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| Saturday, May 20, 2000, Chandigarh, India  
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EU, China say
cheers, reach deal on WTO Industry predicts
8 to 10 pc growth
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CACP recommends Rs 20 hike in paddy price CHANDIGARH: The Commission for Agricultural Costs and Prices (CACP) has recommended an increase of Rs 20 per quintal in the minimum support price (MSP) of paddy, besides suggesting varying increases in the prices of other kharif crops including cotton, groundnut, pulses and tobacco, for the 2000-01 season. In its report submitted to the Government of India, the CACP is understood to have proposed Rs 510 and Rs 540 per quintal as MSP for common and grade-A paddy varieties respectively as against last year’s Rs 490 and Rs 520. The MSPs recommended for other kharif crops are (last year’s prices in brackets): Jowar, bajra, maize and ragi Rs 445 (Rs 415), tur (arhar), moong and urd Rs 1200 (Rs 1105), Groundnut-in-shell Rs 1220 (RS 1155),
soyabean (yellow) Rs 865 (Rs 845), Soyabean black Rs 775 (Rs 755), sunflower seed
Rs 1170 (Rs 1155), Sesame Rs 1300 (Rs 1205), Nigeria seed Rs 1025 (Rs 915), cotton F-414/H-777/J-34 Rs 1625 (Rs 1575), cotton H-4 Rs 1825 (Rs 1775), VFC tobacco — Black soil (F-2 grade) Rs 2600 (Rs 2500) and light soil (L-2 grade) Rs 2800 (RS 2700). The CACP has also recommended that a high-level expert committee be appointed to investigate thoroughly proper determination of the level of issue price which would allow the MSP system to continue and, cause the least drain of fiscal resources. In another important recommendation, it has said that the decentralised procurement system should be expanded in a proactive manner and that the States be encouraged to go for procurement of paddy through offers of incentives such as a share in the costs saved. The CACP says there appears to be a strong case for a substantial increase in the MSP for pulses,
sesame and groundnut and for little or no increase in the MSPs for paddy, cotton and soyabean. For coarse cereals and
sunflower seed, although the current MSPs are lower than the high cost of production, market realities suggest
moderation. It will, therefore, remain the responsibility of the government to provide adequate protection to poor farmers against the consequences of any internationally transmitted increase in price instability. Hence, there is need for a system of variable tariffs which could filter out short-term international price fluctuations without being open to charges of protectionism. Concerned at the high inflation in the prices of cereals, the CACP has said that procurement prices have often been fixed too high causing procurement to be much higher than required. Subsequently issue prices have been revised upwards to contain subsidy implications. But offtake has fallen further causing unnecessary stock accumulation. Such stock accretion has reduced availability of grain in the market and pushed up market prices much above what they would have been had the Commission’s earlier recommendations been followed. Also, the cost of holding these stocks has, by and large, negated the government’s attempt to control food subsidy. The CACP has assessed the situation arising out of the recent decisions to substantially increase and rice issue prices, in many cases making these higher than the market prices, for sale in the open market. Such sustained high increase in cereal prices not only hurt the poor but can cause serious imbalances in parities leading to unbalanced growth of agriculture. The high MSPs awarded to wheat and rice have substantially disturbed inter-crop parities. Some impact of these shifting parities in favour of cereals is now showing up to production performance. A comparison of the first and second half of the nineties now shows that while yield growth has continued to decelerate, there is also a deceleration in the growth of area under non-foodgrains as a result of some shift in area towards cereals in the second half. In the case of non-cereal crops the situation is aggravated because high cereal prices tend to push up wage cost, reducing profitability. Moreover, in the case of kharif rice, then main increase in area is in Punjab and Haryana where agronomic and environmental consideration dictate discouragement of further rice production. Referring to the new National Agricultural Insurance Scheme, the CACP has recommended modification by incorporating provisions for (i) sharing a
portion of the overhead costs required for greater number of crop cutting surveys; (ii) reassessing the premium on actuarial basis of the need so
arisen, and (iii) creating of some sort of an independent body to settle the dispute between the General Insurance Corporation and the concerned state government. — IPA |
