Enough is enough as far as GST proceedings go: Arun Jaitley

Jaitley said India doesn’t need so many banks in the public sector.

“The immediate priority is to get banks out of the stressed situation they are in and then look at consolidation.”

The government’s move to sell stake in IDBI Bank has met with employee unions' opposition. But Jaitley said that freeing up the bank from their constraints would be a good thing for the bank. 

The Goods and Services Tax Bill has been hanging fire owing to Congress’ stalling tactics. Ideally, Jaitley said he would want the opposition party to give its all-clear. If it doesn’t come through, then he is willing to let the Parliament do its job. “Enough is enough as far as GST proceedings go,” he said.

He said the government is in a state of readiness to roll out the GST, when it passes through all its hurdles. "It is a transactional tax and we are ready."

He also spoke on states' efforts to tackle the drought situation and Supreme Court’s attck on the government.

Below is the verbatim transcript of Arun Jaitley's interview with Shereen Bhan on CNBC-TV18.

Q: I know you have been saying a lot of things on a lot of issues, but let me start by you asking about perhaps what is one of the most critical issues facing the economy and that has to do with stressed assets and non-performing asset (NPAs). I will ask you this in the context of the results of Punjab National Bank, it’s the highest ever quarterly loss reported by an Indian bank, provisions at over Rs 10,000 crore, loss at over Rs 5,300 crore, it’s not the only one you look at Bank of Baroda, you look outside of that even within the private sector it’s the same story that’s playing out there?

A: I think you will have to bear with one fact that over the past several years the balance sheets of the banks have been stressed on account of some sectors which had been stressed. Now to conceal that stress when it actually existed was never the best banking practice and therefore the Reserve Bank of India (RBI) wanted them to make provisioning. The obvious impact of the provisioning would be that in the last quarter and in this quarter they will probably have to provide for a certain category of assets. Now this doesn’t mean that these assets are gone forever; the moment the sectors revived and some of them I can see them reviving, then in the quarters to come this provisioning would have to get reversed and therefore we must take this as a transient phase where everything has come upfront and the banks are now disclosing what the real position is and once the stressed sectors get some element of relief on account of business cycle or because of the sectoral problem being addressed, you will have a reversal of that situation.

Q: So while we await the reversal and you are absolutely right that one of course issue as far as the recognition of the problem is concerned. The market and rating agencies are not entirely convinced that perhaps the worst is behind us. In fact, Moody’s call this out as one of the key risk for our sovereign rating as well. Can you give us an idea now of where things currently stand. The last figure that I have which is of course as per the government’s own data, the NPAs of public sector banks (PSBs) have risen by Rs 1 lakh crore to about Rs 3.93 lakh crore at the end of December 2015. Where things currently stand at?

A: The re-provisioning means that the NPAs already existed, you are now disclosing them, you are providing for them. If you look at each of the sectors which is responsible for this stress, for instance, the largest amount comes from steel and steel had gone unchecked because of the influx of the Chinese steel coming into India. Now with the series of steps which we have taken, more particularly the minimum import price (MIP) that we imposed, coupled with the fact that global prices have also moved up, I think the steel industry over the last two-three months has starting doing significantly better and its only a matter of time before they start servicing their interest and once they start servicing their interest, I think this position is capable of a significant revival. Small sector from a larger banking point of view, but an important sector sugar already the prices have moved up. The series of steps which have been taken, even global prices have helped. In fact, now they seem to be threatening the aspect of inflation and the sector is now in a position much better as far as the NPAs are concerned. Highways have revived. Power sector with the Ujwal Discom Assurance Yojna (UDAY) scheme, most of the state boards their debts have been taken over by the state governments and therefore as the bonds are sold in the markets, that itself will have an impact on the balance sheet, so you have simultaneously a lot of things which are happening and the re-provisioning will show higher debt, a higher losses as far as the banks are concerned, but a series of the steps in the quarters to come will also enable the banks to reverse a lot of these provision.

Q: So when you do anticipate that reversal?

A: I don’t know. I can’t make a generalised comment, it will depend on bank to bank, it will depend upon quality of their NPAs. It will depend on who the debtors are which are the sectors which are involved but if you look at the big picture amongst the 5-6 sectors which are responsible predominantly for the stress, I can at least see bulk of them now moving.

Q: Since you were talking about specific sectors and I just want to talk about steel before I address other issues. There was talk about the possibility of some sort of a restructuring package on the back of the recovery that you have seen in the steel sector. Do you feel that further steps are needed at this point in time or the government will wait now?

