Finmin gets edgy on proceeds from spectrum auction, disvestment

The government now feels jittery over its plans to control fiscal deficit at around the Budget Estimate level of 5.1% of GDP during 2012-13, as some telecom operators stayed away from 2G spectrum auction, while PSUs developed cold feet over proposed disinvestment.

The finance ministry is working out a fiscal reduction plan that involves cutting expenditure, utilising savings from social sector schemes, keeping supplementary demands to the bare minimum, rationalising subsidies and shifting some of the last quarter liability to next financial year.

After the steel ministry did not agree to sell equity of Rashtriya Ispat Nigam Ltd (RINL) -- the first company listed for disinvestment this fiscal-- below its book value of Rs 22 a share leading to deferment of its proposed stake sale, some other ministries are also believed to have expressed reservations on offering equity in PSUs in the current market conditions.

Officials said Finance Minister P Chidambaram and Cabinet Secretary Ajit Seth have begun deliberations to address the issue, failing which the disinvestment target of Rs 30,000 crore will be missed.

On Friday telecom operators like Reliance Industries and Sistema did not apply to participate in the spectrum auction. As a result, telecom companies are not expected to bid very high. The finance ministry is not expecting more than Rs 35,000 crore from the auction, against the target of Rs 40,000 crore.

Subsidies are likely to overshoot the budget target of Rs 1.90 lakh crore by at least Rs 50,000 crore this fiscal, as per the ministry's estimates. The requirement for food subsidy has already swelled to over Rs 1,01,879 crore in the first six months of 2012-13, which is 36% more than the Budget Estimate of Rs 75,000 crore. Underrecoveries of oil market companies are estimated at Rs 1,67,415 crore this year and more than half of it is likely be paid by the government.

There may be some shortfall in tax collections too due to slow down in economic growth. Till August, only Rs 1.75 lakh crore could be mobilised, which was 22.7% of the tax revenue target for entire year. September figures have not come officially, but those in the know said indirect tax collections rose 15.6% to Rs 2.17 lakh crore in April-September, against the annual target of 27%. On the contrary, net direct tax collections grew 16.32% at Rs 2.26 lakh-crore against the annual target of 13.90%, largely due to lower outgo on refunds.

Kelkar panel on its report on fiscal consolidation recently said that the Budget Estimate for revenue was higher by Rs 60,000 crore, while subsidies could shoot up by Rs 70,000 crore. It said only Rs 10,000 crore was expected from disinvestment. However, these estimates were in the context of the worst case scenario.

“If the revenue is overestimated (in the Budget), so is the expenditure. We are expecting savings of at least Rs 30,000-40,000 crore on the Plan side. Besides, we have to take care of the additional demands arising mainly till the end of December quarter. Some of the liabilities for January-March quarter can be shifted to the next financial year. So there will be arrears in the next fiscal,” said a finance ministry official.

Of over Rs 1,00,000 crore food subsidy demand, around Rs 22,008 crore is the arrear carried over from 2011-2012. Arrears may swell to around Rs 39,909 crore for the current financial year as till date the government has allocated just around Rs 61,978 crore. Similarly, Rs 43,000 crore which was provided as fuel subsidy in the Budget for 2012-13 has already been exhausted towards last year’s dues.

The Budget Estimate pegged the Centre's fiscal deicit at 5.1% of GDP for 2012-13. In absolute terms, it was estimated at Rs 5,13,590 crore. Of this amount, fiscal deficit has already constituted 65.7% in the first five months of 2012-13. However, it was lower than 66.3% in the corresponding period of last year. But then, fiscal deficit was projected at 4.6% of GDP in 2011-12 in the Budget Estimate, but it finally shot up to 5.76%.