The Centre will include in the Budget only the politically acceptable clauses in the Kelkar reports.

"The government is not bound to accept the reports in their entirety. The government will implement only such recommendations it considers worth implementing," Prime Minister Atal Bihari Vajpayee said at a press conference in Shimla on Friday.

Vajpayee, who is campaigning in Himachal Pradesh for the Assembly elections, said the reports, submitted to the government by two task forces on direct and indirect taxes headed by Vijay Kelkar, adviser to the finance minister, were of a "bureaucrat and an economist", and the government was under no obligation to implement them in their entirety.

A few weeks ago, Vajpayee had observed that the National Democratic Alliance government would not accept economic reforms if they were politically damaging. His statement today admits the reservations of the Bharatiya Janata Party on several elements of the Kelkar reports, including a tax on farm income, and new structures for personal and corporate taxes.

The Rajnath Singh committee, set up by the BJP to examine the Kelkar recommendations, had rejected several of them. While it appreciated those on sprucing up the tax administration and raising the income tax exemption limit, the committee advised against doing away with the standard deduction for employees and tax rebates. It was dead against taxing farm income.

The Rajnath Singh committee felt that tax incentives for long-term savings under Section 88 could be withdrawn only after a comprehensive pension scheme was in place.

It also rejected the proposal to remove incentives on interest charged on housing loans, pointing out that home loan disbursements had gone up from about Rs 10,000 crore in 1998 to Rs 37,000 crore in 1999.

The committee also opposed the abolition of benefits under Section 80P to co-operative societies.

It said the societies played a major role in the rural economy and were of great importance to the unorganised sector. It also rejected any rise in the excise duty on kerosene because that would adversely affect the poor.