The government plans to raise additional Rs 52,000 crore from disinvestment of 24 public sector undertakings (PSUs), besides the budgeted divestment of Rs 1 lakh crore in this financial year, for partly bridging the fiscal gap arising out of the Rs 1.45 lakh crore tax stimulus offered to the corporates. The policy think tank Niti Aayog has already recommended the names of the companies. The government will look into those to counter the budgetary shortage arising out of the tax exemptions. Another mode of fund-raise that the government may consider is via monetising assets such as power transmission lines, real estate around big railway stations, golf courses and stadiums and 10,000-km road. Niti Aayog vice chairman Rajiv Kumar hinted about it at the India Today Conclave in Mumbai last week.
The government has budgeted disinvestment target of Rs 1.05 lakh crore for 2019/20, compared to Rs 80,000 crore in the previous year. If it manages to raise another Rs 52,000 crore from the sale of PSUs, the total disinvestment will shoot up to Rs 1.57 lakh crore. Besides, the government has received off-budget dividend of around Rs 58,000 crore from the Reserve Bank of India (RBI). As these additional revenues total up to Rs 1.1 lakh crore, the Centre will have to look for another Rs 35,000 crore from non-core assets sales. According to Kumar of Niti Aayog, even 20-30 per cent of the non-core asset sales can bridge the budgetary shortage.
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 for buying the assets as it had asked ONGC to buy the government's stake in HPCL to achieve the disinvestment target in 2017/18.
However, while the government is doing maths to find alternate revenue sources, there is another issue to take into account. 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. According to analysts, the fiscal deficit gap may increase by at least 70 basis points to 4 per cent after Finance Minister Nirmala Sitharaman announced a cut in corporate tax rates on September 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, say industry sources. 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.
Earlier, the government had decided to forgo a revenue of Rs 1.45 lakh crore in 2019/20 as it offered corporate tax cut to 22 per cent from 30 per cent for reviving economic activities in the country. It expects that the corporates would transfer the tax benefits to the end consumers and it would trigger the demand, which went dormant after household savings shrunk against soaring prices of goods. Many companies say that they will not be able to transfer the benefits entirely to consumers as they are already selling products at a discounted price. At the same time, the stock market has already adjusted the expected pick-up in earnings in the stock prices of the companies, leading to a spectacular surge in benchmark indices Sensex and Nifty.