PM favours removal of tax exemptions

NEW DELHI: Giving strong pointers to budget 2007, Prime Minister Manomhan Singh has stressed on the need to do away with various tax exemptions, bring down import duties further and bring in a less restrictive forex regime. The PM also assured the industry that the power sector would be given priority this year and steps would be taken to remove bottlenecks and make the sector more attractive for private investors.

Speaking at the 79th annual general meeting of Ficci on Monday, Dr Singh said that the country's tax regime should not have too many exemptions which make tax administration an unnecessarily complex exercise vulnerable to misuse. Removing exemptions would also step up revenue collection releasing more resources for the government to meet its social sector commitments made under the National Common Minimum Programme.

Indications are also strong of a further reduction in the average customs duty which was brought down to 12% in budget 2006. India has set itself a goal of bringing down customs duty to the Asean level (5% for raw materials and 10% for finished goods) by 2010. The PM said that the timetable for tariff reduction should be adhered to. "Indian industry can no longer seek excessive protection through tariffs and must prepare for the brave new world of global integration," he said.

A more liberal foreign remittances and capital account convertibility norms may be on the cards with the PM promising a gradual move into a ``less restrictive'' forex regime. He said that monetary authorities have the responsibility to ensure stability in the financial, foreign exchange and money markets while sustaining the growth process. "The recommendations of the Tarapore committee are a step in this direction, mixing caution with optimism," Dr Singh said.

The PM added that to make the power sector more attractive for private investors, a meeting of chief ministers has been called in February to address bottlenecks constraining the sector, particularly the viability of distribution companies.

In the agriculture sector, Dr Singh said that the Integrated Food Law, which has been passed by Parliament, will be operationalised in the next few months. "This will impart new dynamism to agro-processing," he said.

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