FinMin: Big fiscal hit unlikely from telecom revenue shortfall

The telecom department’s (DoT’s) plea to the finance ministry on inability in meeting its 2017-18 revenue target will not affect the fiscal situation in a big way, say policy makers at the latter.

However, economists differ and say that in a year of revenue uncertainty due to the new goods and services tax (GST), any shortfall in budgeted revenue will have to be matched by an equivalent cutting of expenditure.

DoT had written that it would not be able to meet its revenue target of ~47,305 crore for FY18; it has asked the finance ministry to revise this projection to ~29,524 crore, almost a 40 per cent fall. Their letter pointed to severe financial stress in the telecom sector and rapidly declining revenue of all major operators.

Finance ministry officials say in a total budget of ~21.47 lakh crore, a question on ~17,781 crore would not make much of a dent.

“There will be a case wherein the revised estimates for telecom revenues will be lower than budgeted estimates. Such situations occur almost every year,” said a finance official. “Of importance however, is the overall revenue figure, which includes tax and non-tax revenue and capital receipts. As long as we can make up from other sources, a shortfall of less than ~20,000 crore should not be a problem.”

Finance Minister Arun Jaitley has projected a fiscal deficit target of ~5.46 lakh crore or 3.2 per cent of gross domestic product for 201718. The official quoted above they were counting on increased tax revenue due to better compliance in the wake of demonetisation. The government also hopes that GST will be able to bring a lot of unorganised businesses into the organised sector and, hence, more of taxes.

“A potential shortfall in telecom revenue could impact the fiscal deficit,” dissents Madan Sabnavis, chief economist with CARE Ratings. “This is a year of GST implementation. In the short term, there could be a loss of revenue.” He argued the only way to maintain the fiscal situation was to cut capital expenditure as well.

DoT had written that it would not be able to meet its revenue target of ~47,305 crore for FY18; it has asked the finance ministry to revise this projection to ~29,524 crore, almost a 40% fall