We should not look at disinvestments as a fiscal plug-in, rather we need to have a reform approach and recognise that the real operational efficiency in public sector enterprises will come by change of ownership control. The PSE policy underscores the same approach of not letting the government be in business. With the new PSE policy, it is a matter of time before the government will exit from most public sectors. This is akin to 1991 moment for the public sector. This was stated by Shri Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management, Ministry of Finance, during the session on Economic Revival and Financing Growth at CII Annual Meeting 2021 held today. A mega listing in LIC is planned this year, which will be the biggest of its kind in history of Indian stock market, he further added.
“The disinvestment agenda has been put on fast track, through the unveiling of the new PSE policy, notified on 4th Feb,2021, which is expected to be an important policy for the next five years and will result in increase in privatization in the economy”, Secretary DIPAM further added.
The major disinvestments in pipeline this year as underlined in the Union Budget as well include Air India, BPCL, Shipping Corporation of India, BEML, Pawan Hans and Neelachal Ispat Nigam Ltd. In all these enterprises, the government has got sufficient interest from bidders and are now at the second stage of doing the necessary due-diligence, Shri Pandey underlined. After 17 years, the country will actually see privatization, since the last time, in 2003-04.
“Government is also talking about closure of enterprises quite openly for the first time, in case it cannot be disinvested. In the non-strategic sectors, the direction is that either we privatize or close. Hence, apart from NCLT, there will also be lot of assets on offer from the public sector”, he further added.
On the topic of asset monetization, the Power Grid InvIT was successfully done recently which entailed streamlining of a whole host of regulations and procedure. Using learnings from this, second InvIT is on the pipelines from GAIL. “A big asset monetization pipeline is in place where the government looks forward to private sector participation”, Secretary Pandey added.
Government is adopting a calibrated approach for minority stake sales by keeping the interests of the existing private investors in mind. Also, a balance is required to be adopted between disinvestment and dividends as is evident from the fact that this year dividends from CPSEs is expected to come at around Rs 50,000 crores, Secretary DIPAM underlined.
Shri Tarun Bajaj, Secretary, Department of Revenue, Ministry of Finance, stated that the government is committed to providing a stable and predictable tax regime which would facilitate corporate planning on where to invest and how to invest.
Elaborating further on the topic, Mr Bajaj stated that the pandemic has resulted in the formalization of the Indian economy wherein the formal sector has performed remarkably well. This is evident from the impressive rise in tax revenue from the sector which has helped the government to desist from making calls to tax- payers for payment of advance tax. The corporate sector posted an excellent performance, despite the pandemic, which was beyond expectations, said Shri Bajaj.
While articulating his views, Shri Bajaj maintained that the impressive corporate performance has not resulted in the kickstarting of private investment. He expressed his wish to understand the reason why the corporate sector is not investing and what more is required from the government to revive investment to revitalize long term growth in the economy.
To facilitate competitiveness of the Indian industry, the government has taken significant steps to put together a well- articulated vision and strategy for India under the atmanirbhar Bharat mission. The customs duty has been pared on certain items to encourage industry to improve its competitiveness and take on global giants on equal terms. The government policy has yielded results as the country has emerged as a net exporter of mobile phones. The PLI scheme has gained significant traction and government expects a lot of investment to come in the identified sectors in furture, said Shri Bajaj.
According to Shri Bajaj, the government also proposes to clear the backlog of refunds and ensure that these are made in the same financial year. In fact, he said that the highest refunds have been made in the pandemic year. Hon’ble Secretary assured industry that there would be no calls for making further taxes in the month of March so that industry can focus on business.
While commenting on the complex GST structure, Shri Bajaj emphasized that transparency has been brought into the indirect tax system and the revenue neutral rate has come down significantly from 15.3 per cent to 11.6 per cent. No doubt, the glitches remain but this is just the beginning and we need stability and predictability in the indirect tax system for the GST rates to come down. We need to look at bringing the exempted items under the GST fold and correct the inverted duty structure, added Shri Bajaj.
Responding to a comment on the fact that India’s tax-GDP ratio has remained constant, the Secretary mentioned that the government is focused on widening the tax base for which it is not increasing taxes for existing categories of taxpayers to raise revenue. The government is looking at unconventional measures such as matching GST returns with income tax returns to bring the informal and the non-salaried class in the tax net, eluded Hon’ble Revenue Secretary.
Taking cognizance of the fragile nature of state finances while also recognizing the urgent need for states to spend on areas such as infrastructure to revive the economy, the government has, under the atmanirbhar Bharat initiative, raised the borrowing limit of states from 3% to 5%. But the extra borrowing is linked to state level reforms in certain areas so that states undertake capital expenditure and not spend on freebies, Shri Bajaj stated.
Speaking earlier in the session, Mr Venu Srinivasan, Past President, CII highlighted that “in a post-COVID world, we are going to witness a shift from the requirement of a skilled workforce to a digitally skilled workforce”. Thus, working towards reskilling the workforce in the new and upcoming technologies such as AI, Big Data, Machine Learning etc is critical to be future-ready.
Moderating the session, Dr Janmejaya Sinha, Chairman, CII National Committee on Financial Inclusion and Fintech and Managing Director & Senior Partner; Chairman, India, The BCG, commented that, the growth prospects for the country this year are such that by next year we will be back as before & the biggest thrust of pandemic would be behind us.
“CII will look forward to working with government for devising novel ideas for boosting the revenue generation potential of the economy even under times of duress”, highlighted Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry.
11 August 2021