NEW DELHI (Reuters) – The government has introduced wide-ranging tax, banking and pension reform bills into parliament, but political opposition may derail some of the most ambitious reforms mooted during the ruling coalition's second term in government.
Below are some of the main planned reforms:
GOODS AND SERVICES TAX
Finance Minister Pranab Mukherjee on Tuesday introduced a bill to usher in a single nationwide tax structure, a proposal that would cut business costs and boost government revenue.
But officials have said the politically controversial measure will miss its April 1, 2012 deadline.
The proposal, first introduced in 2007, is behind its original schedule for rollout in 2010, on resistance from several states and the main opposition Bharatiya Janata Party (BJP).
Bringing in the GST requires an amendment to the constitution, which needs approval from two-thirds of federal lawmakers and half of India's 28 states. Congress needs the BJP's support for these numbers.
In a sign of how political battles play into economic reforms, Prime Minister Manmohan Singh has suggested the BJP's continued opposition to the GST was retaliation against the CBI arresting a minister in BJP-ruled Gujarat on charges of murder.
STATUS: The bill will go to a standing committee, which will send it back with recommendations. The government is not bound to accept the suggestions. The earliest the bill can be made law is during the next session of parliament, likely in July.
The government proposes to make it easier to acquire land to set up factories, roads and power plants, resolving one of the biggest barriers to sustaining strong economic growth.
One new law would give market or better prices for land and equity shares in the venture to land owners, addressing a cause for the several violent protests over inadequate compensation that have characterised land acquisition in India.
India's existing colonial-era land acquisition law gives the government the right to take over any land for what it deems a "public purpose", with little compensation, leading to widespread opposition to almost any project that requires land.
Analysts warn India's near 9 percent annual growth may be at risk if it does not quickly build up its infrastructure and set up factories that can help lift hundreds of millions of people from the low-productivity farm sector and from poverty.
Several projects, including multi-billion dollar investments by steel majors like ArcelorMittal, Posco and Tata Steel, have been delayed by land protests.
The bill was passed in 2007 by the lower house of parliament, but lapsed when parliament was dissolved for the 2009 federal elections.
STATUS: The government plans to introduce and refer the legislation to a standing committee during the current session. The earliest it will be passed is in the next session of parliament, probably in July.
The government is close to a decision on allowing foreign investors to enter the supermarket sector, Trade Minister Anand Sharma has said, a move that has been opposed by the politically vocal small-shopkeeper lobby.
If the proposal goes through, global firms like Wal-Mart and Carrefour could set up hundreds of stores to tap the $450 billion market. Current rules restrict them to the wholesale, cash and carry business.
It is also expected to help ease the massive supply-side bottlenecks in the farm sector that contribute to keeping food prices and inflation stubbornly high.
FINANCIAL SECTOR REFORMS
The government aims to lift caps on foreign stakes in the pension and insurance sectors to broaden the penetration of such funds and channel savings into much needed infrastructure projects. It also wants to make it easier to bring more capital into its banking system.
The government on Tuesday introduced a bill to give investors in private banks voting rights proportionate to their shareholding.
On Thursday, it introduced a bill to pave the way for private players in the pension sector and ease the government's pension liability. The BJP is likely to support the pension bill.
STATUS: The banking bill and the pension bill will go to a standing committee for recommendations. The earliest they can be voted on will be during the next parliament session.
FREEING FUEL PRICES
The government is yet to take a decision on letting retailers set prices of diesel, despite making a promise to do so, given high inflation and a series of crucial state polls.
Easing controls would eliminate costly subsidies it has to pay state-run oil retailers to compensate them for selling fuel at below-market rates.
The government freed petrol prices in June and prices have been lifted 9 times since then. Diesel prices, in comparison, have not been raised during the period. The recent surge in global oil prices makes it politically harder to free diesel prices, while adding to the government's subsidy burden.
STATUS: A ministerial panel is looking into when prices can be freed, but any decision is unlikely to come before state elections end in mid-May.
(Reporting by C.J. Kuncheria; editing by Tony Munroe)
Trending On Reuters
Liquefied Petroleum Gas, long a niche product used by the poor to cook and the rich to barbecue, has become a rare bright spot amid a broad commodities rout, riding on the wave of strong economic growth in India and parts of Southeast Asia. Full Article