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Many major steps in last Budget reversed by Mukherjee's successors
February, 25th 2013

Along with the Union Budget, the government usually presents an Action Taken Report (ATR) for the previous set of announcements that suggests that almost all the proposals have been implemented. This year's ATR, however, might read very differently on at least half-a-dozen major announcements by Pranab Mukherjee - from Goods & Services Tax (GST) to Direct Taxes Code (DTC) and from General Anti-Avoidance Rules ( GAAR) to a tax claim of over Rs 11,000 crore on telecom giant Vodafone.

These are among the prominent decisions that have either been reversed or modified by Mukherjee's successors - Prime Minister Manmohan Singh, who held the portfolio in July and August, and P Chidambaram, who returned to the finance ministry on September 1.

There are also several issues where the UPA has made little headway despite these being identified as priority areas. For instance, the direct benefits transfer (DBT) has not been fully rolled out across 50 districts, while Mukherjee had said that the government will scale it up in "at least" these districts within six months. Although DBT is the UPA's flagship programme in the run-up to the 2014 general elections, even the Aadhaar cards for the entire population are not ready and subsidy transfer, which was a key element, has not been included in the current test runs.

While the government is yet to identify the beneficiaries of fertilizer subsidy, beneficiaries of the kerosene pilot project in Alwar did not get the subsidy for months. Similarly, in Mysore, which was chosen for a pilot project to transfer cooking gas subsidy, the users have only received a token transfer of cash into their accounts despite the district having 80% Aadhaar penetration.

The track record on infrastructure is no better. Against a target of awarding contracts to build 8,800 km of highways, the year will close with projects to the tune of around 3,000-3,500 km getting awarded. There is, however, some progress on fuel supply agreements with Coal India although power shortage continues to plague the economy.

In his February 28 speech, Chidambaram will, of course, take credit for several decisions such as allowing FDI in retail and civil aviation and decontrolling fuel prices, which were not part of Mukherjee's budget agenda.

But on financial sector reforms, there is only progress in banking with Parliament clearing the Banking Amendments Bill. With the amendments done, RBI on Friday issued the final guidelines for awarding new bank licences, a promise that Mukherjee made in 2010 and something that the government will boast about on Thursday.

It has shied away from introducing long-pending Pension and Insurance Bills that are expected to boost savings and help generate long-term funds to finance large infrastructure projects. Several other legislative steps announced by Mukherjee are still pending including amendments to the Indian Stamp Act that will make transactions cheaper and easier and a new law for management of public debt.

While these are pending as all departments and agencies are not on board, several others such as the Constitution Amendment Bill for GST or the new DTC Bill have not been introduced as the government decided to reverse the position that Mukherjee had taken. The revised DTC Bill may come before Parliament during the Budget session itself. Chidambaram has made it clear he will go through the draft DTC Bill that was prepared during his last stint, the revised draft (that retained tax exemptions), the Bill and the standing committee recommendations.

On GST, Chidambaram and the states seem to have finally come on board with a new design and the finance minister is now hoping to introduce a revised Bill in August. The review of Mukherjee's decisions that incidentally began with PM Singh's query related to compensation of Rs 19,000 crore to states now seems to be complete.

The only thing that's missing is a decision on how the government will deal with tax claims on Vodafone that has been referred to the cabinet. Perhaps Chidambaram's budget speech will end that suspense.

 
 
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