2. In his opening observations to the Council, the Prime Minister briefly dwelt upon the strong fundamentals of the economy, including the satisfactory rate of growth of 5.9% in the last fiscal year, and the possibility of the growth rate going up to 6.5%-7% in the current year. He also mentioned about inflation remaining well under control, the satisfactory Balance of Payments position and the creditable improvement in export performance. India’s international credibility is at an all time high with important trading partners seeking new investment opportunities here. The Prime Minister observed that there is all round recognition that we truly have the potential to become a major power in the area of what is being described as the "New Economy". He stressed that policies which enable us to realise our full potential, will be pursued. These include fiscal consolidation, reform of banks and financial institutions, a credible disinvestment programme and removing bottlenecks in infrastructure. Simultaneously, high priority will be accorded to building social infrastructure in education, health and rural development, particularly rural road connectivity, increasing agricultural productivity and addressing basic human needs.

3. The Council then heard Shri G.P. Goenka, Shri Rajeev Chandrashekhar & Shri Nusli Wadia who had put together a report entitled "How to get Disinvestment going ?". The salient recommendations made by this Group, inter alia, include the following :-

• The management and responsibility of the entire disinvestment process should exclusively be with the Disinvestment Ministry (DM).

• Stronger PSUs must enter the market first.

• The proceeds of disinvestment should not go into the Consolidated Fund of India. They should be used to retire the public debt or for a genuine NRF.

• Explain to citizens the benefits of disinvestment – more expenditure on education, health care and infrastructure, higher growth, more employment, lower interest rates, lower inflation.

• All non-strategic government companies should eventually be brought down to 26% government equity.

4. Shri G.P. Goenka, Shri A.C. Muthiah and Shri Sanjiv Goenka presented their report on "Power Sector Reforms". The main suggestions put forward by the Group are as follows:-

• Recognize that reforms must begin with transmission and distribution, especially distribution, not with generation.

• For agriculture, increase tariffs over a pre-announced three-year period to Rs. 0.50, Rs. 0.75 and Rs. 1.10 per unit.

• Take subsidization away from SEBs and move it to State budgets. Target subsidies only at the poor, subject to a threshold monthly consumption of electricity.

• Break up monolithic SEBs into four corporations to look after thermal generation, hydel generation, transmission and distribution.

• Privatize distribution through management contracts, joint ventures or full-fledged licenses. This should be done through competitive bidding with transparent criteria.

• Make regulatory commissions independent and autonomous, subject to judicial review.

5. Shri Nusli Wadia and Shri Ratan Tata had prepared a report on "Revival of Traditional Industries", such as textiles, chemicals, tea, sugar etc. In its presentation, the Group focussed on the following important recommendations:-

• Remove structural anomalies: have uniform structure of fiscal levies across all sectors, except handlooms, and make applicable industrial power tariff rates to all sectors of the textile industry.

• Remove knitting and garments sectors from SSI purview to improve scale economies and competitiveness.

• Simplify procedures for relocation/ closure of unviable units, and development of real estate in urban areas.

• Set up a "Brand Equity Fund" for promotion of the "Made in India" label.

• Develop legal and industry knowledge infrastructure to respond to anti-dumping measures and other new non-tariff barriers. Initiate an industry- government partnership for this.

Chemicals

• Allow offset of CENVAT on fuels to improve cost competitiveness.

• Strengthen anti-dumping mechanism by developing legal and industry knowledge infrastructure to take prompt action on petitions.

• Encourage scientific knowledge based activities by exempting patented products from all central and local taxes, and upgrading the patent office.

• Facilitate industry restructuring by providing fiscal incentives for modernisation and allowing closure or relocation.

Tea

• Have a single point central income tax and share tax revenue with states.

• Improve labour productivity: link wage revisions to productivity increases, withdraw norms on employment in tea plantations.

• Invest in brand building to obtain a higher value in overseas markets.

Sugar

• Decontrol sugar sales fully by removing levy obligation and allow free movement.

• Set up a futures market for sugar.

• Allow use of the Sugar Development Fund for modernising existing units.

6. Shri Mukesh Ambani and Shri Kumarmangalam Birla were entrusted with the task of preparing recommendations for policy reforms in education. The salient recommendations made by the Group include the following:-

• Make primary education compulsory and free. Secondary education should be compulsory as well. There is no getting away from enforcing the Constitutional commitment to compulsory education for children up to the age of fourteen years.

• Leverage the vast and growing resources in information and communication technologies to bring about smart schools that integrate computers, networks and content.

• Focus strongly on literacy, primary and secondary education and leave higher and professional education to the private sector.

• Establish an Education Development Fund for literacy and primary education with donations to this fund exempted from income tax.

• Progressively reduce the funding for universities and make them adopt the route of self-sufficiency. Concurrently, a credit market for private finance of cost of higher education should be developed.

7. Shri N. Srinivasan and Shri Rahul Bajaj presented their report on the "Strategy for a Reconvened WTO Ministerial Meeting", wherein they focussed on the following main suggestions:-

• Re-assert the relevance of ‘special and differential’ treatment for developing countries.

