Prime Minister Manmohan Singh and finance minister P Chidambaram are keeping the reforms tempo alive. Priority is on tax reforms, reviving investment and subsidy management. The ball has been set rolling in each of these areas over the previous weeks and with the Congress endorsing tough decisions like foreign investment in supermarket chains, Mr Singh and Mr Chidambaram could cut through the resistance to the next round of reforms. The finance minister has already allayed states’ fears about compensation for phasing out the central sales tax, their flexibility in setting rates for a uniform goods and services tax (GST) and a disputes settlement mechanism. Mr Chidambaram expects to convince state finance ministers about the need to get the GST rolling at a meeting later this week. He hopes to get a Constitution amendment bill changing the tax powers of the Centre and states vetted by a parliamentary standing committee before tabling it in the winter session of Parliament.
The PM has asked public sector units (PSUs) to invest the Rs. 2.5 lakh crore cash they are sitting on. In return, the government will set up a high-powered panel to look into the reasons that are holding back investments. These typically are delays over land acq-uisition, environmental clearance, greater financial freedom for PSU boards and supply concerns like the coal shortage. The government is in the process of setting up a National Investment Boa-rd that will audit approvals pending in the Cabinet and a special cell in the Prime Minister’s Office is also monitoring coal linkages for power companies. A fast-track mechanism for clearing infrastructure projects has been a long-standing demand of industry. India is planning to build a large chunk of its infrastructure through public-private partnerships. The 12th Five Year Plan projects a $1 trillion bill and expects private players will put up half the amount.
A pilot project on cash transfers for fertiliser subsidies using bank accounts, Kisan credit cards and Aadhaar numbers offers a way out of the immense strain exerted on the treasury by the UPA’s growing list of entitlements. Subsidies on food, fuel and fertiliser were likely to be 2.4% of the gross domestic product this financial year, Mr Chidambaram told the Planning Commission in Septe-mber. He argued that by the end of the current plan in 2017, delivery of all subsidies should be through cash. Mr Singh is himself overseeing the rollout of such transfers, which get around the problem of doles not reaching the deserving and being diverted to those who are not. The government is banking on eliminating free riders, thereby giving the Congress space to promise more welfare schemes like the right to food.