A: The situation is dynamic, you have to keep watching the situation very closely, but all the steel industries which come and discussed the issue with me now, I think they are fairly satisfied with the kind of steps the government has taken and I am told their balance sheets have started reviving.

Q: Let me continue with the banking and talk to you about the Banks Board Bureau (BBB) which has been set up by the government, in fact, being held up as one of the achievements of the government. You know they are also looking at things like credit pick up as far as lending is concerned. They have meetings on the possibility of consolidation, the first sign of that we have seen emerge yesterday with State Bank of India now seeking the government’s approval for the merger with five associate banks and the Bharatiya Mahila Bank before I specifically ask you about the terms of reference for the BBB, how quickly will the government move in terms of giving approval to State Bank of India because post that they will work on the scheme of purchase etc.

A: Let the proposal come to the government. I read in the newspaper that the State Bank Board has given us, I had already announced consolidation as a roadmap in the budget itself and therefore I think the larger question that India doesn’t need so many banks in the public sector and therefore you reduce the number of banks by consolidating some of them and therefore let larger global size institutions come into existence without adversely impacting upon the employees working conditions and if it come to us, I will certainly look at it and I will look at it very positively.

Q: This has been on the agenda for a while even your predecessor talked about creating these world class institutions here in India, they didn’t go much further with that, but has this been sort of done on the prodding or the nudging of the government this move to actually to get State Bank of India to move on this proposal?

A: Consolidation was something which was a part of the Indradhanush package, consolidation was something that I had announced in the Budget and therefore the banks have acted, it’s in accordance with the government policy, the banks have given their own opinion. If some bank has a contrarian opinion, we will certainly respect that view and take it into consideration, but the government’s policy being in favour of consolidation and my own views on the subject were not a matter of state secret.

Q: So can we expect now more banks to seek government approval, more public sector banks to seek government approval?

A: It depends on the market situation. I think the immediate priority with regard to other banks is to get them out of the stressed situation, improve upon their economic health and then look at a possible consolidation wherever possible.

Q: Coming back to the BBB, what are the terms of reference for the BBB. We don’t seem to know because they are looking at everything it almost sort of operating as a quasi-regulator?

 A: There is a written terms of reference (TOR), I don’t have it immediately and I won’t be able to offhand read out all the terms of reference. It’s a fairly detailed document. I don’t think it’s a secret document. This can be certainly made public._PAGEBREAK_

Q: But overlaps with what the RBI is trying to do. They are addressing exactly all the same issues whether its consolidation, lending, NPAs, vacancies?

A: I think they have started functioning. You must now give them an opportunity to function within. It is a responsible bureau, it includes some eminent people and I am sure they will work within the framework of their TOR and therefore the question of overlapping or usurping somebody else's function doesn't arise.

Q: Since we are talking about consolidation, let me also ask you about the possibility of looking at consolidation of somebody like Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD). Is that likely?

A: I do not think in the course of the interview I will be able to make a comment because it is too speculative unless we have applies ourselves to it.

Q: Could this perhaps be something that the government may want to consider?

A: I won't make a comment till we examine it.

Q: Let me ask you about IDBI Bank because the first time that you talked about the government wanting to divest its stake in IDBI Bank was to me in an interview that we did in Singapore. There seems to be a feeling that even though it is part of the government announcements that you have made in the Budget that the government maybe going a little slow given the opposition that you are facing from employee unions. Would it be fair to assume that maybe there could be some delays there?

A: I think the employee unions have nothing to worry. The government is not handing over the management of IDBI to any private party. We have a living example of Axis Bank which has done extremely well. The government only has a marginal role despite its minority shareholding in this and therefore freeing up IDBI from the kind of constraints that you have if you are a state instrumentality, I think will do a lot of good to IDBI itself, for example, today we are struggling with a basic question, every private sector bank is going to the campuses and recruiting the best. However, when the public sector banks or the government institutions went to the campuses and started recruiting them. The courts came down on them and said you are a state, you have to conduct a written exam with 85 percent marks and interview with 15 percent marks. You cannot go to the campus and pick and choose. As a result of which the public sector banks started with a handicap of not being able to recruit the best from campus, which is now a global phenomenon. If you free an institution in the government from this kind of limitations, I think you are doing a lot of good to those institutions.

Q: What can we expect and how soon can we expect?

A: You have the announcement of the government and I stand by that announcement.

Q: So you will give us the outcome in your Budget speech next year, but let me also ask you about some of the other announcements that were part of the Budget - on strategic divestments. My conversation with the NITI Aayog CEO, Amitabh Kant yesterday, he said that the NITI Aayog has moved very vigorously, those were his words, on identifying potential candidates but the final decision will be taken by the cabinet. How soon can we expect that process to start?

