Kelkar Committee Report on Roadmap for Fiscal consolidation

BY CA SRINIVASAN ANAND.G

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Increase Disinvestment receipts

Divest minority government equity stakes in private entities such as SUUTI, HZL and BALCO

Address the two policy concerns-(1)right price and (2)risk reduction for retail investors through innovative models

Innovative models –(i)Offer for Sale(OFS); (ii)Call option models; (iii)Exchange Traded Funds(ETF) model

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Cash rich CPSEs- “Use it or lose it policy”

Cash rich CPSEs be asked to expedite sound investments in key areas

CPSEs which cannot find good investment outlets should be asked for special dividend

Govt can ask for a special dividend on ‘use it or lose it’ principle

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Reduction of subsidies

Petroleum Subsidy Phase out diesel subsidy-50% in 2012-13 & balance 50% in

2013-14 Phase out LPG subsidy by 2014-15-25% in 2012-13 & balance

75% in 2013-14 Reduce Kerosene subsidy by one-third by 2014-15 Immediate increase in diesel prices by Rs.4 per litre, LPG prices

by Rs.50 per cylinder Keep adjusting price on regular basis in incremental steps

towards eventual deregulation of diesel and an affordable subsidy on LPG and kerosene

Direct cash transfer of subsidy on LPG to cap the number of subsidised cylinders

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Reduction of subsidies

Fertilizer Subsidy Kill two birds in one stone by increasing price of urea-(i)reduce

subsidy (ii) ensure healthy mix of N-P-K in usage of fertilizers Department of Fertilizers’ proposed 10% hike in Urea MRP be

implemented.Food Subsidy Increase the Central Issue Price(CIP) Every time MSP is revised, revise CIP in same proportion Reduce administrative cost of PDS Remove system of levy sugar Introduce direct transfer of cash subsidies Appropriately phase the Food Security Bill

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Plan expenditure

Too much leakage in plan schemes By better design & targetting, outcomes can be easily improved

with reduced expenditure Planning Commission to improve its monitoring systems Protect allocations for schemes that create capital assets

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Monetize Govt’s unutilised /underutilised land resources

Monetize unutilised /underutilised land resources to finance infrastructure needs in rural areas

Set up a group to work out modalities for this

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Recommendations on Direct Taxes

DTC Bill,2010 likely result in considerable unacceptable losses Comprehensively review DTC before enacting it Enhance ability to effectively detect & penalise non-compliance Quality taxpayer services to promote voluntary compliance Department lacks data mining skills. Mandatory 1 year intensive training in data mining to personnel Establish data-warehousing & data-mining infrastructure Real-time verification of transactions reported under TDS,AIR Make quoting of PAN or UID compulsory on all economic

transactions irrespective of amount & whether person liable to tax or not

Amend tax laws to charge interest at rates which reflect market rates to deter deferment of advance tax payment

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Recommendations on Direct Taxes-II

Issue all pending refunds at the earliest Create a national portal to enable taxpayers to file applications

seeking rectifications & appeal effect 360 degree profiling of all taxpayers & institutions Make mandatory online PAN verification for high calue

transactions

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Recommendations on indirect taxes

Reduce standard rate of 12% for UED and Service tax to align with GST rate of 8%

Review negative list of services introduced in Budget 2012 to prune exemptions further

Remove ST exemption for Non-profit organizations Even where exemption of infrastructure projects from UED & ST

justified, give supplier an option to opt into system to lower project cost

Pass pending Constitutional Amendment for introduction of GST in Winter session of Parliament

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