Spectrum proceeds ring alarm bell for Centre's fiscal deficit

Will Finmin be able to rein in fiscal deficit at 5.3% of GDP for FY13, ask economists

Low proceeds of just Rs 9,400 crore from 2G spectrum has dealt another blow to the beleaguered government exchequer, prompting economists to raise doubts over the Finance Ministry's target of reining in fiscal deficit at 5.3 per cent of GDP for 2012-13.

Besides, even this Rs 9,400 crore would be a staggered payment as telecom operators need to shell out only Rs 2,820 crore this financial year.

Even this amount may not go to the Centre’s kitty as the government under the auction terms had agreed to  adjust the 2G licence fee with operators whose licences have been cancelled  due to the Supreme court order.

 

The Budget had estimated Rs 40,000 crore to come from spectrum sale for 2G services for 2012-13.

Another source of revenue--disinvestment-- has not yielded any revenue for the government so far even as over seven and a half months are about to be over. The budget had estimated Rs 30,000 crore from this route.  Already, disinvestment in Rashtriya Ispat Nigam Ltd (RINL) and Nalco has been deferred.

CARE Ratings chief economist Madan Sabnavis told Business Standard that the government will have to look at another route for disinvestment as public offers would be difficult, but it may manage to garner something towards the end of this fiscal.

“The government will only be able to manage less than Rs 40,000 crore from disinvestment and spectrum against target of Rs 70,000 crore,” he added.

Though the finance ministry has revised the Centre’s fiscal deficit target to 5.3 per cent of  GDP for this financial year from 5.1 per cent estimated in the Union budget, now even the revised target seem to be a distant dream, analysts said

Sabnavis pegged fiscal deficit at 5.8-5.9 per cent of GDP, higher than 5.76 per cent during 2011-12.

“Fiscal deficit at 5.3 per cent of GDP is simply not attainable,” he added.

 The Centre’s fiscal deficit has already touched 62 per cent of Budget estimates till September this fiscal.

Economists also raised doubts over tax collection targets as slowing growth will have an adverse impact on that mobilization.

In the first six months, tax revenue, net of devolution of the share to states, rose to Rs 2.93 lakh crore or 38.1 per cent of the BE pegged at Rs 7.71 lakh crore. Till August, tax collections totaled just Rs 1.75 lakh crore or 22.7 per cent of the BE. There is no surprise in the huge jump in September collections, as the second quarterly advance taxes come in. Last year, tax collections rose from Rs 1.44 lakh crore (21.8 per cent of BE) till August to Rs 2.54 lakh crore (38.3 per cent of BE) till September.

So, even if the tax collections were higher as a percentage of BE till September-end last year than this one, actual collections fell short by Rs 32,000 crore of the BE for the entire year.

It is the expenditure side, which has given a ray of hope to the minister, particularly the errant non-plan expenditure side. Plan expenditure also more or less kept the same pace.  End