Economic issues, leadership main election planks: Jaitley

Shereen Bhan

Arun Jaitely, Leader of the Opposition in the Rajya Sabha and the man considered to Narendra Modi's closest ally in Delhi says the BJP will marry the idea of inclusion with the mantra of growth if voted to power. While it continues to have apprehension on crucial FDI related matters like multibrand retail or insurance, Jaitley admits overturning a policy decision which has the sanctity of Parliament's approval is not easy. He said the BJP is open to discussing its opposition to hiking the FDI cap to 49 percent in insurance and is flexible on the quantum of FDI in the defence sector.

The party which initiated the breakaway from the administered price mechansim of fuel products seems to have developed cold feet on diesel decontrol. Jaitley said at current prices decontrol would be unpalatable. He also kept close to his chest the party's position on the Rangarajan Commitee's gas price formula.

He added he was not opposed to the GST and the BJP would try and push India's most ambitious tax reform if it comes to power.

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Below is the verbatim transcript of Jaitley’s interview.

Q: Let me start by asking you particularly as far as your position on Foreign Direct Investment (FDI) is concerned, because I am a bit confused as to where the BJP stands on issues related to FDI? When it comes to insurance, you seemed to be pulling that. When it comes to retail there seems to be a blanket no. When it comes to defense there is an ambivalence on which side you are going to take. What is the BJP's position as far as the FDI goes?

A: We are very clear. There are various infrastructure areas. We are certainly not opposed to FDI in those areas. On defence, there is a certain amount of headspace which is required. In fact, the 26 percent opening was done when the NDA was in power.

Today, as it is we are buying most of our equipment either from foreign companies or foreign governments. So, if you have an Indian company established in India with an FDI I do not think it is a very serious issue as far as we are concerned.

As far as retail is concerned we have gone through this debate extensively. We have serious reservations, because India at the moment is not prepared for it. That was our view which we expressed, the government not withstanding went ahead and has not been able to achieve much in the process. As far as insurance is concerned I think we are in discussion with the government.

Q: Has there been a change of thought on insurance, because this is something that the BJP piloted?

A: At the time when we piloted, we had originally suggested 49 percent. We could not do 49 percent because at that time Manmohan Singh and Pranab Mukherjee objected to 49 percent.

Q: So is it tit for tat?

A: No, it is not a tit for tat. In fact, the Finance Minister, Sushma Swaraj, myself and Yashwant Sinha have had a series of meetings and let us see what happens. The issue I would say is still not closed at the moment. Various suggestions have been made. I think the issue is still open for discussion.

Q: The Finance Minister said that he had had a series of meetings with the leaders of the opposition including you and Swaraj and he was hopeful that in the winter session of parliament the insurance bill will be taken up and perhaps there could be a breakthrough even as far as the FDI cap is concerned?

A: No, if it is 26 percent, then it will not be taken up, because that is the status quo. On 26 percent, when Yashwant Sinha headed the standing committee and the suggestion of 49 percent was made, each and every Congress member of the standing committee opposed 49 percent.

They probably thought this 49 percent was a Yashwant Sinha proposal and therefore alternative ideas were also discussed, FDI plus Foreign Institutional Investor (FII) and so on and then the standing committee has come out with a unanimous report. To overrule that report you need larger discussions and a consensus and you have to develop a political environment for it.

Q: So should industry expect a breakthrough with the BJP continue to oppose 49 percent or is the BJP going to reconsider its view on 49 percent?

A: I will not answer that question. Let the discussions be completed and I think we will be able to a concrete position thereafter.

Q: The door is not closed on 49 percent?

A: I would say the discussions are on and therefore if something comes out of the discussion so be it.

Q: I want to now talk to you about retail and you said the government finally decided to open it up, there was debate in parliament and so on and so forth. However the reason why foreign investors are not investing in multi-brand retail at this point in time is because there is a question mark because publically several BJP leaders have stated that if we come to power we will overturn the decisions. This has never happened, we have never seen major reforms being rolled back?

A: I won't go into that question of what happens about the policy if we come into power. I wouldn’t get into that question at the moment, but at the time when this issue was discussed with the government and in parliament, I myself had led the debate in one of the houses of the parliament and I believe we had given very cogent reasons why India today is not ready for disinvestment.

Q: But it is the law today.

A: It is the policy of the government, the government presently wants to implement it. Let it go ahead but then it has to create a environment. I think the lesson for this is economic reforms are an art of the possible. You have to carry a large part of the public opinion in the country along with it. You have 40 million trade establishments in this country - people who have reasonable apprehensions about this. There are also apprehensions as it happened elsewhere in the world that even manufacturing jobs suffered because one hasn't done sufficient manufacturing reforms. That is one of the objections which I had made.

