Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, talks to Supriya Shrinate of ET Now on ways to control the fuel price rise, maintain the trade and fiscal deficits and getting the value of rupee right. Edited excerpts: Congratulations on four years of Modi government. Let’s talk about the macro picture first as there is a lot of concern out there on account of crude oil prices. Yes prices have come down a little globally, but it is the volatility that is causing a lot of concern. Do you believe that getting back to subsidy regime is a solution at all? The real answer to the fuel issue is that we cannot depend on imported fuel. That means carrying out more explorations and also manufacturing and generating and refining more at home. This is one part of the strategy that has already been put in place. The other part of the strategy is to create a non-oil economy over a period of time. That is why we are working on 175,000 MW of clean energy generation and that will also happen. The third strategy is the mobility strategy because you need fuel for mobility. We are going in for electric vehicles to reduce dependence on oil, It is going to take some time to implement it but the issues are transitory. We are very clear that we want to protect our consumer. As internationally the prices are going up, we have also taken up the issue of cartelisation to artificially jack up prices. That ultimately proves to be detrimental to the interest not only of the consumers but also the producer themselves because after sometime there will be a demand glut. For some time, you make profit but in the long term, you lose. We are working on all these strategies put together. The macroeconomic picture is very clear. The moment you start giving subsidy, it affects the poor people because you create a regime in which fiscal deficit is not taken care of. But the Prime Minister is very clear that we must protect the interest of those consumers, the poor people and therefore we are trying to work out a best possible solution which will ensure that poor people are properly protected from the international prices going up. Could that solution involve a windfall gain tax on a company like ONGC? Best solution is actually including the entire fuel basket also into the GST regime. I feel that as a consumer and an aviation minister, if you bring aviation fuel along with diesel and petrol into the overall ambit of the GST, it will help everybody, This is one solution that really needs to be looked into but for that we have to take all the states on board, therefore I am very happy that even the states are also now started thinking about it. We hope this happens soon. Both you and the opposition are saying bring oil under the GST and that will take care of all the woes. By training you are a CA. You understand this a lot better than some of the other politicians. Is it so simple to just bring fuel under the GST because there is a revenue neutral rate and chances are that in places it may cost even higher? Will states be on board a) to make fuel more expensive and b) to let go of this huge revenue? Obviously, somebody has to lose the revenue because if you are going to reduce the prices, somebody will foreclose on the revenue but it is in the interest of the states and the centre at a long-term basis because then there will be uniform taxation all over the country. Sometimes, people go to bordering states to fill up the tank and so the state loses revenue this way as well.All these issues will get resolved and over a period of time we are seeing a good buoyancy in the revenue stream. This may be a temporary loss for some states but that would be compensated because the overall economy be growing. When fuel is bought under GST, transportation cost will go down, when the transportation cost will go down obviously it will boost the economy more and there will be more revenue. It is a virtuous cycle. There may be some loss of revenue for some states on account of this fuel basket but at the same time that will be more or less compensated because with economy going up, overall GST revenues will increase and that will get compensated. In the interim, is it possible that the states, at least the ones ruled by the BJP reduce VAT to start with?The states have to really be more proactive because it is not just central tax which is inflating the crude price, it is the states who are taxing more because even today you can see that the price of petrol and diesel are different in different states. The states will have to shoulder more responsibility and understand that over a period of time, consumer interest is not just the responsibility of central government. The prime minister is really proactive, pro-people and pro-poor but it is the states who must share the responsibility of making it happen. Excise duty cut is not a simple solution that the centre will look at doing. I want to specifically ask if trade deficit is on the rise. People are worried that is India staring at the return of the twin deficit problem. Is that a concern that you share? This is an important issue but you must notice one thing. In the last six years, our exports were not rising. Now, we are seeing some dark clouds and everybody is talking about protectionism. We are trying to deal with this. I am going to Paris tonight for a WTO meeting. I will meet all the 25 trade ministers of the most important economies of the world. We are trying to take up that issue. For the first time, we are seeing exports rising and this year we are targeting to raise it