The Hindu Business Line : We need land, water policies for industrialisation

We are the largest importers of edible oil in the world, the largest importers of fertiliser, not to mention fuel oil and products. The moment we clear our throats in the world market, prices have already gone up.

MR R. GOPALAKRISHNAN

The Finance Minister himself says he wants to simplify the tax regime. Perhaps, he has, compared to what it was five years ago. But there is considerable scope. I'd rather have one flat rate and be done away with everything else. That is my dream, says Mr R. Gopalakrishnan, Executive Director, Tata Sons Ltd.

His views on some issues that the Finance Minister could keep in mind when he prepares the Budget.

What are your concerns about the economy and industry as we approach another Budget?

One overarching aim is increasing the productivity of expenditure, which means reducing the leakage and making it more effective. And as the size of the pot of money gets bigger and bigger, even a small percentage of that as leakage can be a very large amount of money. It is nothing to do with the Budget as such but with governance.

I think one positive trend is that there is an attempt to have more allocation for rural India in which I include agriculture, rural infrastructure, rural access to funds, water and irrigation, renewal of wells and so on. I think that should continue.

The third issue is self evident, it is infrastructure. But within infrastructure what worries one the most is electricity because it touches a very large number of people. So the areas that I have chosen — which are rural India, social issues and infrastructure, specifically power — all have a common feature, they (currently) touch the largest number of people in a negative way. If you look at what is happening in the power sector, the bottleneck is not so much in generation but in transmission and distribution. We have tried in many ways to reform the transmission and distribution losses.

The social sector, rural India and electricity have another common feature. They are all in the State sector and not in the Central Government. Now this is a bigger challenge.

Whatever is under the purview of the Central Government, airports, telecom, they are well on their way (to progress). But the other subjects are in the State sector. And the Finance Minister cannot do anything. There are innumerable complexities. Perhaps further Central funding to the States can be more directly linked to the milestones in taking action.

What can be done to address what appears to be a supply deficit in the country of several commodities and products?

As far as agricultural commodities are concerned, after the first Green Revolution, we need Green II. We haven't got our act together on Green II. Why should we not have record production of wheat and rice? Why should we be big importers of wheat or rice? Above all, our agriculture is in a pathetic condition. If you take the growth rate of agriculture, we set a target and we get to half of it. This has been going on for 15 years.

Another example is fertiliser subsidy, approximately Rs 30,000 crore in urea and Rs 20,000 crore in phosphates. For the last 10 years, there has been no investment in fertilisers, it has been zero. Why will you not head for a crisis? Either you make a statement that we will henceforth be reliant on import of fertiliser and we don't need to produce and that fertiliser will be duty free or have a duty of 5 per cent or so.

There is a food security angle to it, so you don't want to make a statement. We have the most muddled policies on fertiliser. So here is the crisis brewing and one day it will hit us in the face. Last year import of fertiliser was at a record high. And there is a mistaken impression that the fertiliser subsidy is going to industry and not to the farmer. This is the biggest nonsense. Because you set up fertiliser factories with the Government telling you which feedstock to use, gas, coal and so on. Here a fellow already has a naphtha plant and you cannot be inefficient. You can incentivise naphtha, support him, because you are the one who made him go for naphtha in the first place.

What about the supply factor in industry?

On the manufacturing front, it is different. What is really happening is that demand has picked up, I don't think it is supply-led. Because there is more construction and more infrastructure projects happening, the demand for cement is more.

The world prices of steel and metal are high. This will continue as far as I see at least for the next 10 years.

People are building new capacities, for all these you need to order heavy equipment. And the heavy equipment fellows are all heavily booked, because China is also facing a huge demand. Meanwhile, demand is going up, and one is always catching up. This will last for 10 years.

Do you feel that taxation or duty changes can take care of demand?

There is no magical way to increase production of cement or electricity just like that through fiscal means. I think our peak duty is already 12.5 per cent.

I mean you take steel and I am talking from memory. If the import duty is 5 per cent and you make it 3 per cent, that does not make so much sense. I am told fertiliser is at 5 per cent. Take cement. I don't think much import of cement can happen because it is a bulky material. There is another issue. We are the largest importers of edible oil in the world, the largest importers of fertiliser, not to mention fuel oil and products. The moment we clear our throats in the world market, prices have already gone up.

Do you see conflict between farmers and industry escalating?

It is a complex trend, because we don't have a land policy. India has 16 per cent of the world's population but 2 per cent of the world's land and 4 per cent of the world's water. Land and water are fundamental to industrialisation. So the conflict between farmers and industry will increase, I am not talking about any individual example but generally.

Somebody wants to set up a factory but by the time he gets land and water and all that you have lost a lot of time. I see increasing conflict from different constituencies over issues of land and water. Land and water are so basic, it is not like Mercedes cars that only some people want or need. We need a land policy, we need a water policy.

What do you feel about taxation policy?

If you want to raise taxes, don't raise new things, don't raise complicated things. Just put up the corporate tax rate or whatever. If it is 30, make it 32, 33 per cent. If you put up an education cess, then a surcharge on the tax, and so on, it is too complicated.

The Finance Minister himself says he wants to simplify the tax regime. Perhaps he has, compared to what it was five years ago. But there is considerable scope. I'd rather have one flat rate and be done with everything else. That is my dream.

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