Economic Affairs Secretary Subhash Chandra Garg has 34 years of experience in administration, management and public policy, finance and several development sectors. A 1983 batch Indian Administrative Service officer of the Rajasthan cadre, Garg holds degrees in commerce and law from the University of Rajasthan, Jaipur, and is a professionally qualified Cost and Works Accountant and a Company Secretary.

Garg was executive director of the World Bank before he was named Economic Affairs Secretary. In an interview with PRASHANT MUKHERJEE, Garg explained how the Central government is comfortable in managing the country’s macro economics despite global crude oil prices tending to move upwards. Excerpts:

Q: There is renewed concern over what happens to the country’s macro economics as oil prices remain elevated. How is the government thinking of tackling higher oil prices?

A: Oil is a very important commodity for us but since we are deficient in oil production we import it in large quantities. In fact, one-fifth of our import bill is oil alone. It also has implications on inflation trajectories. We need to be quite aware and conscious of the developments taking place globally.

Oil has been rising in terms of pricing for quite some time. But at present, we have built up foreign exchange reserves, better flows from services side, sound capital flows and better remittances. Hence, our capacity to manage oil shock is much better. Having said that, the higher crude oil prices are going to impact the import bill.

Q: Should the government not roll back those excise duty hikes to provide relief to consumers?

A: Oil prices are cyclical in nature. Hence, for the government it is necessary to provide consumers more stable prices. So, we ensured some part of the benefit of decline in oil prices is passed on to consumers and the remaining was captured by way of additional excise duties.

The fuel prices that we are witnessing today are closer to what they were in 2014. Global prices have increased and it is necessary to watch for some more time. If it persists then the government will take a call accordingly. The volatility of the situation needs to be monitored closely.

Q: Despite petrol and diesel being deregulated and revision of the fuels set to happen on a daily basis, why were the prices kept frozen before the Karnataka and Gujarat elections? Is the government involved in backdoor regulation?

A: The government didn’t give any directive to the oil companies to hold prices. They are free to decide on the revision on prices. It is the oil companies who took their own decisions. This can be better answered by oil marketing companies. The government had no role to play in this.

Q: One of the reports suggests that the government is trying to reduce its fiscal deficit through some smart jugglery in the food subsidy bill through Food Corporation of India. Could you please explain?

A: The government is committed to achieve its fiscal deficit target. We now have a provision in the Finance Bill that this is a statutory binding target for the government. The target is 3 per cent by 2021. In the last 4 years, the government has consistently reduced the fiscal deficit.

The oil bonanza, which came by increasing excise duties, was also used to reduce the fiscal deficit. Coming to your question, which seems to suggest some kind of sharp practice is followed to reduce the fiscal deficit, that’s not the case at all. Let me tell you what the exact transaction is.

The FCI has two kinds of demands. One, the government needs to meet the food subsidy bill. The second thing is that FCI needs working capital for its operations. What we have done is a review of the capital structure of FCI and also the food subsidy refinement of FCI. We have come to two conclusions. One conclusion is that pay them the food subsidy bill 100 per cent every year.

In the past, there were some years when the entire food subsidy bill was not paid. Hence, it was also decided that even the past arrears would be liquidated in the next 5 years in equal installments. We have also now decided that the working capital requirement and the equity capital of FCI should be structured in more stable fashion.

So, there is a proposal to increase the equity of FCI, which should take place this year and also to manage the way in which their working capital is met. FCI needs standing stable long-term requirements of working capital. We have decided to permit them to raise debt funding for their stable working capital requirements. As a first step to meet that we have provided loans from National Small Savings Fund. In due course, they will pay back to NSSF.

Q: Is there any policy in the making where monetisation of assets by state-owned companies will be considered for revenue generation?

A: The monetisation of existing assets, which we call brownfield assets, should be seen in the context of other asset management measures which the government is taking.

Now, you can lease out the assets for some period of time, take a capital contribution for future cash flows and use that upfront cash flow for either further investments or for other purposes. We took the lead in formalising such a mechanism to monetise such assets and now it is under Department of Investment and Public Asset Management to take it forward.

Q: What is your take on the present NPA situation of banks?

A: As we speak, a major resolution has taken place with Tata Steel acquiring Bhushan Steel. In this case, a sinking company is in the hands of better management and it would also provide relief to banks. The IBC process is an absolutely new institutional development.

In India, there has never been a situation when a promoter was asked to leave the company. The process is stabilising with more amendments to come. While cement and steel are turning around, the housing sector has started moving. Hence, in coming quarters you will witness NPAs coming down and investment cycle picking up.