India likely to miss divestment and tax collection target in current fiscal

The Rs 50,000 crore target for divestment receipts in the current financial year is unlikely to be met. With barely 10 days left for the fiscal year to close, the government has to catch up on Rs 19,000 crore worth of divestment revenues. The recent volatility in the market, which continues, may have been one of the factors for the shortfall.

A volatile stock market has added to the government’s woes, creating challenges for the government's plans to come out with an OFS, although the possibility of an offering is not completely ruled out. Even then, it would be highly unlikely to meet the Rs 19,000 crore gap between current actuals and the target.

Earlier, the government’s plans for the Hindustan Zince OFS got nixed with the face-off with Vedanta Grp on its purchase of global zinc assets using HZL’s balance sheet. The outcome of this matter is still awaited.

However, DIPAM has been batting for inclusive or ‘DIPAM receipts’ for a while, meaning including the dividend receipts from CPSEs into the overall divestment pool. While from a budget-accounting purpose, it may not be feasible to have 1 combined head for both, DIPAM favours including dividend receipts as part of its revenues - at least being considered in toto instead of counting only the pure disinvestment receipts.

The government has already exceeded the FY23 dividend aim. Against a Rs 43,000 crore target, the government has received over Rs 52,000 crore as dividends from CPSEs, much higher than the disinvestment actuals of Rs 31,106 crore.

This has helped push the total mop up by DIPAM to over Rs 83,000 crore, against a combined disinvestment and dividend aim of Rs 93,000 crore for FY23.

Not just disinvestment, but on the tax revenue front too, the government could face a marginal shortfall.

Sources indicate around 98 percent of the total tax revenue aim for FY23 will be met, leaving the govt short by likely 2 percent of the aim.

On a combined base of direct and indirect tax targets, the 2 percent odd gap could translate into a shortfall of Rs 50,000-60,000 crore for this financial.

The government has to achieve Rs 16.5 trillion as direct tax revenue and Rs 13.82 trillion as indirect tax revenue. Sources say the targets are somewhat steep given the high base of last year and upward revision in the aim in the revised estimates of this year’s budget.

However, this is a possibility looking at the current trends, sources say. If tax refunds do not pinch in these 10 days, the govt may still be within its overall tax revenue target.