Revenue secretary takes on PMO over GAAR guidelines

The differences between the PMO and the ministry of finance over the controversial General Anti- Avoidance Rules (GAAR) issue took a sharp turn with revenue secretary Raminder Singh Gujaral’s publicly that the “PM has not applied his mind to the issue.”

The PMO had distanced itself  from GAAR guidelines issued by the finance ministry late on Thursday night stating that the guidelines had not been approved by the PMO, and the PM had “called for a wider feedback before they were finalised.”

While the corridors of North Block, which houses the finance ministry was abuzz with Gujral’s comments, this is not the first time that the senior bureaucrat has stepped into a controversial position.

Many in the government dealing with economic issues know that he was the man behind the controversial clause in the finance bill that seeks to tax companies like Vodafone with retrospective effect. But Gujral’s defiant stand also shows the divergence that has existed between the PMO and the finance ministry during Pranab Mukherjee’s term. In fact Gujral is widely viewed in government as a key advisor and confidant to Mukherjee during his stint in UPA II.

Gujral, a 1976 batch Haryana cadre officer, has run a controversial streak for many years. Under his charge, the Directorate General of Foreign Trade (DGFT) was dragged into the controversial rice export scam when Kamal Nath was also the commerce and industry minister in UPA II. The case is now with the CBI after it was forwarded to them by the CVC.

After Kamal Nath was shifted out to the ministry of surface transport, Gujral followed him as the surface transport secretary. However, Kamal Nath was moved out again to the urban development ministry while Gujral bided his time.

When the job for the revenue secretary opened up, the PM was keen to have the then commerce secretary, Rahul Khullar in that slot. But Mukherjee prevailed upon the government to bring
in Gujaral. 

Earlier, in January 2011, when CP Joshi was brought in, the Planning Commission, which had been kept at bay by Kamal Nath, began to finally make inroads into this ministry.

Sources told DNA that Gujral had had kept the planning commission at bay because he had a running feud with Gajendra Haldea, the commission’s principal adviser on infrastructure. It was not lost on anyone that the Planning Commission had the PM’s close confidant and deputy chairman, Montek Singh Ahluwalia at the helm while Gujral belonged to the “other camp.”

So there is a history and context to Gujral’s current statement which, in turn, is indicative of the fact that most of his subordinates in the finance ministry agree with him and want to stick by the provisions of the GAAR and other controversial proposals as envisaged earlier. Gujral did not respond to several messages from DNA.

After the PMO took over the daily monitoring of the finance ministry, a senior ministry official told DNA on the condition of anonymity, that the “government cannot be seen going back on the Vodafone issue. It cannot happen that a company strikes a multi-billion deal and gets away without paying tax with impunity.”

Other finance ministry officials DNA spoke to voice a similar opinion. “Didn’t Vodafone serve a notice to the government for international arbitration over the matter? So let them have it,” the official said.

With the retrospective taxation proposal, the ministry was seeking to mop up revenues worth worth Rs12,000 crore and penalty of about Rs 7,000 crore from Vodafone for its acquisition of an Indian telecom company, Hutchinson-Essar, in 2007. However, immediately after PMO took over the finance ministry, Vodafone India chief Analjeet Singh paid a courtesy call to deputy chairman Ahluwalia. He was apparently told to carry on with business as usual.