After flashing the scalpel, Jaswant just drops it

NEW DELHI: An angry Bharatiya Janata Party got Finance Minister Jaswant Singh to do a Kelkar Committee on the mid-term review and disown all the key reforms-friendly measures of the mid-term survey.
The BJP leadership was upset with the "callousness" of the ministry in advertising its politically incorrect intent... bang in the middle of the electioneering in Gujarat.
The net result was a hurried media briefing by the finance ministry this afternoon. "There is no proposal to do away with farm subsidy... at the moment we aren''t disturbing the interest rates," finance secretary S Narayan said.
The finance ministry has, it may be recalled, been pressing hard over the years for reduction in all types of subsidies, and for reducing the interest paid on the EPF corpus and other small savings.
"Pension and other retirement benefits need to be rationalised. There is need to revise the rate of interest on small savings in line with movements in market-related interest rates," the mid-term review had emphasised. The ministry''s denial today belies the perception that the problems diagnosed in the review would be addressed in the Budget.
Running for cover, the finance secretary did what his ministry had done when faced with anger over some of the recommendations of the Kelkar panel.
The mid-term survey was reduced to a mere set of recommendations within 24 hours of having been touted as a statement of intent and an attempt to de-mystify the budget-making process.
Trying the by-now-familiar tack, the minister, it is learnt, instructed the official to jettison recommendations relating to subsidy and interest rate regime.
The official was particular that the blame was pasted on the press who drew headline-grabbing inferences from what was merely a set of recommendations.
The retreat was ordered early in the morning when the BJP leadership woke up to the politically contentious recommendations. Worried that unpopular proposals — MSP, subsidy, pension — could give the rivals a handle in the battle for Gujarat, the party is believed to have pressed for instant corrective measures.
Party circles are upset that the finance minister chose to be out of step with the party''s concerns in Gujarat. By contrast, they are happy with the petroleum minister, Ram Naik, for so scheduling the changes in the petroleum prices as to suit the party in Gujarat.
Mr Naik is believed to have instructed the officials not to indulge media on price-related matters without proper authorisation.
Mr Narayan said at the press meet that though government favoured movement towards softer interest rate regime, it was keen to push up savings.
Recently the government had launched tax-free bonds for pensioners and retiring employees which effectively offered around 9.8% interest rate, which is higher than prevailing interest rates on other savings instruments.
The finance secretary said the government was also concerned over the plight of pensioners, who depend on fixed deposits for their income.
Mr Jaswant Singh had informed Parliament that Government would seek to address the problem of decline in interest rates in savings instruments in the next year''s budget.
Mr Narayan said the government was committed to fiscal consolidation as fiscal deficit was the "biggest challenge" facing the economy. To deal with the unsustainable fiscal deficit, he admitted, the government would have to tackle interest burden, subsidies, expenditure, besides improving tax-GDP ratio and reining in states'' fiscal deficits.
He argued that the government was keen on overall interest rate following a particular band, at the same time providing instrumentalities for savings, which are specific and directed. "Both can happen simultaneously," the finance secretary claimed. "The finance minister was concerned about the savings potential and savings income of sections of people, who are dependent on this, in particular, the elderly and pensioners," he explained.
However, he could not provide details on the strategy the government would adopt. "What it actually translates into, you will have to wait," he added.