The Supreme Court’s judgment cancelling 2G telecom licences is set to ease the government’s fiscal deficit pressure.
With the apex court ordering auction, within four months, of the spectrum originally given to 122 licensees in 2008, the government is slated to garner about Rs 80,000 crore (at the prices paid last year for 3G spectrum). This should provide finance minister Pranab Mukherjee substantial comfort in fixing the fiscal target for 2012-13 lower than what had been expected.
At present, the government faces the challenge of meeting the Budget target of fiscal deficit not exceeding 4.6 per cent of the gross domestic product (GDP). With the growth outlook for 2012-13 sluggish, it has a difficult task in keeping the medium-term fiscal consolidation schedule on track (see chart).
Even if the government refunds Rs 10,000 crore to the companies that paid for the spectrum allotted in 2008, it should have about Rs 70,000 crore to spend.
The Telecom Regulatory Authority of India (Trai) has already started the process of auction of the 2G spectrum at issue, issuing a pre-consultation paper on this, to seek views of all stakeholders. It is to make new recommendations for grant of licence and allocation of spectrum in the 2G band in 22 service areas by auction, as was done for allocation of spectrum in the 3G band.
The final revenue that would accrue to the exchequer, however, would depend on telecom players’ appetite for spectrum and Trai’s recommendation.
Last year, Trai had recommended fixing the price for 6.2 MHz of pan-Indian start-up 2G spectrum at Rs 10,972.45 crore, more than six times the cost of Rs 1,658 crore, at which it was allocated to those whose licences had been ordered to be cancelled by SC.
The government’s non-tax revenue had significantly exceeded the Budget Estimate of Rs 1,48,117 crore, to reach Rs 2,20,148 crore in the revised estimate for 2010-11, giving it leeway to keep the fiscal deficit target at 5.1 per cent. This was primarily due to the receipts, much higher than estimated, from the auction of the 3G and Broadband Wireless Access spectrum, which brought in Rs 1 lakh crore.
This gave the government enough confidence to project a 4.6 per cent cap on the deficit as target for 2011-12 and aim for maintaining the schedule suggested in the fiscal responsibility and budget management framework in 2012-13 and 2013-14. However, a ballooning oil subsidy bill, a likely shortfall in the direct tax collection target of Rs 5.33 lakh crore by Rs 20,000 crore, and sluggish disinvestment had come as a dampener to its plan for the current financial year.
