Exemption free regime on the anvil, FM rules out their restoration

New Delhi, May 7 (UNI) Finance Minister P Chidambaram today did not give in to the industry's clamour of bringing back sector-specific exemptions eliminated in Budget 2007-08, stating categorically that the government wants to make way for an exemption-free regime.

In a Post-Budget address to the National Council of the Confederation of Indian Industry (CII) here, Mr Chidambaram made it clear to the captains of industry that exemptions have been removed in the Budget after deep analysis and he would not restore them.

Though he gave detailed reasons as to why he had removed these, he left no one in doubt that there was no scope of going back from his decisions in this regard.

''Every exemption has a founding father and an explanation as to why it was imposed,'' Mr Chidambaram said.

All industrialists made a hue and cry of restoring exemption relating to his sector, even though he may not have explicitly stated this.

But the Finance Minister in a curt remark said "all this boils down to the fact please restore the exemption." ''Exemptions will be retained for only the very deserving sectors like Research and Development and knowledge industries. Every other exemption will be examined,'' he said.

Mr Chidambaram took recourse to history to establish that inflation will be moderated. ''There was a time when inflation would rule at 22 to 24 per cent. But those days are gone. Even in recent times, inflation rate was more than 7 per cent during 1999-2000.

Inflation revolved around this rate for nearly 11 months. Again during 2000-2001 inflation for most part of the year remained high.

In 2004, when the UPA government assumed office, inflation remained at more than 6 per cent. But was moderated,'' he said.

The Finance Minister said the government will be able to bring down prices in the short run by using a combination of fiscal, monetary and supply-side instruments.

Mr Chidambaram expressed the hope that monetary measures taken by the RBI would bear fruit soon.

As far as the use of fiscal policy measures were concerned, the problem was that industry was operating at full capacity.

But while imports of agricultural commodities would augment domestic supplies and bring down prices, the long-term solution lies in enhancing production of such commodities. In this regard, he said, production of wheat, rice, pulses and edible oils has been stagnating. It was of utmost importance to improve the productivity and production of these crops.

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