Revenue worry in poll year as PSU dividends, spectrum sale disappoint

Compared to the earlier expectation when that year's Budget was presented, the fall was worse - 33% down from the Rs 2.9 trillion estimated then

Even the truncated collection target in non-tax revenue for 2017-18 could not be met by the government. This has fuelled worry of the same fate in the current, pre-election, year.

For, there is stress in the telecom sector, rising oil import prices, a beleaguered banking sector and prospects for reduced dividends from public sector undertakings (PSUs).  

The central government collected Rs 1.93 trillion or 81.6 per cent of the (revised) target  for non-tax revenue in FY18, shows provisional data from the office of the controller general of accounts. 

Compared to the earlier expectation when that year’s Budget was presented, the fall was worse — 33 per cent down from the Rs 2.9 trillion estimated then. This meant less to spend — 3.4 per cent less in both revenue and capital expenditure from the revised estimate of February, a month before the financial year ended. 
 

Generally, non-tax revenue is about a sixth of total receipts and a fifth of revenue receipts, significant enough to impact the fiscal balance. With this dent in revenue, the government reduced its spending to restrict the fiscal deficit at 3.53 per cent of Gross Domestic Product. 
 

It now expects a moderate rise in non-tax revenue during 2018-19 to Rs 2.45 trillion but would, clearly, have to try hard.

Sources from the finance ministry told Business Standard the failure to sell telecom spectrum and lower dividends from government-owned PSUs were the biggest reasons why a major chunk of the estimated non-tax revenue did not materialise. 

If the stress in the telecom sector due to debt and extreme competition stays put, the situation might stay. There is also the possibility of a dividend waiver for Oil and Natural Gas Corporation. 
 

The reduction in non-tax revenue was although the Reserve Bank of India had already passed on an interim dividend of Rs 100 billion, earlier meant to be paid in 2018-19, in 2017-18 itself. 
 

The Centre expected to earn Rs 443 billion from ‘communication services’, meaning from sale of spectrum, and licence and spectrum usage charges. 

This was revised in February to Rs 307 billion in Budget 2018-19. Communication services fall under the broader ambit of economic services in non-tax revenue. According to the provisional accounts, the revenue from ‘economic services’ was only Rs 613 billion, against the revised estimate of Rs 888 billion. Spectrum, and the power and petroleum sectors contributed the most to revenue from economic services, according to the Budget documents. 
 

The Rs 275 billion fall here was mostly due to the telecom sector, officials said. 

“But, in addition, many PSUs, especially those in coal, and some banks paid out lesser dividend than the government expected in its revised estimate,” a senior official told Business Standard. 
 

In 2017, telecom companies paid about 25 per cent less than in 2016 to the government in lieu of licence fees and spectrum usage charges. From Rs 236 billion in calendar year 2016, the government revenue from these two sources reduced to Rs 180 billion. Average revenue per user for telecom companies dived from Rs 119 in 2016 to Rs 81 in 2017.
 

“In a continuing competitive industry scenario, the larger telcos are vying for the subscriber base of exiting telcos by offering competitive tariff (rate) plans. 

The subscriber-led competition is expected to continue for a few more quarters,” says Harsh Jagnani, vice-president at ratings agency ICRA. 

Analysts say the dividend from state-owned banks would be at the lower end in 2018-19, owing to huge losses.

Over 2017-18, the Centre’s estimate of revenue receipts reduced from Rs 15.2 trillion in the 2017 Budget to Rs 15.1 trillion in the 2018 one (revised estimate) and tanked to Rs 14.4 trillion in the provisional accounts. 

Spending on capital assets, as a result, further fell from the revised estimate of Rs 2.7 trillion to Rs 2.6 trillion in 2017-18.