A: Divestment is the art of the possible. Divestment is not something which you decide and you do it. You decide to divest or privatise the market conditions, may not be conducive to it. You may have other issues relating to a particular proposal; however meritorious the proposal is. Therefore, this is the first time that the government policy has been widened. You have divestment, you have strategic sales and privatisation, you have asset recycling, you have buybacks and therefore over the past policy we have improved upon it and therefore all these options are today open to the government. When we see an extremely volatile market, when we see a market where some sectors, the stocks have been beaten because of global prices. Is this the right time to divest or privatise or is it the right time to buyback. Therefore, there is a lot of flexibility that we now have. Once the NITI Aayog gives us a report, we will do it. For the present, I can only tell you that we have some hotels etc which were left out in the earlier National Democratic Party (NDA) government's privatisation plan, the concerned ministries are moving fast on it and therefore we will wait for the NITI Aayog in regard to any other institution that they comment and then we will consider their suggestion on it.         

Q: Is there anything that is off the table?

A: I don't know.

Q: Airlines for instance, is anything off the table from a strategic sale for you? 

A: I don't want to make a comment on any individual company. These are matters not to speculate in the course of an interview. It is only when governments decide. I don't want to say, I am willing to consider it and tomorrow I have to eat my own words. Therefore, we would disclose only when we decide.

Q: Let me also ask you now about goods and service tax (GST) which is of course the big disappointment primarily because there has been so much negotiation that has gone in, there has been so much and such a long waiting period. You were quoted as saying that perhaps you will not wait this time around in the next parliament session for the Congress to come on board. So, can we expect that despite the Congress support you will push your head?

A: If you look at the history of the bill I have repeatedly said the Congress should have legitimately claimed the original authorship. Today but for this 1 percent additional tax on interest rate movement, my bill is identical to what Congress had introduced. Two eminent finance ministers of the Congress party had approved it. Standing Committee approved it; the select committee of Rajya Sabha has approved it. Every political party in parliament except the Congress is openly supporting it. It is therefore for the Congress to really introspect.

I have tried all avenues; I have spoken to their leaders, every session I am told come on the next session. Meanwhile work has gone on. After all this government has passed over 90 bills in the last two years; in the last session I passed 24 bills. The only one held up amongst the significant legislation is the GST. Therefore, having been passed by the Lok Sabha, having been approved and supported by every Congress government in the state, I think enough is enough. 

However, I would ideally like to do it with consensus. I will continue to discuss with them till the last moment; after all we are the government, it is our responsibility or otherwise let the Parliament process decide. 

Q: That is a very important statement coming from you Finance Minister - you are saying enough is enough as far as the GST negotiations are concerned. You will press ahead with passage of the GST in the Rajya Sabha irrespective of the whether the Congress comes on board?

A: I will try till the last minute to convince them. In the course of the debate in the last session I used the debate on the finance bill when they raised the objections to clarify what the government's position is and how unreasonable their own position was. In fact when I spoke against the kind of dispute redressal mechanism the Congress party was suggesting, I can tell you if you go back to the video on television every Congress member was supporting me by thumping its desk that we don't want a dispute redressal mechanism headed by a judge. We want GST's political mechanism that is the council to resolve it.

Now if this is the real state of play then consensus is the preferred option. Effort till the last minute will go on or ultimately let the parliamentary processes decide. After all democracy is a game of numbers.

Q: If you were to ensure the passage of the bill in the Rajya Sabha in the next session then what is the realistic timeline that we could expect for the rollout because then it goes to States Assemblies and so on and so forth?

A: This will go to the State Assemblies, thereafter you need three supporting legislation which hopefully being taxation laws are money bill and those two of them will have to passed by parliament one will have to be passed by each of the states and then we have the whole year to pass them. Now fortunately, GST is not an Income Tax law that it has to start on April 1st. It is a transactional tax. So I think then the GST council itself can adopt any date when it puts it in to process.

Q: What could be the realistic target, if you are saying April 1 is no sacrosanct?

A: I don't want to count my chickens ahead of time. 

Q: I get that but still because you obviously know what is the readiness on the administration point of view as well?

A: We are in a complete state of readiness. The moment the constitution amendment is passed it can go to the State Assemblies and we will immediately have the three legislations before the GST council.

