admitting there was need to remove the infrastructure deficit in the country which was impeding growth.

He was happy to note that modernisation of ports was going on at a brisk pace and said the government was committed to quicken infrastructure development by infusing more public investment and encouraging public-private partnership.

The finance minister also said agriculture growth could not be pushed up to 4 per cent by merely raising the production of wheat and rice.

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