Draft 3-year action plan: Niti Aayog concerned over handling of NPAs, tax disputes

It also pointed out that a “key factor” behind rising tax disputes was the tendency of tax officials “to initiate an action” without “necessary” justification. “This is reflected in the low success rate of 30 per cent they have in tax appeals…,” it said, adding that there was a need for assessing performance of tax officials based on the success rate of their cases. The action plan also called for reducing the scope of interpretation of tax laws via precise formulation of rules that “spell out in detail tax liability under specific situations”. It suggested implementation of the Easwar panel suggestions.

On the rising issue of NPAs, the draft plan said that the Rs 70,000 crore commitment by the government under the Indradhanush scheme may not be enough. “…it is likely that as the NPAs are moved out of the bankbooks, we will need a larger sum for recapitalisation. The NPAs are now much larger than at the time the Rs 70,000 crore figure had been fixed,” the draft plan said. The plan also highlighted the “immediate attention” required by the NPA issue, particularly considering that the detrimental effect was testified by the recent sharp decline in the credit growth of public sector banks. It has also called for linking compensation of employees with bank’s having a lower share of NPAs in their portfolios, in order to stunt further growth of stressed assets in the country.

The draft action plan also proposes accelerating of the disinvestment process over the next three years as one of the key reforms to the role of the government. Based on recommendations by a Niti Aayog-committee, the Cabinet had granted its approval for the strategic disinvestment of 20 public sector undertakings. “These are now in the implementation stage. It is recommended that the Department of Investment and Public Asset Management speed up the process of disinvestment,” the document said.

Apart from these issues, the draft action plan also flags the fundamental issue in the country’s expenditure planning by having a “strong tendency” towards revenue expenditure at the expense of capital expenditure. It also noted that within revenue expenditure, subsidies have overshadowed expenditure on social sectors such as health and education. “Similar misallocations also characterise capital expenditures. Owing to the traditional path chosen, a large part of government resources has been used for investment in products that the private sector can readily produce and serve no public purpose,” it said. The plan proposes that the government reduces the revenue deficit to 0.9 per cent of GDP by 2019-20, compared with an estimated 1.9 per cent in 2017-18.