Drill to dodge fiscal deficit
The government is looking at multiple options to redress its fiscal math, with the fiscal deficit till November well past the target set for the budget.
Rising subsidies on food, fertiliser and fuel, besides shortfalls in GST collections as well as earnings from divestment and spectrum auctions, have hit deficit calculations.
Top officials said the government will try to avoid to mess up its fiscal math by using strategies such as off-budget borrowings and the rollover of some of its subsidy payment obligations. However, this will place the next government in a tough financial situation, with unpaid bills and weakened PSUs from day one.
Fiscal deficit till November stood at Rs 7.17 lakh crore against the target of Rs 6.24 lakh crore for the whole of 2018-19. The deficit is almost 115 per cent of the target by November. The fiscal deficit target for the year is 3.3 per cent of GDP.
The Food Corporation of India, which buys foodgrains, stockpiles them and sells at a discount to a nationwide chain of ration shops, will be taking over Rs 90,000 crore in loans to pay for its operations, which the government is supposed to subsidise.
The government’s budgeted food subsidy bill is Rs 1.69 lakh crore. However, very often the government shows a lower expenditure by rolling over part of the payment and getting the FCI to borrow money to pay for its operations, thus actually off-budgeting part of a bloated subsidy bill.
A recently tabled CAG report says during 2016-17, the government’s expenditure towards food subsidy was Rs 78,335 crore and it rolled over Rs 81,303 crore as carry-over liability. It was the first time that the carried over amount was higher than the actual expense shown by the government.
“The government resorts to off-budget methods of financing to meet revenue and capital requirements. The amount of such borrowings is huge and current policy framework lacks transparent disclosures and management strategy for comprehensively managing such borrowings,” the report said.
Similarly, the fertilser subsidy budget for 2018-19 was Rs 73,439.85 crore, of which Rs 60,383.79 crore has been spent. Yet the arrears of fertiliser firms now stand at over Rs 23,284 crore. Part of the arrears could stay on the books and be rolled over for the next financial year.
The oil subsidy situation is no different. Of the Rs 24,933 crore in oil subsidy, around 95 per cent was spent in the first half of the year itself. Officials estimate the government will have to roll over around Rs 20,000-25,000 crore in oil subsidies in the next financial year. With elections round the corner, the government wants to show a clean book but it can’t given its financial situation.
About Rs 1 lakh crore shortfall is expected on account of the GST alone, while the divestment target of Rs 80,000 crore looks tough. Similarly, spectrum charges and auction income are not expected to tot up to the required budget target of Rs 48,661.42 crore.
In September, a worried telecom department had moved the Supreme Court for approval to secure dues worth almost Rs 33,000 crore from all operators towards licence fees and spectrum use charges, saying existing bank guarantees aren’t enough to cover the “huge public money” at stake.
“The only way out is to ‘rush some of the expenses away under the carpet’ to be handled later by whoever comes to power,” admitted finance ministry officials.
According to data released by the Controller General of Accounts (CGA), the revenue receipts of the government totalled Rs 8.7 lakh crore or 50.4 per cent of budget estimate in 2018-19 till November, compared with 53.1 per cent during the same period last year. The government has budgeted to mop up Rs 17.25 lakh crore revenue during the current fiscal.
Tax revenue was 49.4 per cent of budge estimate, compared with 57 per cent in the comparable period of the previous year.