The finance ministry is making a desperate dash to the wire to contain the runaway fiscal deficit at 5.3 per cent of GDP at the fag end of the financial year, which draws to a close on March 31.
A senior financial ministry official told Mail Today that no funds will be released to departments in the last quarter unless they provide "utilisation certificates" for previous allocations. "Several departments have been sitting on funds that have been allocated to them two years ago. The government pays around eight per cent interest on the credit that it raises from the banking system, and it does not make any sense for government departments or public sector undertakings under their control to sit on this cash when they are not going to utilise it," he explained.
The reduction in quantum of funds, which in any case get "stuck in the pipeline", will lead to a significant saving in the government's expenditure in the current financial year on allocations made in areas such as social sector programmes, defence and even the home ministry.
Senior officials also said that the government plans to accelerate the disinvestment
in public sector companies in the remaining part of the financial year and push through big-ticket tax collections from companies such as Nokia in order to rake in more revenue. Increased collections from telecom companies such as the one-time spectrum fee and refarming of spectrum in the prime 900 MHz band are also expected to add to the kitty and help curtail the fiscal deficit.
D.K. Mittal, secretary, Department of Disinvestment, said that the disinvestment in public sector companies, starting with Oil India this month, will be stepped up in February and March. "The government is confident of meeting the target of raising Rs 30,000 crore through the disinvestment route," he told Mail Today.
However, analysts are of the view that the market may not have the capacity to absorb the huge avalanche of shares in such a short span. They point out that divestment in shares of Oil and Natural Gas Corporation (ONGC) last March had no takers and governmentowned Life Insurance Corporation of India was forced to buy most of the shares at the last minute to help raise Rs 12,000 crore.
The government fell way short of the target of raising Rs 40,000 crore through disinvestment during 2011-2012. The target was then scaled down to Rs 30,000 crore for the current fiscal keeping the ONGC experience in mind.
Senior officials admit that they cannot go in for a distress sale of shares and if they do not get the minimum reserve price, there would be no sale. At the same time, they are banking on fresh enthusiasm being shown by foreign institutional investors in Indian stocks, which was reflected in the successful sale of shares in mining company National Mineral Development Corporation this year.
Clearly, containing the fiscal deficit is a herculean task as the subsidy bill for petroleum products is set to scale the Rs 163,000-crore mark with international prices of crude oil ruling close to $110 a barrel. Similarly, food and fertiliser subsidies have also risen above their budgeted amounts. Taxes collections, on the other hand, have fallen short of the budgeted target due to the economic slowdown. As a result, most economists expect the fiscal deficit to exceed 5.3 per cent, which in any case is higher than the 5.1 per cent fixed in the Budget for 2012-13.
The Kelkar Committee on fiscal consolidation had observed that overall tax collections, including indirect taxes, could fall short of the target by as much as Rs 60,000 crore. However, finance minister P. Chidambaram had dismissed this as the worst-case scenario in the report.
Courtesy: Mail Today