Q: Those apprehensions have been put on the table as I said it is government policy, it is the law. If the BJP were to come to power and it is a relevant question will you decide to overturn this decision?

A: I don’t announce the decisions that we will take when we come to power. But when they got the policy ratified in parliament, it was courtesy the Samajwadi Party and the BSP which had taken a contrarian position outside and then when the voting started they abstained on some pretext or the other.

Q: The BJP has changed its position on retail as well. You were the ones who first filed it as the very idea and the concept of FDI in retail?

A: The BJP always had serious reservations.

Q: It was part of your manifesto, it was removed later but it was part of your manifesto?

A: It was at one stage mentioned in an NDA agenda which was subsequently altered. It has never been a part of the BJP manifesto. The BJP, our supporting constituency had serious reservations about it even today.

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Q: You are not going as far as to say that if the BJP or the NDA were to be voted to power you will not overturn this decision?

A: Economic policy is not an issue on which you make hypothetical statement as to what you would do two years or five years ahead.

Q: What is your position on it?

A: My position on it is very clear. We are opposed to FDI in retail.

Q: I now want to talk to you about FDI in defence because you said that there is that 26 percent limit. The government has now said that it can be enhanced. The Cabinet Committee on Security can take a call on that based on the state-of-the art technology; however those guidelines are finally going to be defined. What is the NDA and the BJP's position as far as FDI is concerned?

A: FDI in defence - we are flexible. 26 percent FDI in defence was brought by the NDA government when we were in power. At that stage also there was opposition from some of the people and we had elaborately explained that today we are buying our defence equipment from companies which are 100 percent foreign; we are buying it from companies owned by foreign governments and therefore if we have Indian companies established in India with a large Indian equity and a foreign holding therein, it would be much better than the situation is today.

There is a large financial outgo that goes out because of the purchases from outside. So we had taken this initiative of 26 percent. So, as far as FDI in defence is concerned we are reasonably flexible about it.

Q: Let me now talk to you as far as the Goods and Services Tax (GST) is concerned. The Congress believes that Narendra Modi single-handedly derailed the GST. Jairam Ramesh in an interview to our channel a couple of days ago said that it was the other Modi, i.e. Narendra Modi that single-handedly derailed the GST. Does the BJP take responsibility for this that the most ambitious tax reform of this country has been held back on account of issues with one particular individual?

A: Let us be very clear, Jairam squibs apart; this is not a BJP versus Congress issue. Within the political party structures it is stays governed by same party which may have two different views. For example, when some of the BJP states were strongly in favour, at one stage Punjab was strongly in favour of it, it was Madhya Pradesh which had led the opposition to it. It was not Gujarat which had led the opposition to it. Everything being put in a Narendra Modi basket is the favourite Congress ploy.

Madhya Pradesh is one state which had consistently opposed it. Tamil Nadu had opposed it at one stage. Bihar was in support of it, it was is in the same structure. You could have Congress governments in some states; the consuming states had one particular view, the other consuming states had another particular view about it. The right thing to do at that stage was, and the earlier Finance Minister Pranab Mukherjee and we discussed it at length and therefore this has to be conveyed to the states that the center will deal with them on a fair basis. Pranab babu used to say, this is cooperative federalism and therefore the center and the states have to cooperate.

Now there are issues both economic, and other issues relating to discrimination of the states where some states have an apprehension about the center. You cannot have a consensus on economic policy or even on a good reform. I personally would be supportive of the GST. I have no hesitation in saying so, unless you are able to drill confidence in the minds of the states to say that the center is going to be very fair to you even in various allocations and the decisions have to be taken. I am afraid the kind of hostile position the center has taken with regard to certain states, they have not been able to do so.

Q: Why would you say that? The empowered panel on GST was headed by a member of the BJP,  Sushil Modi and he was very hopeful at one point in time that the GST bill would actually go through parliament.

A: I also hope it will go through, but at the same time to convince a large number of states, the number of states which are opposed to it…

Q: It is largely the BJP states?

A: No, it is not necessarily the BJP states, there are other states also which had serious reservations about it. The number of states which have reservations and which had been raising questions has been increasing, therefore the center has to negotiate with those states and bring them onboard, because some of those states have serious issues about the solution.

Q: Is there any possibility that we could see a breakthrough on the GST before the tenure of this government?

A: I do not know whether this government is going to attempt a consensus or not, but if this government were to send the right signals to the states and create an environment of consultation with the states it would be possible. If they take an environment of hostility as far as states are concerned and they are apprehensive about discrimination, I am afraid it will be a slow process.

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Q: The Prime Minister himself has said that he is not hopeful of the GST being implemented before the term of the UPA runs out. Will the GST be top of the economic agenda as far as the BJP and NDA is concerned?

