 "Macro economic concens: FM to take stock of PSUs investible surplus")
The finance ministry will try to address two important macro-economic concerns -- economic growth and the Centre's fiscal deficit-- today. The issues assume important as most independent analysts have pegged economic growth for this financial year less than a decade low GDP expansion of 5% in 2012-13 and doubted the government optimism over reining in fiscal deficit at 4.8% of GDP.
Fnance minister P Chidambaram is scheduled to meet heads of major public sector units today. He is expected to nudge them to invest surplus funds to perk up the economy whose growth crawled to a decade low in 2012-13 and a four-year bottom in the first quarter of this financial year. Or else, he may ask them to make the exchequer fatter by giving higher dividend.
The Finance Minister will meet the chiefs of PSUs and will be discussing various issues, including dividend payment and investment of surplus funds, a senior finance ministry official said.
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Currently, excess funds of some PSUs are estimated at around Rs 2.8 lakh crore.
"Obviously, the surpluses of public sector enterprises cannot lie in a bank. The surpluses have to be invested, either they (CPSEs) invest or they give it to somebody who can invest it," Chidambaram had said in an interview with the Press Trust of India here.
India's economic growth declined to five% in 2012-13, which was the lowest GDP expansion in ten years. This year, most independent analysis did not expect the economy to grow even this much. The economy expanded 4.4% in the first quarter of 2013-14, which was the slowest growth in four years.
At a time, when the government cannot provide stimulus to the industry as it faces a challenge of restricting the Centre's fiscal deficit at 4.8% of GDP, PSU's investible surplus can come to the aid of sluggish economy.
Higher dividend by PSUs, on the other hand, may help the government narrow fiscal deficit. The deficit has widened to 75% of the Budget Estimate in just five months of the current financial year.
The government expects to raise Rs 73,866 crore from dividends in the current financial year against Rs 55,443 in the previous financial year.
The fiscal deficit concerns face challenge from dwindling revenues, particularly indirect taxes . As tax collections were subdued in the first half of the financial year, it has planned to issue instructions to field officers to take all possible measures to meet their Budget target.
The revenue department’s worry is that in many cases taxpayers have taken credit for the tax already paid by them on inputs, thus reducing their net cash outgo. The Central Board of Excise and Customs (CBEC) might ask field officers to do a special audit in such cases.
The CBEC brass is to meet today in this regard. Besides special audits, other measures could include notices to non-filers and stop-filers, recovery of arrears and fast settlement of disputes, among others.
“This time, the tax credit has been more than cash payment. It could be because of expansion by companies, particularly in capital-intensive sectors, but this might not be true in all the cases. We are trying to figure out why this happened,” said a ministry official who did not wish to be identified.
The official said the ratio of tax credit to cash payment was 35:65 a decade earlier; now, this had reversed. Tax credit of about Rs 2.5 lakh crore was given last year. So far this year, tax credit of Rs 1,72,000 crore has been taken, while cash payments are Rs 62,107 crore.
The growth in tax receipts during the first half of this year has been lower than the 19% projected in the Budget for the entire year, as GDP growth is less than expected.
Indirect taxes are particularly bothering the government, as excise collections till August were 8.3% down due to weak industrial output, against the Budget Estimate of 11.9% growth for the year. Service tax collections, though up, have also grown at a much lesser pace of 14.3% against the asking rate of 36%.
Collection from customs duty during April-August recorded 9.6% growth over the same period of last year. This is lower than the Budget projection of 13% for 2013-14.
Officials said in September some pick-up was seen, as industrial output grew by 2.7% in July and 0.6% in August. There is a lag effect of one to two months between the two sets of data.
The ministry is expecting collections to pick up in the coming months, led by a growth in industrial output in July and August after a two-month contraction, stimulus to the automobile and consumer durables sector by way of additional capital to banks and higher GDP growth in the last two quarters.
Another silver lining is the coming Assembly elections in five states, which would increase fuel consumption.
Net direct tax collections in April-September were up 10.7% at Rs 250,959 crore, compared with Rs 226,653 crore in the same period of 2012-13.
The government has set a target of Rs 668,109 crore for direct taxes this year, against the BE of Rs 570,257 crore last year. For indirect taxes, the target is Rs 565,002 crore in 2013-14, against last year’s BE of Rs 505,044 crore. In 2012-13, both direct and indirect tax collections fell short of the target and the Revised Estimate was set at Rs 565,835 crore and Rs 469,546 crore, respectively, a rise of 17.4% over the previous year.
Owing to huge imbalance between the receipts and expenditure, the Centre's fiscal deficit has already touched 75% of the Budget Estimate in the first six months of the current financial year. However, the Finance Minister had said that the fiscal deficit would not be allowed to breach the 4.8% of GDP mark.
Dwindling Indirect Tax Collections
Dwindling Indirect Tax Collections
| Asking Rate for 2013-14 | April-August 2013-14 | |
| Service Tax | 36% | 14.30% |
| Excise Duty | 11.90% | -8.30% |
| Customs Duty | 13% | 9.60% |
Dividends by PSUs:
| 2011-12 | Rs 50,608 crore |
| 2012-13 (BE) | Rs 50,153 crore |
| 2012-13 (RE) | Rs 55,443 crore |
| 2013-14 (BE) | Rs 73,886 crore |
Source:Finance Ministry, Budget papers