Advised Manmohan Singh, Pranab Mukherjee against Vodafone tax: Montek

Former Planning Commission deputy chairman Montek Singh Ahluwalia
Montek Singh Ahluwalia, who was deputy chairman of the Planning Commission during the United Progressive Alliance’s (UPA’s) decade in office (2004-14), has said he had in 2012 advised then prime minister Manmohan Singh and then finance minister Pranab Mukherjee not to implement one of the most controversial decisions taken by the government of the day — to retrospectively amend the Income Tax Act, 50 years after it was passed, to overturn the Supreme Court’s Vodafone judgment. However, they did not heed his advice.


Asked whether this meant that Singh agreed with the proposal and didn’t think it would send out a damaging message about India’s attitude to investment and the rule of law, or that he was weak and unable to overrule the finance minister, Ahluwalia said he couldn’t answer that because he was not privy to any discussions between the two of them.


However, he did say that at no point thereafter (during the past eight years) had Singh told him that the decision to retrospectively amend the Act was a mistake. He said this had not been discussed between them.


In a 60-minute interview to The Wire, to cover the launch of his forthcoming book Backstage: The Story Behind India’s High Growth Years, Ahluwalia told Karan Thapar that the land acquisition law in 2013 “went too far”. He admitted the government had received petitions from industrialists pointing this out but since they were “stakeholders” their advice was not taken.


In his book, he accepted the Act “increased the cost of land to financially unsustainable levels … and made it easier for anyone who wants to stop a project to use the various consultative processes required under the law to delay matters”.


In the interview, he said the Act squeezed industrialists in two ways — in terms of cost and by providing an easy route to obstruct their plans.


Ahluwalia agreed environmental regulations held up clearances of several projects during the UPA years and, consequently, delayed investment and growth. However, he said this became apparent around 2010-11 and thereafter the government needed a couple of years to work out what to do. In 2014, the UPA was voted out of office. Ahluwalia suggested that the UPA did not have the time to act and take corrective measures.


Describing the first seven years of the UPA’s 10-year term as “outstanding”, he said possibly its greatest achievement was an 8.4 per cent rate of growth during the period, when 138 million people, a figure without precedent, were lifted out of poverty. However, the UPA failed to get recognition for these achievements because it didn’t broadcast its successes. Unfortunately, the Congress, too, did not take sufficient steps to publicise the UPA’s successes.


Speaking about the charges of corruption that emerged from the 2G and Coalgate controversies, Ahluwalia said the government did not handle them well. He said the UPA had a credible defence, which it failed to make properly. He said the accusation that the exchequer had made a huge loss because spectrum and coal were sold cheaply overlooked the critical facts that this stimulated the growth of telecom and industry, which led to faster GDP growth and which, in turn, brought in additional revenues, which could be used for other developmental purposes.


As for his assessment of Singh as prime minister, Ahluwalia said the view he was weak and vacillating was unfair.


There was a long discussion about whether the fact that Sonia Gandhi was “the final decision-maker” undermined the constitutional position of the prime minister and the traditional manner in which the Indian government worked.

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