A: I see merit in the GST proposal and therefore for any government, this government or the other government to try and create a consensus on this and convince the states of the bona fides of the center would be a measure which an NDA government would take up. This proposal came under discussion when we were in government.

Q: Another proposal that came up for discussion, in fact forward momentum actually took place under the NDA was this entire business of moving away from the administered price mechanism as far as petroleum products were concerned. The government is trying to deregulate diesel pricing - partially deregulate it, you continue to oppose it whether it is inside parliament or outside parliament. What is your position on subsidies? Specifically oil subsidies?

A: Today you can't have a situation in India with varying sections of the society to say – it stands to economic logic to say we are slowly going to phase out all subsidies but you can't do it. You have people who can't afford it therefore the government has to supplement their costs through the subsidising process.

These proposals came up for discussion during the NDA when the crude oil prices were around USD 30 per barrel therefore nobody had anticipated they will touch USD 120 at some stage or even more. Therefore the deregulation at that stage seemed a little pausible idea. Now they have started the deregulation when the prices are in three digits.

This is creating a burden and therefore always consistently suggestions have been made that if international prices go up then you have to somehow modulate your taxes accordingly because the taxes are almost charged ad valorem and therefore let there not be a double whammy on the consumer, the international prices go up, the quantum of tax also goes up. So, let it be tax neutral and this is a suggestion which has repeatedly come up in parliament.

Q: So you are not in favour of deregulating diesel prices at this point in time?

A: When the prices are at this exorbitant level your farm sector will not be able to take the kind of pressure of an absolute market price of diesel as of today.

Q: Crude prices are not going to go back to USD 30, atleast not in the foreseeable future. So, if you are talking about the rationalising the subsidy structure and I am not just talking about oil but oil being one of the biggest ones, will the BJP like to address this issue of deregulating prices?

A: Subsidies at times becomes an unquantified amount given to an unidentifiable section. Therefore targeting them so that they go to the people who are vulnerable and therefore the vulnerable section benefits and everybody across the board doesn’t benefit out of that is a reasonable idea. Any government - this is a kind of a consistency in economic policy which governments of the day have reasonably followed.

Q: Market determined diesel pricing is not something that you would look at at this point in time if you were to come to power?

A: At this stage I do not think I am in a position to make that commitment.

Q: Since we are talking about diesel prices and freeing up diesel prices I also want to talk to you about gas prices. The Rangarajan Committee submitted its formula as far as gas pricing was concerned. It comes into effect only April 2014 onwards. The matter has been taken to court by Gurudas Dasgupta. The BJP has been largely silent as far as Rangarajan Committee is concerned. Do you agree with the basis?

A: No, according to me, the issue has come up before the standing committee of parliament. As far as the public knowledge of this was concerned, since facts were clearly coming out in the open as to what the basis was for this particular pricing which has been done, therefore the suggestion of the standing committee that the government reconsiders this in terms of the recommendations which have been made. The standing committee has made a moderate suggestion as far as the government is concerned. The BJP member headed the standing committee and our members have agreed with that suggestion.

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Q: Where do you stand? Do you believe that gas prices should be linked to the market and should be freed up completely? Do you also believe that there should be a cap as far as the consuming sectors like power and fertiliser are concerned? Where do you stand on the issue of gas price?

A: As far as gas pricing is concerned, since adequate facts have not come out in the public domain and these facts had been presented before the standing committee, the standing committee has made a recommendation. Now, there will be various issues involved. The first one is the international prices of gas. The other question would be what is the cost plus basis? Do you come to a formula in between them? On this particular basis the government so far has not even come in for a political discussion before parliament.

Q: Policy decision has been taken to actually implement the Rangarajan formula from 2014.

A: No, they have said 2014 because they want the electoral impact of the price rise not to be there. That is why they have chosen the date of 2014.

Q: Another issue that I want to talk to you about is the Land Acquisition Bill. Finally consensus amongst all political parties, passed by parliament. This has become the baseline as far as the land laws across the country are concerned. There has been progressive states. There has been a lot of talk about the way that Gujarat has implemented its land acquisition laws. How soon can we expect BJP-ruled states to actually make changes, amend their land acquisition laws in alliance of what has happened at the center?

A: This is a central legislation now and this central legislation will prevail across the board even as far as the states are concerned. There is a certain flexibility which has been given under certain provisions to the states to formulate that policy and I am sure the states will be in the process of doing that.

Q: This law is going to make it harder for industrialisation. It is going to make it harder for industry to set up public private project to acquire that.

