The government can sell land held by PSUs and potentially reduce its majority stake in some companies to make up for the significant shortfall in tax revenues, Chief Economic Adviser (CEA) Krishnamurthy Subramanian said on Thursday.
According to the figures in the Economic Survey 2019, the government is expected to receive as much as ₹1.6 lakh crore less than what was estimated in the interim Budget presented by then Finance Minister Piyush Goyal in February. Mr Goyal’s interim Budget pegged the government’s receipts in 2018-19 at ₹17.2 lakh crore, while the Economic Survey’s provisional actual figures show this will be only ₹15.6 lakh crore.
The main reason for this sharp downward revision is a commensurate reduction in the tax revenue the government expects to earn in 2018-19. This has been slashed to ₹13.16 lakh crore, from the ₹14.84 lakh crore estimated in the interim Budget.
Many avenues
There are several avenues for the government to increase its non-tax revenue, the CEA said, including selling land held by PSUs and increasing disinvestment.
“The non-tax revenues have a significant potential to expand, especially because our PSUs, many of them, are sitting on large pools of land which can be monetised,” Dr. Subramanian told The Hindu . “There is also an opportunity for greater returns from divestment.”
Regarding disinvestment, Dr. Subramanian made the somewhat radical suggestion that the government could reduce its holdings in some PSUs to below the majority stake of 51% of direct control.
“This is something that can be thought about as well, that the 51% majority stake of the government... instead of looking at it as 51% only of the government, you can look at a situation where it is 40% of the government and 11% of LIC, that is also 51% effectively,” he said. “And that change can enable you to raise a lot more money from divestment as well. The divestment targets are expected to fill in some of the gaps that the tax revenue is creating.”
The subdued tax receipts were mainly due to slower economic growth, he said.
“Tax revenues themselves depend on growth,” he said. “Last year, we clocked 6.8% and the buoyancy in the indirect taxes has not been that great because of a lot of tax concessions that were given over the last year. Once that is streamlined, the tax buoyancy for indirect tax should improve.”
