When the President hits back

Significantly, at the very outset, the President made it clear that he was breaking with convention which once again threw into stark relief the rising level of mercury.

It is not often that the President of India takes a position on matters of state publicly. Whatever has to be said by him is conveyed through his speeches on the television when he addresses the nation before Republic Day and Independence Day or on the eve of the budget session when he lays down the objectives of the government.

On Saturday, though, he did the unthinkable and showed why he is a ‘Political President’. The underlying message coming from his Kolkata speech while addressing the Bengal Chamber of Commerce was that he was furious. Junking the prepared text, the President chose to make certain facts known on the economy. These comments were in the nature of clarificatory statements on his tenure as the finance minister between January 2009 and June 2012. This was unprecedented.

Significantly, at the very outset, the President made it clear that he was breaking with convention which once again threw into stark relief the rising level of mercury.

What is the genesis of this missile strike? At the kernel of the present discord is the finance minister P. Chidambaram’s recent speech in Parliament where he reopened a festering sore by saying, “There are not just external factors, there are also domestic factors. One of the domestic factors is that we allowed fiscal deficit to be breached and we allowed current account deficit to swell because of certain decisions that we took during 2009 to 2011.” Now, that caused a flutter in the dovecotes as it appeared to be a direct attack on Pranab Mukherjee’s stint as finance minister.

And the former FM, now President, is not one to take kindly to such comments.

Seeds of discord

On Saturday, when he spoke, this was amplified with his vitriolic and pungent remarks, “The President doesn’t have the privilege to air his views. The President of India is not a policy maker, but I will take this opportunity to air some of my observations about the Indian economy. In 2008- 09, the GDP growth came down, then there was improvement in 2009-10 and 2010- 11.

Now again there is a slump.”Though P. Chidambaram had later clarified his Parliament remarks saying that he had not blamed any individual but the government in its entirety, motive was seen behind the disparaging comments.

The seeds of this discord go back to the finance ministry note dated March 25, 2011which sent shockwaves through the political system. The damaging note stated that the Department of Telecom would have been forced to cancel the 2G licences if the Ministry of Finance ( MoF) had stuck to its original demand for auctioning the initial spectrum of 4.4 MHz.

The MoF recommendation that all spectrum including the startup spectrum of 4.4 MHz be auctioned was overruled by Chidambaram, the note added. It said, “ DoT could have invoked this clause ( 5.1 of the UAS licence) for cancelling licences in case MoF had stuck to the stand of auctioning the 4.4 MHz spectrum. It may be mentioned that while the UAS licenses were signed between February 27 and March 7, 2008, spectrum allocations were done starting only in April, 2008, almost 4 months after the Letters of Intent were issued. However, these were not charged ( beyond the normal spectrum usage charges) since there was consensus, at the levels of the Ministers concerned, that spectrum beyond the start up levels only should be charged.” Causing consternation, it went on to say that the finance ministry “ implicitly agreed to imposition of same entry fee as that prevailing in 2001 for licences allotted up to December 31, 2008." The controversial note was prepared by the Department of Economic affairs under the finance ministry and signed by Dr PGS Rao, deputy director, infrastructure and investment division.

Pushing key bills

The covering letter said that the finance minister Pranab Mukherjee saw the 11- page document sent to Vini Mahajan, joint secretary in the PMO. Further, in a meeting between Chidambaram and A. Raja held on January 30, 2008 — 20 days after the controversial 2G spectrum LoIs ( Letters of Intent) were issued to companies — it was noted by the finance minister that he was for now not seeking to revisit the current regimes for entry fee or revenue share. The portion ‘ not seeking’ was underlined to highlight its significance. As finance minister, Pranab Mukherjee can be blamed for revisiting retrograde and regressive regressive tax policies, but he can’t be blamed for the multiple fiscal stimulus packages amounting to Rs 186,000 crore which resulted in a ballooning fiscal deficit to 6.2 per cent in 2008- 09. The stimulus was to drive domestic consumption in the immediate aftermath of the Lehman Brothers collapse contagion which broke the back of several economies around the world. On key legislation like Direct Tax Code ( DTC) and Goods and Services Tax ( GST), the facts are clear as daylight.

In both cases, then FM Pranab Mukherjee did his best to push through the two bills.

Consensus efforts

It was on August 12, 2009 that the draft DTC bill was released in the public domain. Trade and industry responded negatively to several proposals, in the main minimum alternate tax. Subsequently, on June 15, 2010, a revised discussion paper was released. On August 30, 2010, the DTC Bill was introduced in the Lok Sabha. Standing Committee submitted its report on March 9, 2012 and thereafter on March 16, some of the recommendations of the committee were incorporated particularly the one on GAAR ( general anti avoidance rules). On March 12 this year, GAAR too was deferred by two years. As I write this, the DTC bill is still pending for consideration of the Cabinet.

As far back as September 30, 2009, in order to propel the GST- related work, a joint working group comprising central and state government officers was constituted. There was a lack of political consensus on constitutional amendments to provide the legislative framework for GST. Pranab Mukherjee tried his level best to develop consensus, taking 20 meetings with chief ministers, chairman of the empowered committee and with the full empowered committee in 29 months. He even met Narendra Modi and Nitish Kumar among others in order to seek closure on the matter. After due distillation, the constitutional amendment bill was introduced in Parliament on March 22, 2011. The Cabinet on April 12, 2012 approved the setting up of a special purpose vehicle to create an enabling environment for smooth introduction of GST. The only thing holding back the roll out of GST is the constitutional amendment bill which has been pending with the Standing Committee, on which a report has finally been submitted to the Lok Sabha recently.

Meanwhile, the jury is still out on this latest skirmish between the current and former finance minister.

Reproduced From Mail Today. Copyright 2013. MTNPL. All rights reserved.

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