Fera, I-T & Companies Act Under Review: Chidambaram

A review of the Foreign Exchange Regulation Act, substantial changes in the Income Tax Act and amendments to the Companies Act for greater accountability of managements are on the cards, finance minister P Chidambaram said here yesterday.

While declining to go into the details of these measures, Chid-ambaram said in an interview that the review of the Foreign Exchange Regulation Act was part of a legislation against money laundering to be introduced during the budget session of Parliament likely to commence on February 20.

The Fera review will take note of the liberalisation, changes in the foreign exchange regime and the need for further liberalisation in the context of demand for full convertibility (of the rupee), he said.

 

The minister avoided a specific reply to the question relating to the suggestions for the full convertibility of the rupee. I do not rule in or rule out anything, he said adding everything should be left for appropriate time.

He also said the draft report on model bills containing changes in the Income Tax Act and the Companies Act will be released in mid-February so that a public debate could start on them.

Chidambaram said objective of the changes in the Income Tax Act was to simplify procedures, widen tax base and to tighten enforcement. It is a mind-boggling law at present and should be simplified, he said. He said only 1.2 crore out of 97 crore population paid taxes at present. I would like the number of tax payers to double, he said adding that there was need for new earners to come into the tax net.

On the amendment to the Companies Act, the minister said the main objective was to create a more deregulative and decentralised system with tighter enforcement.

Today it is micro-management. Companies must have freedom. But within the regulated freedom, there should be greater corporate democracy, greater reliance on full disclosures, greater accountability of managements to shareholders, he said.

The finance minister rejected charges of raid raj and said the cases against two major business houses being pursued by the enforcement directorate were a legacy inherited from the previous government. There is no drastic change of gear. There is no raid raj, he said.

On reports of flight of capital to the tune of $11 billion, he declined to comment. He said there was a similar report last year which had alleged over-invoicing of imports and under-invoicing of exports. We found out that the experience had been over-invoicing of exports and under-invoicing of imports.

Apparently, mis-invoicing of both types had been taking place. The intensity of the problem has to be taken into account. The extent of mis-invoicing has to be established.

The minister said the remedy whether there should be more controls or less controls had to be worked out and he would not give his opinion now.

On the reported suggestion of West Bengal Chief Minister Jyoti Basu at a recent NDC meeting for tapping black money for productive use, Chidambaram said he had had discussions with the state finance minister on the issue. We are considering the suggestions, is all that he would say in reply to questions on the subject.

The minister said among the key decisions to be taken in February were the reconstruction of the coal industry, broadcasting policy and the question of foreign participation in the civil aviation sector.

Chidambaram said the Prime Minister had assured the industry on the eve of the New Year that the government understood its concerns and that it would take decisions in various areas before his departure to Davos.

He said the last 30 days of the government had been most productive ones because it had taken a lot of reforms-oriented decisions.

I daresay we have taken more decisions in the last 30 days than in the last 30 weeks or 30 months as opposed to pronouncements and announcements. Together, I believe, this constitutes a comprehensive and cohesive package of reforms, he said.

The minister said the government understood that it had the capacity to aim at 7 per cent growth and that it had the determination to take decisions to reach this objective.

THE POLICY MEASURES ANNOUNCED IN JANUARY

POWER

Laws have been changed to facilitate private and foreign investment in power transmission;

States have been given greater powers; they are now free to clear projects upto 250 mw;

Liquid fuel linkage policy has been finalised and state-wise allocations have been made;

Counter-guarantee to ST-CMS project in Tamil Nadu has been approved;

Renovation and modernisation schemes will no longer need approval of the Central Electricity Authority.

TELECOMMUNICATIONS

Telecom Regulatory Authority has been established by law;

Assignability agreement between DOT and the financial institutions has been reached;

Letters of Intent have been issued to basic telecom service in Karnataka and Madhya Pradesh.

Telecom projects will be treated as infrastructure and will now receive fiscal incentives currently being extended to infrastructure projects like tax holiday and concessional project import duty. ECB limits have been made liberal and ECB for 50% of project cost will be approved as a matter of course. License fees will be treated as revenue expenditure or as capital expenditure with a suitable amortisation formula.

SURFACE TRANSPORT

Detailed guidelines for private projects in roads and highways have been announced;

Special procedure for land acquisition for national highway projects has been announced;

Contract for private container terminals valued at about Rs 700 crore at JNPT, Nhava Sheva has been awarded;

Independent Regulatory Authority for major ports has been set up by law.

CAPITAL MARKETS

Shares issued by public companies have been included in investment instruments qualifying for exemption from capital gains tax under Section 54 EA and Section 54 EB of the Income Tax Act;

Stock lending scheme has been introduced and this will not attract capital gains tax;

FIIs have been allowed to invest in government debt instruments (gilts);

Three 100% FII debt funds have been approved by SEBI;

Proprietary FII funds have been allowed to invest in the country ;

Depositories Act has been amended to remove all lacunae and to facilitate the functioning of the securities depository. 13 companies have joined NSDL. Scrips of 3 companies are trading in dematerialised form and 3 settlements have taken place. Option for dematerialisation is available for scrips of 10 other companies;

New and transparent take-over code has been approved and announced by SEBI.

BANKING

Two new private local area banks in Karnataka and Maharashtra have been approved ;

IRBI has been converted by law into a full-fledged development finance institution ;

nfrastructure Development Finance Company (IDFC) is being registered on 31st January, 1997. Promoters have been identified and a non-executive chairman appointed ;

INSURANCE

Full GIC Board has been constituted

ENVIRONMENT

National Environment Appellate Authority has been set up by law. Public hearings have now been built into the environmental impact assessment. Machinery for hearing appeals against the impact assessment is being set up by law. Together, these measures will ensure transparency in and quicken the pace of decision making in matters relating to the environmental impact of industrial projects ;

SUGAR

Policy of free licensing of new sugar factories as well as for expansion of capacity announced;

Exports of sugar have been decanalised.

PLANNING

Approach paper to the Ninth Five Year Plan has been finalised and was approved by the NDC on January 16th.

CIVIL AVIATION

New policy for private investment in civil aviation announced, including allowing 40% foreign equity in domestic airline services.

FOREIGN INVESTMENT PROMOTION BOARD

Detailed guidelines for foreign investment announced for the first time ;

List of industries eligible for automatic approval of foreign investment expanded.