|Slipping on oil, again|
|Tuesday, 28 June 2011 00:00|
Though critics panned Budget 2011-12 when it came out and said the fiscal deficit targets were impossible to achieve, those in the know pointed to several aces up the government’s sleeve. It is true the government isn’t going to get the kind of bonanza it got from the 3G/BWA auctions in 2010-11—against the Budget estimate of R49,799 crore from all telecom services including licence/ spectrum fee, it got R1,28,806 crore finally—but the Budget had several other hidden surprises. So, for instance, there’s R16,000 crore that the Trai estimates can be got from existing firms like Bharti and BSNL who’ve got “extra” spectrum—this is not there in the Budget estimates. Another R12,000 crore or so from the Coal India disinvestment were collected at the end of 2010-11, but not accounted for in the Budget for 2010-11; the profits from RBI’s interest earnings on forex reserves look lower than what RBI is likely to earn by R3,000-4,000 crore … even tax collections were estimated to grow at just 18.5% in 2011-12 versus the 26% in 2010-11. In other words, if there was a slippage in one area—oil subsidies are certain to vastly exceed the budgeted R23,640 crore—it would be more than made up in other areas.
Friday’s decision on oil price hikes, however, gives away R37,000 crore (4% of the year’s target) in customs and excise duties in the remaining part of the year. The R16,000 crore estimated as what the telcos should pay for what’s left of their licence period of their extra spectrum, for instance, may be difficult to get if the government doesn’t get the Raja beneficiaries to cough up extra as well—after all, if the Raja beneficiaries can get away by paying R1,651 crore for a pan-Indian licence that’s worth at least four times as much, why should Bharti/BSNL pay a higher price? Disinvestment looks a bit dicey in the current investor mood, and the tax outlook doesn’t look that great. The April-May direct tax collections, for instance, grew much slower than was projected—while they were R12,954 crore, based on the budget target, they should have been as high as R33,670 crore. Indirect tax collections grew at 38% in this period as compared to the budget target of just 17.4%—so there’s some scope here, but once you take into account Friday’s oil sector giveaway, the growth potential pretty much disappears. In short, the budget is looking a lot more iffy and can’t take any more shocks.