Fiscal strain shows in run-up to Budget.

NEW DELHI: For the finance ministry, budget-making is usually an annual exercise with a focus on the new year. But this year is different. As finance minister P Chidambaram gets into a final huddle with his officers for the 2013-14 budget, he is worried about the targets set for the current financial year.

After all, government finances have never looked as bad in recent memory, with the Centre staring at the prospect of ending the year with lower-than-budgeted revenues from taxes, disinvestment and spectrum sale, besides overshooting its spending target.

The disinvestment and revenue departments are going to be on an overdrive to mop up every possible paisa over the next 12 weeks.

The success of the spectrum auction, the second in a span of three months, will only be known in March but before that, a message has gone to every government department that they should try and cut expenditure, and if possible defer some to the first quarter of the next financial year.

Already, the finance ministry is talking of a saving of Rs 65,000-70,000 crore in plan expenditure, which is around 5% of budgeted spending, as ministries that have not spent in line with the allocation will have to surrender a part of the resources at their disposal.

There are others, which have for years not bothered to collect utilization certificates of funds released earlier. They will now have to adjust their "past dues" with this year's allocation. For some, the reduction is as much as 25%, conceded a minister.

"It's normal budget practice but this year the enforcement is tougher," said the financial advisor in a ministry with a large allocation. Finance ministry officials admitted that the budget division is keeping tabs on every single paisa that flows out of the treasury.

A request from agriculture minister Sharad Pawar to clear Rs 30,000 crore of unpaid fertilizer subsidy has been turned down. Similarly, oil companies may have to deal with a new subsidy-sharing mechanism that will translate into a higher burden for them.

From defence to rural development, no one is surviving the axe as Chidambaram is keen to ensure that at least the revised fiscal deficit target of 5.3% of GDP is met. He has so far scoffed at the possibility of the government missing the revenue targets but that's something that experts are worried about.

After all, the run rate, as far as tax collections are concerned, is lower than the asking rate and his ministry's own document in Parliament has talked about corporation tax, customs and central excise duty targets being tough to achieve given the trend in the first half, although it said that "slippage" may be minimal by the time the year ends.

Even on Tuesday, Fitch reiterated its fears and joined Moody's and Standard and Poor that have warned India of a possible downgrade in sovereign rating to junk status.


Source : timesofindia.indiatimes.com