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Vexations of a VAT ONCE again sales tax reform exercise has been undertaken. And this time it is set to create preconditions conducive to a nationwide value added tax regime that could be imposed replacing both Central excise or MODVAT (now CENVAT) and general sales tax/Central sales tax. It is a prerequisite for a successful VAT system to have a fewer tax slabs if not just one uniform rate all over the country with a small list of zero rated goods. For the last two decades VAT has been in the forefront of the public finance debate. Over 10 countries have introduced this system. In India, VAT was advocated by many in the past. It was recommended by the L.K. Jha Committee in 1976 and reiterated by the Raja Chelliah Committee in 1991. Since 1986, it has been creeping in the books of statute with the introduction of MODVAT and now CENVAT at the Central Government level. In the recent past, a number of progressive States have also introduced the principles of VAT in their sales tax structure. It has at best remained a half hearted effort. The debate on the need of introducing VAT had been intensified since 1991, when the Narasimha Rao Government embarked upon the structural adjustment programme (popularly known as economic reform programme) with the help of the World Bank and the IMF. Traditionally, tax reform is an integral part of the structural adjustment programme and VAT is considered to be an essential component of the tax reform. The practice has been followed in a number of countries which were undertaken structural adjustment programme. Major taxes levied by the Central government have been substantially rationalised with a view to broadening the tax base and minimising the rates. The rates of income tax have been reduced considerably. A good deal of measures have been taken to simplify Central Excise. Specific sites have been changed to ad valorem. Notwithstanding, tax reform process cannot be complete unless the exercise percolates down to the State level. A beginning has already been made as the need for such an exercise is being felt by the State Government themselves for the sake of efficiency in general and to improve their deteriorating finances in particular. As per the revised estimates of the RBI for 1998-99 the States gross fiscal deficit touches a high of 4.3 per cent of GDP. In India the States have limited powers of taxation. Historically, sales tax is the major source of revenue for the States. Revenue forms this source alone accounted for more than 60 per cent of their own tax revenue. In last several years, the growth and the buoyancy of the tax was severely constrained by increasing tax
competition among the States and UTs. Many States were concerned about their residents buying goods from low tax jurisdictions. Many States have had to lower their sales tax rates on consumer durable and automobiles to counteract the advised reduction in the sales tax rates in neighbouring States/UTs. Complexity, arbitrariness and lack of transparency are among the glaring features of the Indian sales tax system, which are of grave concern to trade and industry. The way, this tax is administered, impedes the growth of the economy and realisation of the full potential of the huge consumer market that the Centre offers. Many researchers and committees have studies the tax in depth. Notables among them are, a study team of NIPFP headed by Amaresh Bagchi in 1994, which recommended a dual VAT system,. The reform exercise gained momentum after the Conference of Chief Ministers, Finance Ministers held on September 14, 1998. In the conference a resolution was adopted recommending constitution of a Committee of six Chief Ministers — of West Bengal, Gujarat, Haryana, Orissa, Karnataka and Arunachal Pradesh — to go into the issues concerning rationalisation of sales tax, introduction of VAT and fiscal incentives to backward areas. The Committee endorsed the recommendations made by the Committee of Finance Ministers (1995) with regard to the adoption of floor rates. Finally, the Conference of Chief Ministers/Finance Ministers held on November 16, 1999 adopted
resolutions of uniform floor rates and abrogation of sales tax based incentives. January 1, 2000 was considered as suitable date to implement the floor rates across the States and the UTs. We feel it was much too short a notice. Till date, a number of States have not implemented the floor rates. These States are Arunachal Pradesh, Bihar, Goa, Haryana, Jammu & Kashmir, Mizoram, Orissa, Punjab, Rajasthan and Tamil Nadu. Most UTs are known as low tax jurisdictions and it is remarkable to note that none of them have implemented floor rates. The States that have implemented floor rates and getting nervous as their neighbouring States or UTs are delaying the execution of the same which is leading to trade diversions. The Standing Committee of State Finance Ministers headed by Dr Asim Dasgupta of West Bengal took note of the development and temporarily suspended implementation of uniform floor rate for motor vehicles until other States fall in the line with the policy. On the other hand, the trade and industry reported that the rates have been increased to the floor levels on the items where these were lower while the rates have not been reduced
