Matter of interest for India Inc
New Delhi   13-Mar-2008
<b>Suggestions, complaints and plateful of hopes </b> Sustaining the current growth momentum was the theme as leading CEOs raised issues of concern and offered recommendations at ET’s session with the FM. JK Paper MD Harshpati Singhania raised the issue of relatively high interest rates and a possible negative impact on reinvestment by the manufacturing sector. C Rangarajan, chairman of PM’s Economic Advisory Council, pointed out that with the inflation rate rising, one could not claim the real interest rate is rising as the nominal rate has remained the same. “I certainly think that over the medium term and long term, low interest rates combined with low inflation is the best solution. However, in the short-term, there are situations in which interest rates have to be raised as inflation management is extremely important,” he added. If capital inflows abate, it could allow an adjustment in interest rates, Mr Rangarajan said. “Lowering interest rates artificially is not something that should be expected,” he added. The finance minister said most companies already borrow at sub-PLR rates. SAIL chairman SK Roongta asked for a tax on unproductive land so real estate speculation could be curbed. To this suggestion, the FM quipped, “Let’s see, there will be another Budget, I suppose.” Power secretary Anil Razdan made a case for graded excise duty reduction on energy-efficient products, while PepsiCo India CEO Sanjeev Chadha recommended the government incentivise industry’s use of technology and best practices to improve farm productivity as well as incentives for water conservation. <span style=color:brown>Expressing concern over the oil subsidies doled out by the government especially when oil prices have crossed $100 per barrel, IndianOil CMD S Behuria said petrol subsidies next year will amount to Rs 12,000 crore if prices stay at current levels. While refraining from a direct comment on subsidy levels, the FM said the industry needs to do much more in terms of fuel conservation as well as targeting subsidies effectively.</span> Former Maruti MD Jagdish Khattar expressed concern that only a few companies were bagging most infrastructure projects which could lead to delay in implementation. He asked the government to provide support in execution to ensure there is no backlash. “We invite bids ... but not enough companies are willing to come forward,” Mr Chidambaram said. However, he said, many more infrastructure companies are coming up which should allay these concerns. Stanton Chaise partner R Suresh said FBT and capital gains tax on Esops is a double whammy for managers. “The concerns on Esops are very narrow that don’t affect millions of Indians,” the FM said. He pointed out that the ESOP package was designed by leading professional financial managers.