PM man Kaushik Basu to bridge 7 RCR-North Block gap

Now that he is doing what he does best — managing the country’s finances, especially when it is in tatters — Manmohan Singh wants his trusted lieutenant Kaushik Basu to bridge the gap between the finance ministry and the PMO (prime minister’s office).

The prime minister has asked Basu, chief economic advisor, ministry of finance, to prepare daily an in-depth report on the developments in the five departments of the ministry. He will revert to the PMO with the report, along with his comments.

Once a report, based on details collected from a department, is formed, it is sent back to the department, a ministry official said. “Cosmetic changes, if any, are done at the department’s end. It is then sent to the advisor’s office, which then forwards it to the PMO.”

Singh began micromanaging the finance ministry as soon as Pranab Mukherjee resigned on Tuesday. A source said Singh wants to reprise his 1991 finance minister’s role when he pulled back the Indian economy from the brink.

Distancing himself from Thursday’s draft guidelines, issued by the finance ministry, on General Anti Avoidance Rules (GAAR) under section 101 of the Income Tax Act, 1961, Singh made it clear to ministry officials that guidelines would be finalised only after going through the feedback of various stakeholders.

A PMO release said the prime minister was still to see the GAAR guidelines. “He will go through the feedback before approving it. Once he is through, it will be finalised.”

The Central Board of Direct Taxes (CBDT) immediately followed it up by giving out a circular inviting suggestions and comments on the draft guidelines. The board reports to the finance ministry’s revenue department.

GAAR is a part of the Direct Tax Code bill, which aims to replace the current Income Tax Act, 1961. It was tabled in Parliament in August 2010. Some provisions of the tax code makes any arrangement, such as the Vodafone deal, to avoid paying taxes unacceptable.

Vodafone had created an entity in Mauritius before taking over Hutchinson-Essar in India to avoid paying taxes. The income tax department had slapped the telecom major with a tax liability of nearly Rs12,000 crore. The Supreme Court struck it down though.

When the Supreme Court struck it down, Mukherjee — as the finance minister — circumvented the court order by introducing a new clause in the finance bill. The clause would allow the government to tax Vodafone and other firms with similar charges against them with a retrospective effect.

Potential institutional investors were left aghast. Singh, said a source, is keen to reverse it because it might bring back investors.