A: As far as industrial corridors and industrial townships are concerned, the effect of this is going to be that they have been kept out by a provision as far as solitary industries in certain areas are concerned. People will have to buy the land for real estate projects. Buying land will then have to be applied for conversion of that land. So, one enters into arm's length transaction which probably would be an easier way of settling transactions then going through this act.

Q: One of the things that became controversial even as far as the land bill was concerned was the retrospectivity aspect, that is in the retrospective clause. In fact the BJP was stridently for retrospectivity as far as the land bill is concerned. Let me ask you about the retrospective tax amendment which has also been extremely controversial. There had been several committees which have recommended that the government should do away with the retrospective tax amendment that was brought in by Finance Minister Pranab Mukherjee. Where does the BJP stand on this matter? Will you oppose that if the government were to walk down that route?

A: Retrospective amendments to laws are possible, so it is not that this can never be done. This is normally done in cases where taxes have been paid, assessments have been concluded over the years and years later, some court comes to a finding that the provision was unconstitutional or the assessment itself was bad and the governments have to make large refunds.

In this case, the legality of the issue apart, whether these taxes should have been leviable or not leviable, at the time when the government took this decision, they should have factored in the impact on the investment climate. As it is, the investment climate was going down and I think this hastens the decline.

Q: What can we expect in the winter session of parliament? The big fear was that the monsoon session of parliament would have been a washout. Surprisingly, miraculously perhaps we actually saw significant decisions being made, land and food being the big legislations that were passed.

A: There were various legislations passed. There were various matters of public importance discussed. I think it has become a habit in our country merely because some days are lost because of disturbances.

Q: Not some days, entire sessions were lost. Previous session was lost entirely.

A: Two sessions were lost entirely. One because of the coal scam and one because of the 2G scam.

Q: What made you change your mind about the food bill, because the BJP was opposed to the food bill?

A: BJP was never opposed, some individual members had expressed reservations. If you see my speech in the Rajya Sabha, I had made it clear that this food bill is actually going to take us forward. There is no additional expenditure. It is only repackaging the existing schemes. That is what the food bill is.

Q: Let me now talk to you a little bit about politics, because the big question is who you are going to be able to cobble together as possible coalition partners? Chandrababu Naidu is still sitting on the fence. It is not clear whether he will or will not go your way. Similarly with Jayalalitha. Who can we expect you could tie-up with?

A: Can I tell you one fact? A strong BJP means a strong NDA. A weak BJP would be a smaller NDA. If our own strength increases, which I am reasonably certain is going to increase,it is going to be a large number because I have maintained in the last few comments that I have made that this election is not about arithmetic on the conventional lines.

Q: What is this election going to be about?

A: This election is about two factors. Firstly, there will be a huge anti-incumbency against the UPA. Secondly, in this election there is also going to be a kind of a referendum on leadership and the Congress is going to duck the leadership battle. When it becomes a combination of these two, it is advantage BJP and a stronger BJP would ipso facto (by the fact itself), mean a stronger NDA.

Q: Who you are reaching out to at this point in time? The fear is that because you have decided on Narendra Modi as the Prime Ministerial candidate you are going to be left with fewer potential partners to try and cobble together the coalition with?

A: I can tell you, barring the Congress, barring the communists.

Q: You are talking to everybody else.

A: According to me the past conduct has shown, there are a large number of flexible political parties in India.

Q: So Chandrababu Naidu was more amenable to speaking to you at this point in time?

A: No, I think he is vehemently anti-Congress and therefore there are large number of political parties which are very strongly anti-Congress and when the political space is divided between Congress and non-Congress, these non-Congress parties will have to choose where to stand. Do not forget that the third front itself is a failed idea. Narendra Modi's popularity in every poll shows that he is not only very popular, he is ahead by a huge distance and therefore for the BJP, the most popular candidate really had to lead the BJP in the elections.

Q: What is going to be the poll promise? For the very first time in several years this is going to be an election that will perhaps be centered around economic issues as well.

A: It would be. The anti-incumbency against this government is essentially on account of three factors. First factor relates to governance, that is the state of the economy. Price rise, depleting enthusiasm in the economy, the investment environment has been completely damaged.

I think the second factor is also serious allegations of corruption which have also adversely impacted the economy. The third could be the security related issues. The second big issue is going to be, a referendum on leadership.

If we are making it a quasi-presidential election, the indications from the Congress spokespersons appear to be that they will duck a quasi-presidential election which gives us a natural advantage and therefore on this issue people are asking for a decisive decision making.

One does not want a government which for months altogether leaves Rs 700,000 crore of projects unattended and therefore one finds the economic activity being curtailed in the country. We need a Prime Minister who is a political leader, who has a capacity to overrule others. Therefore a Prime Minister who is just led by others certainly cannot be the Prime Minister who can manage the economy of the country.