Disinvestment blues

Even as the indirect tax collections from the goods and services tax (GST) dipped in August compared to the preceding month, latest reports suggest that the government is likely to face pressure even on the direct tax revenues this year. Though direct tax revenue, net of refunds, grew by around 15 per cent in the first half of the fiscal year, growth in advance tax collections has slowed to 11 per cent in the same period, down from 14 per cent a year ago. This is obviously due to the economic growth deceleration, the uncertainty due to the GST and the continuing twin-deficit problem. The overall weakness is also reflected in lower growth of the personal income advance tax.

It is natural for any government to turn to non-tax revenues at such times, but here, too, the tale is sombre. For one, the Reserve Bank of India almost halved its dividend to the government. With revenues from telecom services dipping drastically and with little prospects of holding the next round of spectrum auctions this year, the department of telecommunications has already asked the finance ministry to revise downward the revenue targets for the sector by nearly 40 per cent. Besides, the third instalment of the income declaration scheme, due by September 30, is expected to yield only half the amount when compared to the first two attempts. The last piece of this puzzle is that of disinvestment proceeds. But, yet again, there is little to cheer for the government.

While setting a rather steep target of Rs 72,000 crore for disinvestment in his Budget earlier this year, Finance Minister Arun Jaitley had hoped to float initial public offering in three railway arms as well as five public sector insurance companies. Apart from IPOs, the FM had also placed his faith in sales, both strategic and otherwise. But six months into the fiscal year, the actual proceeds are only Rs 19,157 crore. Bulk of this money has been raised through the disinvestment in central public sector enterprises (Rs 15,004 crore, as against a target of Rs 46,500 crore) and a smaller portion (Rs 4,153 crore, as against a target of Rs 15,000 crore) via strategic disinvestment. None of the public sector insurance companies has been listed. Their listing was expected to raise another Rs 11,000 crore.

If the government misses the target for the year, which is most likely, it will not be unusual. Data from the department of investment and public asset management show that governments have consistently, and by a considerable margin, missed the targets each year since 2011-12. The story is not expected to be different this year. A key prospect was the privatisation of debt-ridden Air India, but that can be virtually ruled out in this fiscal year, given the pace at which it is proceeding as well as lack of clarity about how the market will respond to it. The fall in economic growth and weakening market sentiment are likely to dent the prospects for other proposals as well, leading to a substantial shortfall. Half of India’s 235 central public sector enterprises have been under scrutiny for possible disinvestment and the NITI Aayog has recommended strategic sales in over 40 public sector undertakings and outright closure of 26 sick PSUs. But predictably, there has been too much talk and very limited action.

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