The big thrust areas of Union Budget 2016-17, which is Finance Minister Arun Jaitley’s most closely watched budget, will be the agriculture and transport sectors and big-ticket disinvestment, including strategic sales in high-value companies such as Bharat Heavy Electricals Limited (BHEL), and oil and defence public sector units (PSUs) such as Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), Hindustan Aeronautics Limited (HAL) and Bharat Earth Movers Ltd (BEML).
Mr. Jaitley will announce in his budget speech a new centrally sponsored scheme for irrigation.
On the expenditure side, the big outgo will be on account of the implementation of the 7th Central Pay Commission recommendations for pay and pension hikes with effect from January 1 this year.
The government has decided, an official source told The Hindu , to announce hikes slightly more generous than the Commission’s recommendations. The payouts that will begin from April 1 will include arrears for three months. More than Rs. 1 lakh crore has been budgeted under the head.
Although this payout has turned out to be the biggest challenge for the Finance Minister in meeting the fiscal deficit target, the source said “full effort is [on] to ensure there are no further pauses in the committed fiscal consolidation targets.”
The Finance Ministry earlier sent its budget calculations including proposals related to the fiscal deficit for approval to the Prime Minister, the source said. Mr. Jaitley will present the budget in Parliament on February 29.
To meet the fiscal deficit target, the government will rely on proceeds from disinvestment for which the budget will set ambitious targets.
Mr. Jaitley, who was the first Disinvestment Minister in the Atal Bihari Vajpayee-led NDA, proposes to unveil in his budget speech a two-year road map for three types of sales of government stake in PSUs.
First, a plan for winding up loss-making units, including rules for the disposal of their assets and land. Passage next month of the new bankruptcy code by Parliament during the budget session, it is expected, will aid these sales. Second, profitable PSUs will be listed on stock exchanges through public sales of shares. The government’s shareholding in enterprises already listed will be pared down through public offers to the minimum level depending on the sector and “in line with government policy.” The third category will be that of strategic sales of high-value and big-size companies such as BHEL, and the oil and defence sector PSUs.
The government will invite global companies to bid for its stakes in such companies with the aim of inducting cutting edge technology and improving corporate governance in them.
“The private partners will be expected to turn the energy PSUs into global giants spread across the world… India wants to be big in the energy sector,” the source said. The mega strategic sales in the oil sector will be part of India’s energy security plan.
“The bureaucracy has not been very supportive of our plans for disinvestment but we will push ahead,” the source said.
Based on inputs received from private investors, the government is finalising a new revenue model for irrigation projects to be developed in the public-private partnership space, which will bring down the downstream user charges for farmers. This technology-intensive concept will be selectively applied to high-yield, plantation and commercial crops.
Changes in the policy regime for repatriation of returns by investors from their Foreign Direct Investment (FDI) on the basis of inputs from inland highways and waterways are also being worked out.
Mr. Jaitley announced earlier this month that railways will soon invite bids for modernisation of 400 stations, including their development and management. The Centre has already opened up 100% FDI under the automatic route in rolling stock, services, catering and the development and running of passenger terminals. Measures are likely for addressing delays in land acquisition in various States that is leading to stalled rail projects.
