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Last Updated: March 05, 2007 15:40 IST
Finance Minister P Chidambaram on Monday said the government was not resorting to price control in the cement sector and invited industry players for talks on duty differential measures announced in the Budget 2007-08.
"We are not reinforcing price control," he said at a post-budget interaction with FICCI members, while referring to the issue of duty differential proposed for the cement sector.
The budget reduced excise duty on cement by Rs 50 from Rs 400 per tonne if it is sold at Rs 190 per 50 kg of bag, but raised it by Rs 200 per tonne on higher retail price.
"The government owes responsibility to the people of India to moderate prices where prices seem to have risen unreasonably. Whether they have risen unreasonably could be discussed. But if they have risen unreasonably, surely the government has obligation to moderate prices," he said.
He asked cement industry players to discuss the Budget proposal among themselves and with the government as well.
However, the government's plea to cement players seems to have fallen on deaf ears as manufacturers raised prices by around six per cent a day after the Budget was announced.
The Budget proposal had also drawn flak from the industry with CII president R Seshasayee expressing doubts over the efficacy of the measure.
Pointing out that moderating inflation is good for all, Chidambaram said opportunity to take profit in the short term should not cloud the thinking that in the long term price stability is a fundamental feature of a sound economy.
He also wondered how tax on Employees Stock Options (ESOPs) could take away a company's ability to retain talent and asked these companies to give inputs to the government to calculate the rate at which ESOPs should be taxed.
Dismissing the argument that tax on ESOPs would diminish a company's ability to retain talent, Chidambaram said the levy would be imposed across the board.
"How does it affect company A's ability to retain somebody, and how does it enhance company B's ability to attract somebody," he said, "It applies uniformly, where everybody gets ESOPs, ESOPs will be taxed, I think the argument that it affects companies ability to retain talent is little misplaced," he added.
He said the method for evaluation would be worked out by the finance ministry and asked the industry to give inputs in this regard. ESOPs can either be taxed as fringe benefit at the company's level or perquisites at the employee's level, but it is a benefit and needs to be taxed, he said.
Industry representatives can also discuss with the government whether ESOP should be taxed as fringe benefit or perquisites, the minister said.
On bringing companies in Export Oriented Units, Export Processing Zones and Software Technology Parks under the ambit of Minimum Alternate Tax, he said if these companies are paying tax overseas, then MAT could help them take advantage of double taxation avoidance treaty.
He said there is a case for allowing more companies a weighted deduction of 150 per cent from tax for expenditure on in-house R&D and he was willing to consider suggestions in this regard.
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