New Delhi: Recommending an end to all cesses and surcharges on taxes, and decontrolling of prices of fertilizer and fuel ahead of the Union Budget for 2009-10, the Economic Survey on Thursday suggested aggressive financial sector reforms to bring the economy back to high growth track.
“Review and phasing out of surcharges, cesses and transaction taxes (such as commodities transaction tax, securities transaction tax and fringe benefit tax),” it said, prescribing possibly the boldest set of financial sector reforms and lifting of all restrictions on farm sector trade.
The Survey, tabled in Parliament by finance minister Pranab Mukherjee on Thursday, also sought reduced role for government and end of state monopoly in areas like railways, coal and nuclear power while seeking up to 49% foreign direct investment (FDI) in defence and insurance.
Taking advantage of low inflation and global crude prices, it is high time that petrol and diesel prices should be decontrolled, the Economic Survey said, while criticizing the government for its “imperfect” handling of oil price hike.
The Survey made suggestions for sweeping reforms in the energy sector, including limiting subsidised cooking gas to domestic consumers to 6-8 cylinders per year.
A day after the government announced an ad-hoc increase in petrol and diesel price by Rs4 and Rs2 respectively, effectively buried all hopes of freeing auto fuel prices, the pre-budget Survey said the entire rise in raw material price should be passed on to consumers.
The doubling of international crude oil prices to $70 per barrel since December had warranted Rs5.82 a litre increase in petrol and Rs3.62 per litre hike in diesel rates.
The message was clear, “Decontrol petrol and diesel prices”, with the Survey saying that “as long as the domestic prices remain below the cost of import, demand would continue to grow accentuating the negative impact...
“At times higher inflation and on other occasions political imperatives have prevented a better alignment of fuel and fertilizer and food prices with the border/market prices.”
In practice, the issues of prices were addressed somewhat “imperfectly” through a sharing formula that represented a mix of government subsidy, taxation of rents and some pass through, the Survey decried.
The hitherto politically sensitive areas of FDI in multi- brand retailing, also caught attention of the Survey, which recommended foreign investment in the area beginning with food.
Analysing the impact of the global financial crisis and the challenges, the Survey said: “The Indian economy has shock-absorbers that will facilitate early revival of the growth.”