With just over a fortnight to go for next financial year’s Budget, the government is expected to record a significant shortfall in estimated revenues for 2020-21 as the projected receipts from disinvestment and strategic stake sales are unlikely to materialise, while collections from other communication services are expected to be below targets.
Of the Rs 2.1 lakh crore of targeted disinvestment receipts for 2020-21, the government has, so far, raised only 6.6 per cent of the targeted amount or Rs 13,844.49 crore, as per the latest data available with the Department of Investment and Public Asset Management (DIPAM).
Nearly Rs 9,400 crore has been raised through offer for sale (OFS) of HAL and IRCTC, while the remaining amount has been through other OFS and buybacks by state-owned companies. While the crash in stock markets in March and a lockdown to deal with Covid affected the government’s stake sale plans, subsequent recovery in markets has not yielded much on the disinvestment front as yet.
Plans for strategic stake sales of Air India, BPCL, Container Corporation of India, Shipping Corporation of India will stretch into next year, as will the planned initial public offering of country’s largest insurer Life Insurance Corporation (LIC), government officials have indicated. In the last seven years, the government has missed disinvestment collection targets in four years and thrice exceeded it.
The biggest shortfall in disinvestment receipts is expected this year. Anticipating some big ticket strategic sales and LIC IPO, the government had steeply raised the estimates to Rs 2.1 lakh crore in the current year, from Rs 65,000 crore in the previous year. For three years between 2016-17 and 2018-19, the government exceeded the BE targets for disinvestment. In 2015-16, the government collected Rs 23,997 crore through disinvestment as against BE of Rs 25,313 crore. The shortfall in 2014-15 was around Rs 2,000 crore from BE of Rs 26,353 crore.
As regards the telecom sector, the government has pegged non-tax revenue of Rs 1.33 lakh crore from other commutation services in 2020-21 Budget Estimates (BE), which is 126 per cent higher than Rs 58,989 crore in the 2019-20 Revised Estimates (RE). According to government definition, other communication services “mainly relate to the licence fees from fellow operators and receipts of the Wireless Planning and Coordination Organisation.”
For the auctions that are scheduled to start on March 1, the government aims to sell 2,251.25 MHz of spectrum across seven frequency bands at a reserve price of Rs 3.92 lakh crore. Industry experts, however, estimate that like the 2016 auctions, the actual receipts from the spectrum auction could be only about 10 per cent of the reserve price. Of the three private telcos, most research houses such as Morgan Stanley have in reports over the last week said that they do not expect “aggressive bidding” in these auctions.
“In our view, spectrum auction in India has turned into a buyer’s market. We expect minimal competition with operators picking up spectrum that provides best value for money instead of focusing on renewing all their expiring spectrum,” Kunal Vora, analyst with BNP Paribas’ equities research team, said in a note last week.
In 2016, the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore. It had managed to sell only 965 MHz — or about 40 per cent of the spectrum that was put up for sale — and the total value of bids received was just Rs 65,789 crore, which was roughly 10 per cent of the total ask of the government.
The government would meet this shortfall in revenues via higher market borrowings that were announced earlier this year. Non-tax receipts form a crucial portion of revenues for the expenditure requirements of the central government. With a shortfall, the concern is of excess reliance on off-balance sheet borrowing through internal and extra-Budgetary resources (IEBR), which is deployed by Central Public Sector Enterprises and departmental undertakings.
In the last few years, the IEBR route has been increasingly used by the central government in order to finance even revenue expenditures such as the bills for Food Corporation of India (FCI) for procurement purposes. While earlier the amount of capital spending through IEBR used to be lesser than the gross budgetary support, since 2014-15, this trend has reversed, with capital spending by CPSUs exceeding the amounts budgeted for capital expenditure. For 2019-20, IEBR was estimated at Rs 7.1 lakh crore, 16.9 per cent higher than Rs 6.07 lakh crore raised in 2018-19. For 2020-21, the government has estimated it to come down by 5.3 per cent to Rs 6.72 lakh crore.
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