The Hindu : Opinion / News Analysis : `Reforms on right track, concerns can be addressed'

Online edition of India's National Newspaper
Tuesday, May 31, 2005

Opinion

Opinion - News Analysis

`Reforms on right track, concerns can be addressed'

Union Finance MinisterP. Chidambaramdiscusses withV. Jayanththe United Progressive Alliance Government's reforms process, including the latest debate on free power.

Finance Minister Chidambaram ... pondering over the reforms?

When investors are looking for your reforms agenda, are you convinced the Government is on the right track and proceeding at the right speed?

The direction is correct. I don't think anyone is pleading for a change of direction. There are two things that are being insisted upon. One, to calibrate the pace of reforms, and, two, have a parallel track to deal with some other concerns and issues. The Government has no problem with either claim. Obviously, there are bound to be some differences about what is the right pace. But there is no difference about the need to have a two-track approach.

What about the differences in perception of reforms in the power sector and CPI (M) general secretary Prakash Karat's response to the Prime Minister?

Read that in the context of what I have said. Mr. Karat does not say that any State that has not introduced the free power scheme so far must do so. All that he has said is that those who have introduced free power should not stop it immediately. There is need to work out a phased programme. This is quite consistent with my view that there is no quarrel over the direction. The rival position, if one may call it so, is to calibrate the pace correctly.

How about the problems on the disinvestment front?

The idea of setting up a National Investment Fund was elaborately discussed with the Left parties, after the scope and purpose and on how to operate it was explained to them. We took it to the Cabinet and the Cabinet approved of it, if I recall correctly, in January 2005.

The idea of a fund has been accepted. The income from the fund will be spent 75 per cent on the social sector and 25 per cent to revive Public Sector Enterprises which are `revivable.' Only last week I approved the payment of Rs. 141 crore of unpaid wages and statutory dues to employees of a dozen PSEs. Once the fund and its purpose are accepted, we must make a beginning to set up the fund. Workers of the BHEL have been consulted. They asked for a portion of the to-be-disinvested shares to be reserved for them. We have agreed to reserve 15 per cent. If they want more, I am willing to give them more. I think over a period of time, when we see that this fund has been built and the income from the fund is being spent as promised, there will be wider support for the National Investment Fund.

Are you satisfied with the progress in the development of infrastructure?

One can never be satisfied because the demands are so huge and our ability to meet this is only partial. Once we get the Special Purpose Vehicle going, then I think the degree of satisfaction will increase. That means leveraging a little more than $2 billion and ensuring the flow of over $4 billion investment in the development of infrastructure, in the debt: equity ratio of 1:1.

With more State Assemblies due to go to the polls within a year, there is bound to be pressure from your regional allies for more populist schemes. How do you plan to tackle this demand?

I make a distinction between popular and populist schemes. The road sector project is popular, the electrification programme is popular; the irrigation canal programme is popular. I have no hesitation in putting more funds into these programmes, provided I can raise the revenue. But I would be very reluctant to put the money in a programme which is merely intended to spend money without corresponding outcomes. That would be populist and should be avoided. But if anyone can show me that the outcomes are commensurate with outlays, I would have no hesitation to release more funds, subject of course, to our ability to raise additional resources.

How long will it take for you to resolve the problem over the pricing of petroleum products?

Petroleum is a very emotive issue. While people understand the logic of a price increase, they do not accept it. Even well-to-do upper-middle class groups demand that LPG prices should not be raised. This is one aspect which any Government has to keep in mind ... The second is it is a complex issue — the pricing of petroleum products. So far, we have followed one model, viz. the import parity prices. We are now exploring whether there are alternatives to this model, or a modified form of it. Nothing has been decided yet. And these are highly complex issues and therefore it is taking time.

How long can the oil companies absorb the price increases in the global market?

You must make a distinction between under-recovery and cash losses. Cash losses must be ruled out. Under-recovery is only a manner of describing that the oil companies are paying a disproportionate share of the burden; not that they are unwilling to bear any share of the extra burden, but that they are only pointing out that they are being asked to bear a disproportionate share and some part of it must therefore be shifted to the Government, the refineries or to the consumers.

Working on a balance among the stakeholders is taking time and that is what the Government is trying to do. No time limit can be set. It depends on the readiness of the Petroleum Ministry and the convenience of the Prime Minister.

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