Q: So, what could be the realistic targets? If you are saying April 1 is not sacrosanct?A: I do not want to count my chickens ahead of time.Q: I get that, but still because you obviously know what is the readiness on the administration point of view as well.A: We are in a complete state of readiness. The moment the constitution amendment is passed, it can go to the state assemblies and we will immediately have the three legislations before the GST comes.Q: So that is a big headline that is coming from you there as far as the GST is concerned. There were several important issues that you made in your comment. One of course, has to do with this issue of the money bill and whether the government, which has been criticized by the congress party that the government is trying to subvert the parliamentary procedure by trying to push bills like the Aadhar bill through the money bill route. I also want to talk to your about the criticism that the government has come in for from the supreme court of India on handling the drought situation. The Supreme Court has accused states of adopting a ostrich like attitude. It has also accused the central government of not playing its part and now, it believes that the centre, the buck must stop with you when it comes to drought mitigation. You have very clearly stated in parliament that the framework of the executive is under threat by constant comments and directives that the Supreme Court is issuing.A: First of all let me answer a question which you have not asked. I firmly believe is exclusively a text book example of a money bill. Article 110 clearly defines a money bill. This is debated in parliament and congress had no argument to offer. This bill only says that if you want to benefit of government money, or subsidy, produce your identity and how that identity is to be given is procedural.Now, coming to the issue of drought, drought management is a governmental function, it is an executive function. There are no judicially measurable standards anywhere in the world how droughts are to be managed. The management of the drought and helping the drought areas is also a matter of a legislative support. State governments on the ground handle it and a legislative mechanism is that the state governments have the state disaster relief fund for which moneys are provided. You have the national disaster relief fund for which moneys are provided. They are approved in the budgets, they are approved in the appropriation bills.Now, you can have judicial review if governments do not perform their duty. Now, governments by and large within the resources sanctioned by the legislature try and do their best. Governments are more accountable to the people. Can you ever have a situation in a democracy that an elected government of any political party says I am indifferent to the suffering people in a drought. No government will be able to survive for a day. And therefore, we must have faith in the elected governments. If there are some gaps left somewhere, the gaps can be pointed out, the governments will perform. But I do not think and I made this statement in the context. It is for parliament through appropriation bills and budgets to approve the funding.Q: So, is this is a case of judicial over reach you think?A: I do not want to make comment. The Supreme Court has a prerogative of making comments on us, we do not have that prerogative and therefore, I will not fall into that trap. India cannot have two budget, one made by parliament and one made outside and therefore, every money that we spend must be money which is sanctioned by parliament, that is the constitutional scheme.Q: Since we are talking about money and we are talking about government resources let me also ask you about the status as far as the seventh pay commission is concerned. The empowered committee of secretaries are meant to give their report in their recommendations. The rollout plan I believe is July 1 if my memory serves me accurately. What can we expect on that front?A: The secretaries committee will give its report, it will be considered by the cabinet and then we will announce it. I can't speculate ahead of schedule as to what is going to happen.Q: But is it likely to be significantly lower than what the seventh pay commission had anticipated?A: I won't make any comment. I don't think there is any reason for anybody to speculate that at the moment.Q: I also want to ask you about another issue which gets talked about very often and I won't take more than a couple of minutes with you. On the issue of SUUTI, the logic or the reasoning that the government is continuing to hold its stake in companies like L&T, ITC etc was that L&T has strategic interests because it is in the defence business and so on and so forth and ITC because it is a home-grown company, home grown brand why should we allow the possibility of a takeover at least this is what one has heard in the past. Does that continue to hold reason?A: These are arguments which are given and at a time if the government decides to divest any company SUUTI or otherwise it will factor in all these arguments. After all these are not arguments that the government has given, these are arguments which various stakeholders and opinion makers gave on both sides for and against. For instance the argument for would be why does government need to hold shares in a company which is predominantly dealing in cigarettes and some other products. The argument against would be if there is a professionally managed Indian company which has developed why should government step out. These are all arguments which are given. Whenever this comes up on the agenda table the government will factor in all arguments and taken an appropriate decision.Q: Let me now ask you about what the expectation is now on the 19, that is going to be the big day, exit polls have shown a certain kind of picture emerging for states like Assam, what is your take and how will that change the arithmetic for BJP?A: As far as BJP is concerned our interest in this election is predominantly to try and form a government in Assam and make our presence felt in the assemblies of West Bengal, Tamil Nadu and Kerala. My own assessment is we should be able to make some presence felt in these three states and do quite well in Assam, maybe form a government. In Kerala particularly after Karnataka, that is the second state in the south that we are eying. Andhra of course in alliance with TDP but Kerala is the second state and I see a multiple time improvement in the vote share of BJP in Kerala this time. Now, how that vote share translates into seats is a separate matter.