Mr Chidambaram, who has been very clear that there can be no rollback on the decision to raise diesel prices and cap the supply of subsidized cooking gas, said the Centre was paying a huge amount on account of subsidies on fuel and it was not unreasonable to expect states to bear some of the burden.
He appreciated the Bihar government's move on diesel and also that of several states like Delhi, to increase the number of subsidized LPG cylinders for poorer households. The Congress has asked all the states that it rules to give nine LPG cylinders instead of the cap of six a year that the Centre has decided on.
The UPA government has chosen to stake its survival, but not go back this time on the reforms path it has set out on. Its biggest ally Mamata Banerjee has withdrawn support to it over its refusal to withdraw its decisions on fuel subsidy and allowing foreign direct investment in retail. Mr Chidambaram said today that foreign investor appetite was improving.
Nitish Kumar is a leader of the Janata Dal (United) which is a part of the BJP-led NDA; the BJP is a partner in his government. But earlier this week, in a statement that sparked much speculation, Mr Kumar threw a broad hint at the Centre saying his party would support any political formation that gave Bihar special econonic status.
Mr Chidambaram today also announced that the government will slash a tax on overseas borrowing by local companies to 5 per cent from 20 per cent. The markets, already cheering Mulayam Singh Yadav's pledge of continued support to the UPA government, cheered more.
The reduced tax will apply to funds borrowed between July 2012 and June 2015, he said.
He said the withholding tax liability on Indian companies would also be reduced to 5 per cent.