India -Windfall to help in core push

The finance ministry is sniffing a bonanza of over Rs 30,000 crore by way of higher excise revenues and lower oil subsidies.

Top officials said the extra money was likely to be spent on infrastructure programmes.

Here’s how the bonanza has come about: the fall in global crude prices because of the Chinese crisis is expected to lower the oil subsidy burden by about Rs 18,000 crore.

The slide in crude price, which is expected to bottom-out towards the end of this year, will continue to favour India for at least one to two more quarters.

Sarosh Zaiwalla, an international sanctions lawyer and oil expert, said: “We have a situation where the world’s second biggest consumer of oil is undergoing a major slowdown … will inevitably lead to less crude being sold… it can be expected that low oil prices are here to stay.”

At the same time, officials estimate that they will be earning about Rs 50,000 crore more because of higher excise duties slapped on fuel products and the withdrawal of concessions on automobiles and consumer durables.

After a relatively low growth for months, consumer durables output and sales grew 16 per cent last June.

The excise duty collection that was budgeted to grow at 21.7 per cent in the current financial year, grew by a whopping 37 per cent during the April-July period. While growth in indirect tax collections could taper off in later months, extra cash from excise is already being factored in by the revenue department.

Officials said the extra money would be funnelled into stalled roadways, port, railway and airport projects.

They pointed out that finance minister Arun Jaitley had hinted as much in a speech to Parliament earlier this month.

“We are trying to ensure that the difference between budget estimates and revised estimates, as has been the practice in the past, is not there,” Jaitley had told Parliament.

“If at all, revised estimates may be a bit superior to the budget estimates. That is why, additional amounts are being spent as far as the revised estimates are concerned.”

An analysis done by India Ratings and Research estimates that an additional fiscal headroom of more than Rs 37,000 crore will be available to the finance ministry.

It based its calculations on a complex matrix where it calculated higher income from excise duties, lower oil subsidies and higher dividend earnings, while offsetting higher food subsidies and lower divestment earnings.

It warns that the most prominent slippage will be on divestment. “The divestment target of the government has been budgeted at Rs 69,500 crore for 2015-2016. The department of disinvestment, however, is hopeful of mobilising only Rs 30,000 crore this fiscal.”