India is open to privatisation of certain loss-making state-owned companies, finance minister Arun Jaitley said on Wednesday, promising more initiatives including reforms in the mineral sector along the lines of the recently-announced plans of coal block auction.
The government also plans to open railways further to private investment, ease restrictive land purchase rules, relax labour laws and raise the foreign investment ceiling for insurance companies, Jaitley said.
“Certainly, I would be interested to look at some PSUs (which) could do much better in private hands,” Jaitley told delegates at the India Economic Summit organised by the World Economic Forum and Confederation of Indian Industry on Wednesday. “Taxpayers can’t continue to pay for loss-making businesses.”
For now, however, the government will stick to selling minority stake in profit-making public sector undertakings (PSUs).
In September, the government had approved share-sale plans in three major PSUs — Coal India Ltd, NHPC and ONGC — that can potentially earn the exchequer `44,000 crore.
Revenues from selling shares in PSUs is critical to the government’s plans to keep the fiscal deficit — amount of money the government borrows to fund its expenses — at 4.1% of GDP in 2014-15.
Jaitley added that some allegations of “crony capitalism” were true under last government, an element of fairness in the system was lacking, such as in the case of coal blocks allocation.
Last month, the government had announced plans to put up coal mines for bidding by private steel, power and cement companies and introduce changes in the law to enable commercial mining in the future, signalling its intent to fully open the sector to private players.
The new auction-based system will replace the earlier controversial policy of allotting coal blocks based on recommendations of a panel of bureaucrats, which the Supreme Court had struck down as arbitrary. The Court had recently cancelled 214 blocks allotted since 1993, a move that threatened a nascent economic recovery.
“We are going to take similar steps with regard to other minerals,” he said. “When we take these steps to eliminate crony capitalism, investors will get a system that is fair and not where they have to depend on the largesse of politicians.”
Over the last five months, the Narendra Modi-led government has unveiled a string of measures to turn India into a manufacturing powerhouse, remove bureaucratic sloth, make the country more investor-friendly and aid its economic recovery.
The finance minister assured investors more reforms in the coming months including plans to ease rules for the industry to buy land for setting up factories.
“We need to pursue one positive direction. Reforms are not about one sensational idea,” Jaitley said. “I am quite satisfied with the beginning made by the government. We will take time to rectify the economy. People are now getting convinced that India is a place to invest in,” he added.
Criticising the UPA government’s move to introduce retrospective taxation, Jaitley said: “Retrospective tax was a bad idea, which damaged the economy.”
Praising Prime Minister Modi, Jaitley said, “I have seen his (PM’s) interactions with the bureaucracy. He has made himself completely accessible to them. He has also given them freedom.”
On India blocking the Trade Facilitation Agreement at the WTO, Jaitley said the government is not opposed to the pact. “This appears so because of the unreasonable positioning by some developed countries. All India is asking for is the ‘peace clause’ on food subsidies to continue till a permanent solution is found.”