The total spending cut required to restrict fiscal deficit for the financial year at 4.1 per cent of gross domestic product (GDP) could be as high as Rs 1-1.20 lakh crore, Business Standard has learnt from multiple sources.
At least two government sources have confirmed the government is unlikely to save much on the Rs 63,427 crore Budget estimates for petroleum subsidy, in spite of a decline in global crude oil prices, given that Rs 46,291 crore has already been spent in the April-October period.
“In the June quarter of next financial year, there might not be any big carry-forward pending subsidy payment, thanks to lower crude oil prices. But that will reflect on next year’s spending projections. A benefit is unlikely this year; the entire amount will most likely be spent,” said an official.
Additionally, according to sources, though the Central Board of Excise and Customs (CBEC) is expected to rake in about Rs 10,000 crore more from an increase in excise duty on petrol and diesel, that could be offset by a decline in factory gate collections due to low industrial production, which in October contracted 4.2 per cent.
Internal government estimates indicated a tax revenue shortfall of Rs 70,000-80,000 crore in the total budgeted estimate of Rs 9.77 lakh crore in net direct and indirect tax collections, officials said. The revenue department has consistently had its financial year targets revised downwards since 2009-10.
The government’s fiscal deficit for the April-October period totalled Rs 4.76 lakh crore, a staggering 89.6 per cent of the Rs 5.31 lakh crore target for the entire financial year. The fiscal deficit for this period was the highest in comparable periods since at least 1998-99.
In spite of tight fiscal space, Jaitley has promised Rs 11,000 crore to states as part-payment for Central sales tax (CST) compensation. On its own, the figure might not be too big, but an official said the finance ministry would have to find room for the amount, given a tight fiscal situation. “I won’t be surprised if some spending cuts are made to accommodate this amount for states,” the official said.
Last November, the Centre had introduced a fresh round of austerity measures, including bans on first-class travel, creation of new posts and holding meetings in five-star facilities. The aim for every department was to effect a mandatory 10 per cent reduction in Non-Plan expenditure — excluding interest payment, repayment of debt, capital spending for defence, salaries, pensions and grants to states.
What adds to Jaitley’s problems this year is the fact that the Centre’s ambitious Rs 58,425-crore disinvestment programme is in doldrums, too, with a Rs 15,000-crore residual stake sale in Hindustan Zinc and Barat Aluminium Co set to be scrapped. Among the companies for which it firmed disinvestment plans — Coal India, ONGC, NHPC, and SAIL — one (SAIL) has already happened, fetching about Rs 17,000 crore.
Disinvestment in other companies part of this year’s stake sale road map, such as Rural Electrification Corp, Container Corporation, Hindustan Aeronautics and Rashtriya Ispat Nigam, might have to be postponed to later financial years.