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Our Bureau

New Delhi , Nov. 16

THE Finance Minister, Mr P. Chidambaram, said today that the Government would keep a strict vigil on inflation and fiscal measures could be taken if undue pressure builds up on the price front.

"The Government will stand by and watch the situation carefully. I will not hesitate to take fiscal measures if it is necessary," Mr Chidambaram said while addressing the Economic Editors' Conference, 2005 here.He said one of the major policy challenges before the Government was the hardening of oil prices. "Sustained hardening of international crude oil prices has posed a major threat to price stability," Mr Chidambaram said.

However, he said containing inflation below 5 per cent, despite the oil price scenario, was a vindication of the Government's price management policies.

Non-Navratna PSUs: Mr Chidambaram said the Government has identified a few non-Navratna PSUs for disinvestment and he was hopeful of completing the process of offloading a portion of Government's stake in some of the companies during the current fiscal.

He said inter-ministerial consultations are currently taking place on the PSUs that have been identified, after which the Government might have to hold discussions with the Left parties before finally divesting the holding.

Plea to non-VAT States: Mr Chidambaram called upon all non-VAT States to shift to the value-added tax regime by the turn of the calendar year. "I appeal to non-VAT States to come on board. I am hopeful that they would do so by January 1, 2006," he said. At present, six States are out of the VAT network.

The Finance Minister said that once all States shift to the VAT system, he would begin discussions on moving over to the Goods and Services Tax regime proposed by the Kelkar panel. "Moving over to GST would require constitutional and legal changes. It is too early to give a time line for the shift-over," Mr Chidambaram said.

Rupee movement: Queried on rupee movement, the Finance Minister said that there should be no cause for concern as long as the movement was orderly. "We believe in two-way movement of the value of the rupee. There is no cause for concern as long as the movement is orderly," Mr Chidambaram said.

PSU banks merger: On consolidation among PSU banks, Mr Chidambaram said that Government would not force any banks to merge. "The proposals must come from the bank managements with willing support of the officers and employees," he said.

Mr Chidambaram said that a package for revitalising co-operative banks is virtually ready and would be taken to the Cabinet in a couple of days.

He said that the Banking Cash Transaction Tax has started to yield results with the Government being able to track several account holders who were evading payment of taxes. "In one instance, we have found a person having nearly 200 accounts," Mr Chidambaram said.

New I-T Bill: He said that a new Income-Tax Bill should be ready early next year and that the Government was awaiting the Insurance Regulatory and Development Authority's views before initiating the process of redrafting of a new comprehensive insurance legislation. He hinted that the review of insurance laws could include a re-look on the 26 per cent cap on FDI in the sector.

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