| (Right) Finance minister P. Chidambaram with CII president Y. C. Deveshwar and Videocon chief Venugopal Dhoot at a pre-budget meet in New Delhi on Monday. (Left) Bharti group chairman Sunil Mittal with ADAE chief Anil Ambani at the same venue. Pictures by Rajesh Kumar
New Delhi, Jan. 9: Fringe concerns took centre-stage in consultations finance minister P. Chidambaram held with industry shoguns today on what should make up budget 2006.
At the end of the meetings, the Centre hinted that social infrastructure, rural industry and job creation would be the possible recurrent themes in the February 28 opus.
“The finance minister indicated that this year’s budget will focus on two broad aspects ' employment and value addition. The sectors that are likely to get larger attention are food processing, textiles, pharmaceuticals, petrochemicals, and telecom,” a senior industrialist, who was present in the meeting, said.
The minister is understood to have told industrialists that the government requires funds and revenues to carry forward the commitments articulated in the common minimum programme (CMP). “He categorically said that despite a coalition government, the reforms process will be hastened,” the industrialist said.
As expected, India Inc was unanimous in demanding a complete withdrawal of the fringe benefit tax (FBT), which, they felt, was “hindering legitimate expansion of business”.
“If you don’t abolish it (FBT), you can simplify it,” CII president Y.C. Deveshwar told reporters after his meeting with Chidambaram. One of the suggestions put forward by the chamber requires the Centre to channel entire tax proceeds earned through FBT into the recently-created special purpose vehicle meant to boost infrastructure.
“There is a need to review the existing fringe benefit tax provisions and simplify it. Genuine business expenditure incurred by companies should be allowed a deduction,” Ficci vice-president N. Srinivasan said.
The trade body has stressed on the need for stability in policies, removal of policy obstacles, stronger enforcement of intellectual property rights and introduction of VAT by all states. It says these will draw more foreign direct investment in 2006 and beyond.
Opening up markets, reducing tariff and non-tariff barriers and ensuring stable exchange will also help swell the tide of foreign capital. The chamber said increasing purchasing power, expanding middle-class and a young population would help India emerge as one of the three fastest-growing economies, with double-digit growth.
Assocham chief Anil L. Agarwal and its senior vice-president Venugopal Dhoot said instead of FBT, the government should levy 2 per cent additional taxation on the corporate taxes to offset the losses that it would incur on account of removal of the levy.
ADAE chief Anil Ambani is understood to have sought incentives for greenfield power generation projects. He also sought infrastructure status for projects such as airport modernisation and gas pipelines. Sources even hinted that Ambani wanted infrastructure loans to be treated as priority sector lending.
CII and Assocham called for amendments to acts on agriculture products marketing, essential commodities and mandi taxes as part of the efforts to unshackle trade.
“We have highlighted that there were taxes on food-processing, which remain high. We need to create affordability. Food processing is not a luxury good. It provides employment to the farm sector,” said Deveshwar.
Another key request the industry captains made was a reduction in effective duty on companies. This works out to about 40 per cent now. In addition to the corporate tax rate of 30 per cent, industry has to pay 3 to 4 per cent dividend distribution tax and just as much in FBT.
“Corporate tax rate should be reduced to 25 per cent. In most of the Asean countries, the rates range between 25 and 30 per cent,” said Srinivasan, who is vice-president and managing director of India Cements Limited.
Bharti chairman Sunil Mittal called for cuts in licence fee and an end to the access deficit charge.