The Hindu Business Line : FICCI moots 3-stage reforms plan for manufacturing sector

THE Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested a three-stage implementation of reforms to help manufacturing sector achieve international competitiveness.

The suggestion comprising a time-bound programme calls for labour reforms, tax reforms in the short-term to be followed up with action on larger issues that would call for political consensus.

The FICCI President, Mr Onkar S. Kanwar, told presspersons here on Monday that in the first phase, over the next six months, a degree of flexibility in labour laws could be introduced in the special economic zones, export oriented units and small and medium enterprises (SMEs) engaged in exports. This could involve permitting contract labour. Those involved in exports were the ones facing the most competition, he said.

Referring to the textile sector, Mr Kanwar said the Indian industry could not exploit the full benefits of the removal of quota regime because of competition from China, where textile companies were subject to flexible labour legislations.

Also, all indirect taxes, including State taxes and local levies, should be modvatable; environmental clearances could be based on self-certification and electronic filing permitted; and a common computerised format of applications and clearances introduced for new investment proposals.

In the second phase, to be implemented over 12-18 months, contract labour could be introduced in all SMEs; VAT rates harmonised and all State and local levies such as Central sales tax, entry tax and octroi withdrawn and guidelines framed to provide on a priority basis facilities such as power, water and roads to foreign greenfield investors.

To a question on the impact of States not shifting to VAT, Mr Kanwar said it is only a matter of time before most of them shift to the new system. VAT has been found to be beneficial in terms of revenue to the Government. Even the BJP-ruled Madhya Pradesh has said that it would shift to VAT in two months. If that happens, it is only a matter of time before the other BJP-ruled States change.

FICCI had earlier represented to the Tamil Nadu Government on this issue, he said.

Finally, in the third phase, contract labour could be permitted in all industries; tax on goods and services restricted to less than 20 per cent and inspections outsourced to private technical agencies.

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