wherever they were above the floor rates. It seems that the scheme has some major flaws. One of the prime objectives of the tax reform exercise was to eliminate complexity in the system. Till date, there are a number of rates of the State sales tax system and in some cases two adjacent rates vary by as little as one or two percentage points. Moreover, a few commodities find their place in the general category which means that most commodities are in specified list. The committee of State Finance Ministers (1995) could do very little by suggesting six floor rates and recommended over 130 items to the specified categories. Two adjacent rates also vary by 3 or 4 percentage point. It is debatable if such differences in the tax rates serve a useful policy objective. If would have been better if the Committee in the interest of better tax compliance had recommended one rate structure of 10 per cent with three special rates limited to just 20 or 25 items. Six or Seven conspicuous items, which include automotive vehicles, liquor, entertainment electronics, tobacco and other smoking items, photographic and cinematographic equipment and fire works, should attract high floor rates of 15 per cent or 20 per cent. The Committee listed 25 items in the exempted category. It is much too long and should cover only such articles like newspaper, salt, family planning devices, items manufactured in units of KVIC etc. It is idealistic to expect the switch over by April 1, 2000. There are Constitutional legal and administrative issues to be settled in advance before the country moves to a unified VAT system substituting not only the central excise duties, the State sales taxes but also octroi and the like. The time lag between adoption of a countrywide uniform sales tax regime, and the enforcement or a unified VAT system should be 3 to 5 years. We should not hustle through half-baked initiatives. In the interregnum differences should be ironed out and the legal and Constitutional provision recast. The administrative machinery should be fully trained and dealers and the citizens motivated to accept the new system. We should draw some lessons from the European countries who made haste slowly on tax harmonisation among the EU nations. |
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EU, China say
cheers, reach deal on WTO BEIJING, May 19 — China and the European Union today finally reached a market access deal that removes the last major hurdle to China’s entry to the World Trade Organisation. After five days of talks in Beijing in the fourth round of negotiations this year, the deal was signed by EU Trade Commissioner Pascal Lamy and Chinese Trade Minister Shi Guangsheng. The two shared a Champagne toast to celebrate the end of marathon negotiations that took China to the brink of success in its 14-year quest to join the body which sets global trade rules. Details of the agreement were not immediately available. The Champagne followed an intense day of negotiations and the personal intervention of Premier Zhu Rongji, long keen to open up China’s potentially vast market of nearly 1.3 billion people to put competitive pressure on stagnant state industries to reform. Zhu met Lamy for an hour at lunchtime, then the EU chief negotiator went back for more talks with Shi which finally wrapped up a deal. Devil in the details: Progress in the talks appeared painstakingly slow, with Lamy determined to take home a better deal than the one Washington agreed with China in November and Beijing equally determined to go no further than it did with the USA. The German business magazine Wirtschafts Woche quoted Lamy as saying Beijing would not concede that European firms be allowed to take majority stakes in Chinese mobile phone and car ventures. Shi was “like a wall’’ on the issue, Lamy was quoted as saying. But Chinese negotiators, accused by some powerful Beijing Ministries of giving far too much away to the Americans, made equally plain they believe the US deal was as far as they could go. US vote looms: The legislation, hotly opposed by many labour unions and some of Clinton’s own democrats who dislike China’s human rights and labour records, faces a do-or-die vote in the House of Representatives next week.