further. But this is one part. The other part is imports. The major item of import which is really causing the trade deficit to go up is the issue related to diesel and petrol. We have to work on it. We are already working on diversifying the non-oil economy. We are one of the largest producers of solar power in the world. Incremental increase in renewable energy sources will take some time. Energy efficiency is another solution which I am working on so that per unit consumption goes down.We are trying to work on that also but that is one part of the import. The second is gold. I just raised this topic with the Russians. Gold is necessary. Some are for domestic consumption, it is a cultural issue. We cannot deal with that immediately despite the fact that the government has bought in gold bonds and many other things, it is not working but we also need some gold for re-export, for making jewellery and which we are not using it in a substantial way today. I just spoke to our Indian ambassador in Russia and we are trying to take it forward so that the gold that is necessary for re-export can be addressed through these measures.You are saying that there is no need to press the panic button on current account deficit just yet. In 2013, because of the taper tantrum the rupee had fallen substantially but at that time exports were showing a very robust growth. The rupee has fallen again now. I have a very frank question to ask of you. Do you believe the rupee has found its real value now because many people thought it had appreciated way too much? Also, what impact does this have on exports?In India we need the floating currency. There are three or four issues; one is inflation. Luckily, India’s inflation is down and therefore it is not causing the rupee to rise. Second is the U.S. It is not just India, all emerging markets are suffering because of a little fall in the currency rate. Emerging markets are hurting because US treasury is raising rates and therefore the outflow of capital is happening. Third is the element of how do you get capital flows into India. On that count, India is one of the good destinations for FDI. We are trying to promote that more. Trade deficit is another reason which influences the value of rupee. In a way, market will determine the rate of rupee. But on domestic front, our fiscal and macroeconomic policies are so good that we have managed to reduce fiscal deficit. Our trade deficit has just gone up now for reasons beyond our control. Thirdly, inflation also causes the rupee to rise and that is also under control. Fourth is the fructification of the ideas of India as an investment destination. The capital flows will help the currency to stabilise. You are going to Paris to meet the WTO on export promotion schemes. How confident are you that you will be able to continue with this?We have crossed the threshold of per capita income where we could enjoy the benefit of having some protection against this. US has taken us to WTO on this subsidy pledging. We will first talk to US. I am going there next week. I will meet the US Trade Representative, maybe commerce secretary. We are meeting all important officials to deal with it bilaterally. We have to explain our subsidy regime to them. It is not really a subsidy in that sense of the term. It is compensation for some of the inefficiencies that are there in the system like transportation and others and therefore we have to handle it. But we are trying to make a regime which will be WTO compatible in which the exporters will not be adversely affected. We have already started working on it. We will work out a proper structure which will be WTO compatible and at the same time, our exporters will be properly protected.How concerned are you regarding that? Look at what the US is doing. US is already tightening the H1-B visa rules. How concerned are you with this snowballing into a larger controversy?For the first time in last 40-50 years after creation of WTO, we are seeing people challenging the WTO itself. Just imagine that those who have benefitted from WTO in the past are now questioning the entire existence and the regime of WTO. A country like India which has suffered in the past because we opened up our trade, will be able to take a little advantage of it.Therefore, it is really a matter of serious concern. That is why we are taking a number of measures. One, was to call a mini ministerial wherein 53 countries participated. We are also talking bilaterally to many countries. Tomorrow morning, I will be meeting the 25 trade ministers. I am having most of them I am having bilateral meeting. So, we are trying to explain to them that let us try to resolve an issue in a way that global trading system does not suffer. India has taken it because the global trading system is very important for us. We have also started talks with China. On the 26th of March China’s commerce minister who is very senior in the political hierarchy of China, agreed in writing to not only reduce the trade deficit but to balance the trade over a period of time.I am very happy to say that they have taken some concrete measures for market access for Indian products, in pharmaceuticals, for basmati rice which we have seen struggling for the last several years. They have sent a protocol immediately. I am very happy that our prime minister who met the president of China just exactly one month after that, has also now consolidated his position. So, the Indian Prime Minister and the President of China will make sure that relations improve even on trade front.