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Speaking at a seminar organised by the Indian Chamber of Commerce here, the governor said growth is possible only by improving the condition of public institutions and services and shedding the country�s tolerance for inefficiency.
�While there is a consensus on the direction in which the Indian economy should move, the pace of implementation of reforms is dismal,� Jalan said.
What further irked the governor was the lackadaisical approach to reforms. �We often compare India with China, but our neighbour is far more focused and achieves what it aims, while we go astray,� he said. �There is too much tolerance for non-performance, inefficiency and wastage in this country,� he added.
Lamenting that the country�s public institutions and public services were in �pretty bad shape,� he exhorted industry to assume a lead role in reviving public services. �India today has the potential to change its future, but whether we are able to achieve this will depend on our efforts to improve public institutions and services.�
Commenting on the government�s initiative to revive the economy, the RBI governor said public spending held the key to growth. �But so far, public spending has never been at satisfactory levels, and at times we have not been able to spend even the money allocated in the budget for public spending.�
He said several steps were initiated even before September 11 to speed up the economy and get the system going. �Even now a lot of action is going on and things, I hope, will be better soon.�
Jalan, however, evaded all questions related to the banking industry.
In fact, right at the beginning of his address he made it clear that he would not speak on the issue of CRR and interest rates, as the Indian reality was different from the US so far as interest rates were concerned. �In the US practically every saver is also a borrower, but that does not happen to be the case here, hence it is difficult to bring down interest rates to US levels,� he said.
Asked whether the central bank had made up its mind on IDBI�s proposal for converting itself into a universal bank, Jalan said he had not gone through the proposal as yet.
On the issue of exempting State Bank of India�s India Millennium Deposit Scheme and Resurgent India Bond collections from the reserve requirements, Jalan said the appeal was being considered.
Asked about the central bank�s plans of introducing capital account convertibility, Jalan said, �It is not off, but I cannot offer any timeframe for it.�
Asked whether India needed a foreign exchange reserve of over $ 45 billion, and whether part of it would be better utilised repaying external borrowings, Jalan said, �Reserves are required for times like now, when the country faces extra-ordinary requirements.�
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At present, the nine PSUs cannot put more than 15 per cent of their net worth in a joint venture, with a 5 per cent cap on investment in a single entity. Moreover, they have to seek government approval if the amount exceeds more than Rs 200 crore. Sources said once the caps are lifted, the boards of the navratnas will be free to take all investment decisions on their own.
The government is expected to amend the charter once the Cabinet takes a formal decision on the issue. �The government has, in principle, agreed to provide more autonomy to the navratna companies in order to give them a level playing field with private sector competitors. Moreover, approaching the government for every decision does not encourage investment,� sources said.
ONGC chairman Subir Raha said the removal of these restrictions will give the PSUs a free hand in forging partnerships. �The removal of investment caps will give the navratna companies more autonomy and freedom as far as decision making is concerned,� Raha said.
The Navratna charter was issued in July 1997 to provide some operational autonomy to the nine jewels in the government�s kitty. However, the Steel Authority of India Ltd (SAIL), which is also a member of the profit-making PSU club, later slid into the red owing to the persistent recession in the steel industry.
An amendment to the charter will give major boost to the nine companies, especially to oil majors ONGC and IOC, which are bracing up for the deregulated regime in April.
�Both ONGC and IOC are now busy working on their respective investment strategies so that they can successfully take on the competition both from domestic and multinational companies,� sources said.
A senior IOC executive said the very basis of creating navratna companies was to allow more freedom. �If the investment caps are withdrawn, it will have a tremendous impact on the strategy of these PSUs including IOC,� he said.
IOC, for instance, has plans to invest over Rs 460 crore in Haldia Petrochemicals in West Bengal subject to certain preconditions. The relaxation in navratna investment norms will enable the company take a decision on HPL without having to wait for the government�s nod.
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The Federation of All India Tea Traders Association (FAITTA) says their survival is threatened by the uniform rate of 8 per cent sales tax that was recommended last year by the empowered committee of state finance ministers.
FAIITA chairman Piyush O. Desai told reporters here today that if the states have to adhere to the deadline of increasing sales tax by April next year, tea consumption will be badly affected owing to increased prices.
Desai said the tea export target which only two months back was projected at 210 million kg, is now being estimated at only 175 million kg by the year end. The decline was ascribed mainly to shrinking tea markets in Gulf countries, the uncertainty pertaining to war-related situations and the fact that Indian teas were losing out to exports from Sri Lanka and China.
Exports of tea to Russia have also fallen.
Stating that increased compassion from soft drinks and coffee are bringing down tea consumption. Desai said in such a situation increased sales tax may prove to be detrimental to the tea industry. The increased revenue by raising sales tax would be to the tune of Rs 250 crore, estimated Desai and stated that it is unjustifiable to raise such an amount from an ailing industry.
The federation has submitted a copy of their memorandum against a uniform 8 per cent sales tax regime to the empowered committee chairman, Asim Dasgupta in August to which they have got no response so far. �We want uniform sales tax but something which is more bearable, between 2-4 per cent,� said Desai.
However, the fact remains that tea prices have been going down at the auctioneer�s level without any corresponding benefit being passed on to the consumers. Of course, FAITTA argues that now increased sales tax are preventing the industry to pass on the price benefits to the consumers.
According to FAITTA, tea exporters from Sri Lanka get 365 days credit facility from the government whereas in India the exporters are being penalised if their payments do not come on time from the importers.