Opinion Government must examine reasons for shortfalls in non-tax revenue and disinvestment proceeds, opt for a more structured approach

Data released by the Ministry of Finance last week reaffirmed the healthy growth in the central government’s tax collections this financial year. At the aggregate level, the government’s direct tax collections upto January 10, 2023, stood at Rs 14.71 lakh crore, almost 25 per cent higher than over the same period last year. Adjusting for refunds, collections were up almost 20 per cent. To put these numbers in perspective — direct tax collections have already touched almost 87 per cent of the budget target of Rs 14.2 lakh crore for the financial year 2022-23. This only affirms the view that the tax collections will surpass the government’s budget expectations by a considerable margin. However, even as tax revenue growth has been healthy, there are concerns over the government’s non-tax revenues and proceeds from disinvestment.

For 2022-23, the Union budget had pegged non-tax revenues at Rs 2.69 lakh crore, down from Rs 3.13 lakh crore (revised estimates) in 2021-22. Of this, it had pegged the dividend/surplus of the central bank, the nationalised banks and financial institutions at Rs 1.13 lakh crore. While this was already lower than the revised estimates of Rs 1.47 lakh in 2021-22, so far this year, the Centre has garnered only Rs 68,254 crore. In May 2022, the central bank, after its board meeting, had said it will transfer Rs 30,307 crore as surplus to the government. And as reported in this newspaper, there is a possibility that the surplus available with the RBI for transferring as dividend to the government is likely to remain low in the current financial year. At the aggregate level, while the budget had pegged non-tax revenue to GDP to fall from 1.35 per cent of GDP in 2021-22 to less than 1 per cent in 2022-23, as per some analysts, non-tax revenues are likely to be even lower than budget expectations by around Rs 50,000 crore. A similar trend is observed in disinvestment proceeds. While the budget had already lowered the disinvestment target from Rs 78,000 crore in 2021-22 to Rs 65,000 crore for 2022-23, so far, total revenue through this route has been only around Rs 31,106 crore. This includes Rs 20,516 crore garnered through the sale of the government’s stake in LIC. Some transactions are in the pipeline — for example, bids have been invited for selling the government’s stake in IDBI Bank. However, despite that, analysts expect disinvestment proceeds at the end of the financial year to trail the budget target by a significant margin.

Advertisement

Considering these shortfalls, the government must reexamine the manner in which it formulates targets and plans for garnering revenues through these channels. It must opt for a more systematic approach, keeping in mind macroeconomic uncertainties. More resources at its disposal would certainly help it augment capital expenditure and manage the deficit.