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Divestment clouds Budget numbers

P Vaidyanathan Iyer in New Delhi

Mega bailouts and derailment of the government's privatisation programme will force Finance Minister Jaswant Singh to recast the Budget figures substantially in the coming months.

The government has till date realised just about 25 per cent of the targeted divestment proceeds of Rs 12,000 crore (Rs 120 billion) during the year. Finance secretary S Narayan had only last week in a press briefing pinned his hopes on higher-than-projected capital receipts from divestment to help him stick to the Centre's borrowing target of Rs 1,35,000 crore (Rs 1,350 billion) .

The Centre has already decided to support the Unit Trust of India to the extent of Rs 15,000 crore (Rs 150 billion) and on Saturday announced a Rs 100,000 crore (Rs 1,000 billion) debt-swap package for the states. Having released Rs 500 crore (Rs 5 billion) to UTI recently, it has promised another Rs 500 crore (Rs 5 billion) in the next supplementary.

While the states' package would not result in any direct cash outgo, officials said, resetting the interest rate on central loans from 13-13.5 per cent to 7 per cent would lower interest receipts by at least Rs 1,000 crore (Rs 10 billion) this year.

The cost of servicing the interest will fall on the Centre. With UTI's total needs short of touching Rs 15,000 crore (Rs 150 billion), a 7 per cent coupon on the bonds will result in an additional central expenditure of Rs 1,000 crore (RS 10 billion).

Next in the queue for a bailout is IFCI Ltd, which has sought Rs 5,000 crore (Rs 50 billion) cash succour from the government. And then the Industrial Development Bank of India, where the liabilities are yet to be ascertained. The restructuring of IFCI and IDBI too, officials said, would be akin to UTI inasmuch as it would be their final package.

Add to the bailouts and lower divestment proceeds, the Centre also faces the prospects of increased expenditure due to higher food subsidy of almost Rs 5,000 crore (Rs 50 billion) and a lower than estimated revenue realisation because of the drought.

While the Centre has said reorientation of Plan expenditure will be undertaken to meet additional drought-related expenditure, it is unlikely it will be able to make savings as in last year under the Plan head. Rigidity as regards non-Plan expenditure leaves little scope for any cuts, officials admit.

Revenue collections, too, have provided little solace to the government. While the Centre has budgeted 24 per cent higher direct tax mop-up at Rs 91,140 crore (Rs 911.40 billion) for 2002-03, the net collections till August end have been only 18 per cent higher at Rs 14,385 crore (Rs 143.85 billion). On the indirect tax front too, officials said the target appeared lofty in the backdrop of the drought.

While senior revenue department officials claim the revenue shortfall will not be as bad (over Rs 20,000 crore (Rs 200 billion)) as it was in the last financial year, they admit achieving 20 per cent higher collections as estimated in the Budget is a tough proposition.

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