• In case of industrial tariffs, demand a substantial reduction of tariffs by industrialised countries on labour intensive and low technology manufacturers where we have a comparative advantage.

• Even while ensuring food security and protecting the interest of our farmers, seek greater market access for our exportable agricultural products.

• Ensure that the sanitary and phyto-sanitary (SPS) measures do not hurt our agricultural exports and establish an effective, credible and unified domestic mechanism for SPS certification.

• Demand suitable changes in the Anti-Dumping Agreement.

8. The Council then heard Shri Rahul Bajaj and Shri Sanjiv Goenka who had made recommendations on "Avoiding the Pitfalls of Globalisation". The main suggestions of this Group are as follows:-

• Complete domestic economic reforms (such as agricultural reform, de-centralisation, administrative, legal and institutional reforms and reforms of the labour laws).

• Ensure macro-economic stability and elimination of revenue deficit ¾ reduction of government borrowing.

• Focus on three things: Disinvestment, privatisation and commercialisation of assets, mainly to retire public debt.

• Give due attention to the issue of bankruptcy of industrial companies.

• Broad-base the capital market to attract more Indian investors (institutional as well as individual). Institute safeguards against 'financial panics' by strengthening the SEBI.

9. The Group consisting of Shri Mukesh Ambani and Shri Kumarmangalam Birla had also prepared a report on a "Policy Framework for Reforms in Health Care". The main recommendations of the Group included the following:-

• Enlist private providers to deliver preventive care.

• Prepare and implement a detailed plan for use of information technology in health care delivery, referral, training and administration.

• Levy additional tax on areas which will increase the health care costs, such as use of tobacco and liquor, and dedicate such taxes to meet the increased demands for public expenditure on health care.

• Focus government’s role on primary and preventive health care programmes, apart from providing free and affordable health care to the indigent and needy sections of the population.

10. The Council also heard Shri Nusli Wadia and Shri Ratan Tata who had prepared a report on "Unshackling Indian Industry". The main suggestions of this Group included, inter alia, the following:-

• Formulate a clear cut compliance policy, defining in unambiguous terms the list of compliances, which an investor has to meet. If all the compliances have been met, sanction should be forthcoming automatically.

• Set in motion computerisation and updating of land records (as done in Andhra Pradesh).

• Use IT more intensively in all Government departments.

• Allow contract labour in all non-core activities of a company by making it explicit in the Act, thereby debarring contract labour specifically from only the continuous manufacturing process of a company.

• Abolish the need for government permission for closure/ retrenchment/ layoff. Allow unit to be closed down after paying a mutually agreed compensation to the employees.

11. The Council also reviewed the status of implementation of the recommendations made by six special groups set up by the Prime Minister earlier. These recommendations are now at various stages of implementation in the respective Ministries.

• The Council was informed that an Implementation Review Committee headed by the Finance Minister, which was set up at the last meeting of the Council in December, 1999, has already conducted an in-depth review of the status of implementation of the recommendations made by the Ratan Tata Committee on Infrastructure. Several of the suggestions made by this committee, such as the imposition of a cess on diesel and 4-laning of the major highways of the country, have already been adopted and are under implementation by the Government.

• The Council noted that Government has taken up a major programme for enhancement of existing cold storage capacity in the country following the recommendations made in this regard by the Sub Group on Food and Agro Industries headed by Shri Nusli Wadia. This is expected to go a long way in the promotion of agro processing industries and prevention of wastage of perishable food products.

• The Group on Capital Markets headed by Shri Mukesh Ambani had made recommendations regarding the role of Government in public sector banks, which has now been clearly enunciated by Government. A policy on PSU disinvestment suggested by the Group has also been put into the place, involving reduction of Government equity in non-core sector PSUs to 26%. Other suggestions of the Group such as abolition of BIFR and allowing pension funds to invest in the equity market, are under consideration.

• Shri N.R. Narayana Murthy had submitted a report on Knowledge Based Industries, which has been factored into the Government’s IT initiatives. This includes introducing a legislation in Parliament to give legal cover to IT based transactions, protection, security, etc. Recommendations made by the Group on employee stock options and venture capital financing have also been largely accepted and implemented in the recent Budget. The Government’s internet policy has also broadly followed the recommendations of the Group, with more than 200 licences already issued under the ISP policy.

• The report of the Group on Administrative and Legal Simplifications has been taken up by different Ministries of the Government for detailed scrutiny and follow up action. In many cases legislation or notification is under preparation. Labour issues raised in the report are under consideration of the Second Labour Commission. The Government has already decided to repeal a number of anachronistic laws to simplify and clarify the legal and regulatory environment.

12. The Prime Minister observed that the hard work put in by the members of the Council in preparing their recommendations would be matched by an equal fervour within the various Ministries and Departments for expeditious follow up action. He promised that follow up action on these recommendations will continue to be reviewed and monitored by the Implementation Review Committee under the Chairmanship of the Finance Minister.

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