NITI Aayog, Vice Chairman, Arvind Panagariya in an exclusive interview to CNBC-TV18 spoke about the action agenda put forward by them. The document presented has recommendations across all sectors – defence, education, healthcare, job creation etc.
The document was prepared after consultations with states and all the stakeholders, said Panagriya.
It also talks about their proposals to resolve the NPA mess, land acquisition act, composition of expenditure and other things.
He said, NITI Aayog’s role in NPAs is only that of an advisory. Practical solutions for resolving NPAs have been given and now one is awaiting government’s response.
Below is the verbatim transcript of the interview.
Q: It is a 180 page report with recommendations across all sectors from what you should do on defence, education, healthcare, real estate, jobs creation. I know that this has been something that has been prepared after consultation with various departments both at the central level as well as the state level but like the economic survey is this merely going to be recommendations or ideas that NITI has put forward or are we going to see the government move along these lines?
A: First of all it is extensive and our team including all the advisers, lot of the youngsters we have hired recently, myself have been working hard, last six-seven months I have been working on it myself very intensively. So we have thought through a lot on this.
But one big difference between the economic survey and this document is that this document is the result of consultations with virtually all stakeholders. We have consulted multiple times with states at the level of the chief minister, I sent letters to the chief ministers, chief secretaries, then teams also went to the states, so a lot of discussions there, ministries we discussed extensively here and then of course there was a much wider discussion with the industry chambers, the voluntary organisations, the experts in the fields and all, lot of inputs were taken in so we have been working hard. So, this document has to be seen certainly as a sort of roadmap. The government will have to make decisions on what gets priority, what doesn't get priority but there is general kind of sentiment for the kinds of things that we have been recommending.
Q: You talk about defence capex being seen at Rs 1,72,000 crore in FY20 versus Rs 95000 crore in FY16. Railway capex at Rs 1.12 lakh crore in FY20 versus Rs 40000 crore in FY16. Road development Rs 86000 crore versus Rs 31000 crore in FY16. Similarly in education, health expenditure, food subsidies, you have factored in significant increases. Is this going to be proportionate to the kind of increase that you expect in taxes because you have been a little conservative on the tax front or perhaps realistic?
A: We have been quite realistic actually because what we are forecasting is in terms of the tax revenues and other revenues is below what had happened from 2003-2004 to 2008-2009. It is a bit above what happened after 2012-13, that was a very slow period and very unusual period with CPI going one way and WPI actually collapsing. However now the CPI and WPI are together and the GDP deflator etc will show greater stability and all.
So, I think we are just about right in our prediction and the increase in expenditures that you named are based largely on the incremental revenue. By 2019-2020 you begin to get about Rs 7 lakh crore or Rs 7 trillion extra above the 2016-2017 revenues. So, that is what gives you the room to, because that additional tax revenue you can then start changing the composition. So, we have suggested a very significant shift in the composition of the expenditures without reducing any of the subsidies etc. We have kept that at least at the level at which they are currently.
Q: Let me then ask you about one of the pressing matters and that is on the NPA resolution and this is something that you have talked about as well and it is part of in a sense broadly your vision document. You say that government needs to play an active role in the auction of NPAs. The creditor banks should be allowed to buy 80 percent of share in the asset during the auction of NPA assets and the government should support the auction of assets of NPAs to private ARCs. We are still awaiting clarity from the government and the RBI on this new NPA resolution mechanism or policy. We don't know whether it will entail any amendments to any legislation, whether it is the banking regulation act or the RBI act. Do you believe that the ideas that you have suggested may be the way forward?
A: We certainly think that this is one reasonable kind of proposal, practical proposal because it also solves some of the problems. At 20 percent it gives enough skin in the game for buyer of the assets or whoever is investing 20 percent in the asset. At the same time 80 percent ownership remains that of the bank. Therefore the allegations that you have away the asset at very low price or throw away price cannot be levelled because if the asset resolves at close to its par value, at its face value then 80 percent of it will come back to the bank. So, it alleviates those kinds of fears also.
Q: If you are saying that this is the practical solution to being able to address the NPA crisis that we are faced with today, what has the response been from the government? You have been consulting with various stakeholders, are there buyers or takers for this plan and proposal?
A: We shall see. This is not a matter that NITI Aayog in practical terms kind of takes up. In this our role is very much advisory and we have suggested this one possible way to resolve. However there are also in the discussion alternative proposals and alternative routes to clearing the NPAs. So, largely on the ground it is the finance ministry, department of financial services on the one hand and RBI on the other who have to ultimately do the resolution.
Q: When you floated this proposal or this idea on how you could address this issue, what has been the reaction that has come in from the finance ministry? Have they raised any concerns about it, are they in favour? Eventual decision is later but what has been the feedback to your proposal?
A: This is a more specific version of what I had discussions on but there is general sense that perhaps in a large part of the NPAs the route through the purchases in some form by the private ARCs is a feasible route. Even if you go back to the proposal that Viral Acharya, the new RBI deputy governor had floated, that also had what is the modus operandi of this, how you do it, he may have differed on it but basically when he talked about many of the assets which can be revived, when he talked of those assets, he had also proposed that we can do it through the private buyers of the assets.
Q: Let me move on and talk to you about one of the other sectors that you have given your specific recommendations for. Under the urban development heading you talk about the need to bring down land prices to make the affordable housing scheme to the supply of urban land a reality, you talk about flexible conversion of rules from one use to another, you talk about the release of land held by sick units, this has been something that we have heard a lot about but do you believe that this is now actively going to be something that the government moves quickly on, this business of sick units being able to part with their lands towards affordable housing?
A: Movement is underway. Certainly, the situation is not what it was three years ago. We have been finally, despite scepticism from all quarters, we are seeing the closure of the sick units and the land will then be put up.
We have suggested more wholistic approach meaning that all other fronts also we have to try to work. Conversion of land I think is also an issue on which we need to make progress. It is a state issue but we would engage and we have engaged with the states also.
Q: It is not a recommendation in your document but it is an observation that the land acquisition act and amendments to the land acquisition act is something that should be revisited. Is this something that you are now going to press for? I remember in your press conference you talked about there is space now for legislative change and perhaps even constitutional change?
A: I think this land acquisition issue still cannot be handled at the centre because in the Rajya Sabha the government still lacks the votes.
Q: Post 2019?
A: Once they have votes then of course it can be revisited. What I am suggesting here or what we are observing here is that at least two states have actually amended the land acquisition act - Tamil Nadu and Gujarat and so there are at least two different models that have been pioneered by the two states and perhaps the other states could look at these.
If the central government has given permission to both of these then similar permissions to the other states become quite feasible. So, this is in a way for discussion with the states that they may want to move faster because ultimately when you talk of affordable housing, who benefits, it is the residents of the states and so states have lot of vested interest in doing it.
Q: I want to go back to your previous answer where you talked about the closure of sick units and you said that there was scepticism but it is finally starting to happen on strategic divestments. I can sense from your body language that there is a degree of frustration on why it hasn't moved?
A: It is not frustration, I am disappointed that it has not moved because we had actually moved quite a while back.
Q: What is holding it up you believe?
A: I don't really know. Ultimately it is done by the department of investment and public asset management (DIPAM). What exactly has held this up - I see some movement forward that there have been advertisements out and all for moving this process forward but actual sales have not happened.
Watch video for entire discussion......
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