The soaring fiscal deficit and dipping revenue collections have galvanised the UPA government to consider rolling back duty concessions extended to the industry as part of the stimuli to offset the impact of the economic downturn. If the finance ministry has its way then UPA-II will hike indirect taxes in the fourth quarter of this fiscal itself, which may trigger concerns in Indian Inc.

Arguing that the economy was showing signs of revival, the finance ministry has pitched for increasing excise duties and exemptions well before the next budget.

“We have recently told the Thirteenth Finance Commission (TFC) that as part of our strategy towards reducing fiscal deficit we have suggested a rollback (in duties and exemptions) by the fourth quarter of this fiscal,” a senior government official, who did not wish to be named, told The Indian Express. The government has set a target for reducing the fiscal deficit to 5.5 per cent in 2010-11 and 4 per cent in 2011-12 from an estimated level of 6.8 per cent likely to be recorded this year.

The finance ministry, which made a presentation to the TFC last week over its action plan for meeting targets set in the Budget 2009-10, has said that apart from the rollback the government is working on restructuring oil and fertiliser subsidies. While a committee on the oil subsidy has been formed under former Planning Commission member Kirit Parikh, the ministry of chemicals and fertilisers will soon seek the nod of the union cabinet to usher in a nutrient-based subsidy for fertilisers to lessen the fertiliser subsidy bill by 15-20 per cent every year. The government has provided an outlay of Rs 10,000 crore and Rs 50,000 crore for subsidy to oil marketing companies (carry over from last fiscal) and fertiliser manufacturers respectively in 2009-10.

... contd.