Top 7 policy rollbacks by the UPA-II government

The United Progressive Alliance government is said to be considering a partial roll back of a Rs 6.28-a-litre hike in petrol prices announced on Wednesday, sources told NDTV. A roll back, however, will not be the first for this government. It has had to retract important steps in the past because of opposition and pressure from the UPA-II’s allies, the Opposition, even industry. Moreover, the UPA government in its second term has also not moved on a number of important economic reforms measures, prompting accusations of ‘policy paralysis’.

Here is a list of the key economic ‘rollbacks’ by the UPA-II government.

FDI in multi-brand retail: On November 24, 2011, the UPA government took one of its biggest economic policy decisions when the Cabinet approved up to 51% foreign direct investment in multi-brand retail. The move would have allowed large foreign players such as WalMart and Carrefour to enter India. 10 days later, the government backed down after both its allies and the Opposition decried the move, saying they should have been consulted. The government withdrew the Bill, saying it needed more time for consultations.

Railway fares: In his budget for fiscal 2012-13, Railway Minister Dinesh Trivedi of the Trinamool Congress raised passenger fares marginally, which would have reduced the ministry’s subsidy burden by about Rs 4,000 crore. The move was lauded by markets but drew the ire of Trivedi’s party chief Mamata Banerjee and cost him his job a few days later. The new railway minister, Mukul Roy, rolled back all the fare hikes Trivedi had announced, except those for air conditioned coaches.

Jewellery excise duty: In his Budget speech, Finance Minister Pranab Mukherjee announced a 0.3 per cent excise duty on unbranded jewellery, which accounts for most of the Indian jewellery market. Jewellers across the country went on strike for almost three weeks, demanding a roll back in the duty. Earlier this month, in his Finance Bill, Mr Mukherjee rolled back all excise duties on branded and unbranded jewellery.

Cotton exports: On March 10 this year, barely a week after imposing a ban on cotton exports citing domestic shortfall, the government rolled it back. The government had on May 5 announced the export ban but buckled under pressure from allies, particularly Agriculture Minister Sharad Pawar of the Nationalist Congress Party, who claimed he hadn’t been consulted.

Property transaction tax: In his Budget for fiscal 2013, Mr Mukherjee introduced a 1 per cent tax deduction at source (TDS) on the transfer of property, in an attempt to clamp down on unaccounted-for in the that industry. In early May, he rolled back the tax, after the real estate industry protested, saying it put additional burden on buyers.

GAAR: Mr. Mukherjee also announced the general anti-avoidance rules (GAAR) in his Budget speech in March. Aimed at closing tax loopholes, particularly with countries with which India has a tax treaties, the move, slated to come into effect beginning April 2012, was slammed by the markets and investors. Fearing ad-hoc tax investigations, investors started to reconsider India’s viability as an investment destination. Faced with a large-scale exodus of global investors and a drying-up of future investments, Mr Mukherjee earlier this month deferred the implementation of GAAR to April 2013 to give investors more time to study the rules and become compliant.

Petrol prices in 2011: State-run oil marketing companies raised petrol prices on November 4, 2011. Mamata Banerjee threatened to pull out of the coalition government but retreated after a meeting with Prime Minister Manmohan Singh. While not strictly a rollback, but less than a month later, OMCs effected a petrol price on December 1, 2011, saying crude prices had retreated.