Govt may fall short of Rs 2.45-trn non-tax revenue target despite RBI funds

The biggest pressure point is from telecommunications revenue, which has been targeted at Rs 48,661 cr for the current year

The Reserve Bank of India (RBI) could pay between Rs 20,000 crore and Rs 25,000 crore to the government, but even that would not be enough for it to meet its non-tax revenue target of Rs 2.45 trillion.   

There are already concerns over the goods and services tax (GST) collections and the government overshooting expenditure in this fiscal year (2018-19 or FY19). Missing the non-tax revenue target could put more pressure on the fiscal deficit target of 3.3 per cent of gross domestic product (GDP).

Finance Minister Arun Jaitley, however, had seemed confident of meeting this target during an interview with Business Standard last month. "I don't see any shortfall in non-tax revenues," he had said.

The three main components of non-tax revenue are dividends from the RBI and state-owned financial institutions, dividends from state-owned enterprises (excluding financial institutions), and telecommunications revenue, which includes spectrum sales. These three items are together budgeted to garner Rs 1.56 trillion in FY19, around 64 per cent of the total non-tax revenue target.

The Revised Estimates for these three components for 2017-18 was brought down from the Budget Estimates.

"Non-tax revenue collections remain weak. The telecom sector is currently going through consolidation. We expect that non-tax revenues should also moderate in the current fiscal year. The dividends from the RBI could be as expected. However, it will still not be able to make up for the shortfall from the telecom revenue," said Soumya Kanti Ghosh, chief economic advisor of State Bank of India. 

The budgeted target from the RBI and public sector banks is Rs 54,817 crore. The RBI has already paid Rs 50,000 crore in dividend for its July 2017-June 2018 fiscal, of which Rs 10,000 crore was paid as interim dividend before March 31, 2018. So for FY19, the exchequer has already got Rs 40,000 crore from the central bank.

As reported earlier, the Narendra Modi government is seeking at least Rs 23,000 crore in interim dividend from the RBI before March 31. This will include Rs 13,100 crore that Economic Affairs Secretary Subhash Garg has been publicly seeking from the central bank's contingency reserve fund since 2017-18. The RBI is widely expected to pay a substantial interim dividend.

The biggest pressure point is from telecommunications revenue, which has been targeted at Rs 48,661 crore for the current year. This includes proceeds from any spectrum sales. Analysts expect a substantial shortfall under this item. 

"This is a very difficult time for the telecom industry. There is a collective debt of Rs 8 trillion and to service that debt and repay that principle, you need money and hardly anything is being generated. You are talking about things like 5G spectrum sale. Who has the money? Given the scenario, meeting the telecom revenue target looks difficult," said Hemant Joshi, telecom and technology leader at Deloitte India.

The target for dividends from non-financial public sector units is Rs 52,495 crore. Any full-year dividend that PSUs have paid for 2017-18 (FY18) will count towards FY19 dividend receipts, since they are paid after March 31.

The total dividend paid by listed PSUs for FY18 is about Rs 50,500 crore. However, since the government owns anything between 52 to 90 per cent in these PSUs, an average of the government holding in all the PSUs which paid full dividend for FY18 shows that the Centre may get only Rs 30,000 crore to Rs 35,000 crore.

This means that Jaitley may seek interim dividend from a number of PSUs as well. However, only four PSUs have announced interim dividend for their FY19, totalling about Rs 11,000 crore. Coal India and Indian Oil are among them.

The finance minister may ask other PSUs to make up for any shortfall.

What all this means is that even as major concerns on the GST, divestment, and direct taxes persist, non-tax revenue may come to a cropper. "As you progress on disinvestment, your proceeds from dividends fall automatically, since the Centre's shareholding in PSUs keeps on decreasing," said an official. 

The fiscal deficit target for FY19 is Rs 6.24 trillion. By November-end, it already stood at Rs 7.17 trillion, breaching the Budget Estimates by almost 15 per cent. This means the government needs a fiscal surplus of Rs 93,000 crore in the next four months to meet the target.

Officials have admitted there could be a combined shortfall of Rs 70,000 crore to Rs 1 trillion on the GST, though the Centre's own shortfall will not be more than Rs 29,000-30,000 crore. Analysts have said the government will have to go for deep expenditure cuts, on capital as well as revenue spending sides.

Data available for April-October shows that the pace of revenue expenditure for most social sector ministries and some infrastructure ministries has indeed slowed down when compared to the same period last year. 

Sources in the government earlier said direct tax collections could exceed the budgeted target of Rs 11.5 trillion by at least Rs 30,000 crore.

However, it is now known that the Central Board of Direct Taxes Chairman Sushil Chandra has cautioned officials about the direct tax collection growth rate, and said it can adversely affect the Budget Estimates.