Budget 2020: Failed disinvestment plans, lesser tax collection affected fiscal deficit

The delay in the disinvestment of public sector companies like BPCL, Air India and Container Corporation has affected the fiscal deficit of the country, which widened to 3.8 per cent as against the projected 3.3 per cent in the July 2019 budget. The government had budgeted disinvestment target of Rs 1.05 lakh crore for 2019/20, compared to Rs 80,000 crore in the previous year. Department of Investment and Public Asset Management (DIPAM) has been able to raise just Rs 18,094 crore from divestment of central public sector enterprises so far.

The fiscal deficit widened in this financial year despite the off-budget dividend of around Rs 58,000 crore that the government had received from the Reserve Bank of India (RBI) last year. The government has recently budgeted about Rs 1.45 lakh crore for tax stimulus to the corporates, resulting in escalation of expenditure.

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FM Nirmala Sitharaman has projected the fiscal deficit at 3.5 per cent for the next financial year. As a reason for escalation of fiscal deficit, she said that the buoyancy in tax collection will take time. The government has also proposed to sell a part of its holding in LIC by way of Initial Public Offer (IPO) to bridge the gap. But the market experts believe that it would help in raising a substantial amount. However, it will take at least two years of time, they assumed.

The sale of BPCL will fetch about Rs 60,000 crore government, the market experts estimate. "But the other disinvestments may not be able to attract high prices," an expert said. Another mode of fund-raise that the government considers are monetisation of assets such as power transmission lines, real estate around big railway stations, golf courses and stadiums and 10,000-km road. The Finance Minister proposed to monetise at least twelve lots of highway bundles of over 6,000 km before 2024.

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However, the industry leaders are not optimistic about the disinvestment and asset sale plan of the government as fetching the right price could be difficult in the current turbulent market. The sources say that the government may rope in cash-rich PSUs to buy the assets as it had asked ONGC to buy the government's stake in HPCL to achieve the disinvestment target in 2017/18.

The government fears a deficit of nearly Rs 40,000 crore in the GST collections as compared to what it had budgeted for 2019/20. The centre had reportedly informed the GST Council about the likely shortfall, which may put stress on states' compensation. With tax revenue growth remaining tepid, the divestment and non-core asset monetisation may remain inadequate to contain fiscal deficit at 3.3 per cent of gross domestic product (GDP) in 2019/20.

The government has already laid out a plan for the strategic sale of loss-making companies such as Scooters India, Bharat Pumps & Compressors, Project & Development India, Hindustan Prefab, Hindustan Newsprint, Bridge & Roof Co and Hindustan Fluorocarbons. But, they are difficult to attract investors. The reports said that Niti Aayog had identified around 50 assets including NTPC's Badarpur plant, which is closed and has about 400 acres of land. The brownfield plants of SAIL and some of the assets of Cement Corporation of India and Bharat Earth Movers may be used as the non-core assets for the monetisation programme.

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