— Reuters |
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Industry predicts 8 to 10 pc growth NEW DELHI, May 19 (PTI) — Business confidence continues to be high with an upbeat Indian industry predicting an industrial growth of 8 to 10 per cent during the current year, a FICCI survey has said. “Business confidence index has improved by 1.5 points from 27.8 in February to 29.3 points in May. Given the sharp increase in capacity utilisation, sales growth and profits, Indian industry is poised for fresh investments in capacity building and entails a lot of confidence on the functioning and stability of the Government,” the seventh quarterly Business Confidence Survey released today said. Industrial outlook for the immediate future was relatively optimistic compared to the last survey as 70 per cent of the respondents predicted an industrial growth rate of 8 to 10 per cent for 2000-2001. Regarding the overall performance of the economy, the corporate sector had a positive outlook with 85 per cent of the respondents expecting a GDP growth rate of six to seven per cent and inflation ranging between 3 to 5 per cent despite the hike in fuel prices. “India inc expects capacity utilisation to jump by 13 per cent to 83 per cent in the current financial year from 70 per cent, projected in the last survey. Industry expects the sales figures to grow by 19 per cent as compared to 14 per cent Exim Policy: However, on the impact of the Exim policy, 24 per cent of the companies said they would be badly affected as a result of putting 714 items under open general license whereas 74 per cent were either not sure what impact the policy would have on their industry or felt there would be no impact at all, the survey revealed. On whether the replacement of quantitative restrictions with tariff regime would be equally protective or not, 59 per cent of the companies said that tariff regime would not be adequate while 38 per cent felt that this policy of protecting domestic industry would be effective. Again 30 per cent of the respondents believed that rupee exchange rate could go up to Rs 48 for a dollar compared to 20 per cent in the last quarter. On privatisation of the banking sector, 51 per cent of the respondents were in favour but an overwhelming 72 per cent responded negatively to whether the move would serve any purpose if the public character of the banks were retained. Industry also expressed its delight on the move made by the Government in phasing out of food and fertiliser subsidy and said it would go a long way in controlling the fiscal deficit. Stock market: Corporate India continued to be upbeat about the stock markets with a majority saying that technical correction in the market and slowdown trends in global stock markets, especially Nasdaq were the reasons for recent fluctuations in the BSE Sensex, the FICCI survey said. “The responses of the Indian corporates on the performance of the stock market reflect an expectation of a stable stock market. 77 per cent of the respondents felt that the
BSE Sensex will stay at around 5000 mark in the current financial year,” it said. |
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Withdraw Haryana local area
tax: CII CHANDIGARH, May 19 — The CII ( Northern Region ) has demanded the withdrawal of the Haryana Local Area Development Tax Ordinance 2000 which came into effect from May 5, 2000. In a statement issued today, Mr Piyush Bahl, Regional Director, CII (NR), said the introduction of 4 per cent tax on goods imported by the industry in the State under the Haryana Local Area Development Tax is regressive and will make the industry uncompetitive vis-a-vis the neighbouring States. The CII is all for enhancement of State revenues specially in view of the CII-NCAER recent report which highlights the deplorable state of finances in north India. Imposition of irrational taxes is neither in the interest of the industry nor the State Governments.
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IOC to set up power project at Panipat CHANDIGARH, May 19 — The Indian Oil Corporation (IOC) will invest Rs 9,500 crore in Panipat to set up a joint venture power project of 300MW, a state-of-the-art petro-chemical complex, besides doubling the capacity of the six million tonne oil refinery there. This was announced by the IOC Chairman, Mr M.A. Pathan, at a meeting of the State Coordination Committee presided over by the Haryana Chief Secretary, Mr Ram S. Varma, at Panipat last evening. The Chief Secretary announced a committee under the Commissioner, Industries, for planning and setting up down-stream units. |
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IA orders inquiry into CJ incident NEW DELHI, May 19 (PTI) — Indian Airlines has ordered an inquiry into the unpleasant experience of Delhi High Court Chief Justice Arijit Passayat while he was travelling in one of its flights from Bangalore to New Delhi. “I have ordered an inquiry into the May 8 incident after the remarks of the Chief Justice were published in newspapers,” IA Chief Anil Baijal told PTI. He said “I have asked for reports from the Bangalore office and will be able to comment on the incident only after perusing it.” |
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