Govt can't tie itself up in knots over imagined fears
Given how cash-strapped the government is—the Kelkar panel has projected a 1% of GDP rise in the fiscal deficit, made up equally of a tax shortfall and an expenditure over-run—it’s best bet is to try and scale up the disinvestment target beyond even the budget target. Though it has to be said that, at 18.2%, the April-August tax collections growth is impressive. Which is why the FM has put a R30,000 crore extra corporate tax collection target, asking the taxman to look at companies that are paying less than the average 24% tax level—at R373,000 crore, the corporate tax target suggests a 2 percentage point hike will give you R30,000 crore more. There is, however, a ceiling to what even aggressive tax collections will give you, and indirect tax collections are quite poor.
The obvious low-hanging fruit in terms of disinvestment is the R17,000 crore offer made by Anil Agarwal for the residual stake held by the government in Balco and Hindustan Zinc, both companies Agarwal had bought in strategic sales during the NDA years. What’s more worrying, however, is the relatively poor progress in other areas of disinvestment. For reasons best known to the government, it is not keen to sell the SUUTI shares though these could be worth around R40,000 crore today. One reason for not selling the 11.54% of ITC shares that SUUTI owns, for instance, is that were BAT to snap up the shares, this will give it control of ITC. Since there can be no strategic reason why the government would want to keep ITC in Indian hands, the reluctance is unclear—interestingly, the Kelkar panel has specifically recommended selling SUUTI shares. What’s even more curious, it appears some ministers/secretaries are resisting selling of shares of PSUs under their control by arguing the share values are too low. According to this argument, were the shares to be sold at a low price, this could invite the CAG’s censure! The argument is clearly self-serving since there is no evidence of the CAG making this point—indeed, by this logic, the reserve price for the forthcoming 2G auction should never have been lowered. Apart from what this means for disinvestment receipts, if the government finds it impossible to counter such specious arguments, you wonder what it will do in the National Investment Board. Presumably the same bureaucrats who are delaying clearances to projects will make similar self-serving objections to the NIB – will the NIB then be able to overrule them? If it can, why can’t the Cabinet overrule the ministers/secretaries who’re reluctant to allow disinvestment of the PSUs they control?