PRE-POLL EFFECT Decisions on 5/20 rule, Voda tax row & foreign trade policy on hold. For several corporate chiefs, frequent visits to the capital may not be part of their weekly itinerary for the next 10 weeks. After all, crucial decisions across sectors, especially those involving policy changes, will now be taken only by the new government.
This means several key decisions that overseas investors were keenly watching — from relaxation in the conditions to allow Indian carriers to fly abroad, or foreign direct investment in Railways and more liberal FDI rules for construction — will be deferred until a new government is sworn in.
Officials said even tax conciliation talks with Vodafone cannot be completed till the Cabinet endorses it. A crucial decision, involving government revenues of around Rs 13,000 crore, is not something that UPA II will be able to take. There are several other tax-related changes, including the new Direct Taxes Code and the Goods & Services Tax, which the finance ministry gave up even before elections were announced.
Although the commerce department was toying with the idea of announcing a new five-year Foreign Trade Policy before the model code of conduct kicked in, it junked the idea. As a result, the existing regime will continue even though the policy is due to lapse on March 31.
The announcement of poll dates on Wednesday has thrown cold water on UPA II’s plan to scrap the eligibility criteria for Indian carriers to fly abroad — that they have to be five-year old and have at least 20 aircraft in their fleet — as well as those related to FDI. All the proposals have been awaiting Cabinet clearance for the past few weeks.
Aviation minister Ajit Singh told INNLIVE that now with the code of conduct in place, the government cannot take the policy decision to revoke what is popularly known as 5/20 rule. “The next government will have to take a call on this. It (scrapping of 5/20) cannot happen now,” Singh said. Similarly, the bid to privatize 15 more airports — beginning with six in places like Kolkata, Chennai, Lucknow and Ahmedabad —will also now be taken up by the next government.
The inability of the Union Cabinet to decide on Ordinances means that powers given to the Securities & Exchange Board of India, including those related to search and seizure, will now lapse. If the next government pursues the agenda, the market regulator will be able to crack down on unregulated investment schemes more effectively. “We won’t be able to initiate fresh steps, but whatever action we take while the Ordinance is valid is legal,” said a Sebi official.
Final decision on Vodafone tax dispute may be delayed
Ordinance giving more powers to Sebi will lapse
Easier rules for Indian carriers to fly abroad postponed
Privatisation of 15 airports to be decided by new govt
Allowing 100% FDI in railways and more foreign investment in construction delayed
New foreign trade policy to be decided by next govt
Tax law changes such as those on DTC, GST will have to wait
Signing of several free trade agreements (FTAs) will be on hold
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