Spelling out the pending agenda for the government, CII president Rajesh V Shah said that the restriction of Modvat credit on inputs to 95 per cent has had a "deleterious effect" on the entire industrial community.

Instead, if the government switches over to a levy of 5 per cent surcharge, it would not only provide the government with revenue but also redress the difficulty of the industry to a large extent. He said the Modvat restriction in its present form has affected ancillarisation, vendor development, sub-contracting, small-scale industry and job workers.

CII has reiterated its demand of imposing 4 per cent special import duty on fertiliser, coal mining, power generation and crude petroleum refinery projects.

The CII president, while complimenting thegovernment for taking 42 major initiatives in various spheres, pointed out that another 46 issues were yet to be resolved.

Shah said that the government also needed to urgently revive the capital market by removing restrictions on inter-corporate loans and investments, allowing buy back of shares and removing restrictions on bank loans against shares and debentures. He also called for extension of benefits under Section 88 of the Income-tax Act to all mutual fund schemes and revival of the erstwhile Section 80 CC.

CII has urged the government to disinvest up to 49 per cent in the core sector and 74 per cent in the non-core and non-strategic public sector undertakings while closing down the loss-making units. It wants the government to set up an empowered committee to facilitate the process of disinvestment with merchant bankers and technical/legal experts forming a separate advisory group for assistance.

A revamp of revenue expenditure and subsidy schemes is also on the CII agenda. Calling for sharperfocus and target orientation, Shah said the government should arrest leakages and improve the delivery mechanism of the subsidy schemes.

CII has reiterated its demand for the abolition of the Foreign Investment Promotion Board. A number of laws including LIC & GIC Acts, Urban Land Ceiling Act, IDR Act, and food laws need to be amended or revised, the CII president said. The government should also work for speedy passage of the Insurance Regulatory Authority Bill.

The confederation has asked the government to treat domestic companies at par with non-resident Indians and foreign institutional investors by pegging the capital gains tax at 10 per cent.

The stock option scheme allowed to software companies should be extended to other industries as well and securities allotted under this scheme should not be taxed initially but only on sale.

The Modvat-excise tangle

CII has a point. Instead of restricting Modvat credit on inputs to 95 per cent, a 5 per cent (Modvattable) special excise duty (on thefinal product) would garner revenues for the government and eliminate cumbersome calculations. Actually, simplification would be advanced if instead of the CII surcharge, excise duties were raised by a full percentage point or two. However, the point should not be missed that both the government and CII are talking about an effective hike in excise duties, which are high and need to be reduced. The trouble is that though the excise duties are nominally high, net of Modvat, there incidence is low. The Venkatarama Iyer Committee is looking into these complex issues. CII also wants the special import duty of 4 per cent to cover capital goods and project imports.