After RBI Bonanza, Centre to Rake in More Cash via Critical Mineral, Spectrum Auctions
- May 24, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
After RBI Bonanza, Centre to Rake in More Cash via Critical Mineral, Spectrum Auctions
Sub: Economy
Sec : Fiscal policy
Following a substantial surplus transfer from the Reserve Bank of India (RBI), the Indian government is set to receive further financial boosts through spectrum and critical mineral auctions.
Additionally, improved performance by Central Public Sector Units (CPSUs) and Public Sector Banks (PSBs) is expected to contribute significantly to the public exchequer.
Key Points:
- Record RBI Surplus Transfer:
- The RBI has approved a record transfer of ₹2,10,874 crore to the central government for the financial year 2023-24.
- Spectrum Auction:
- The Department of Telecommunications (DoT) will conduct a telecom spectrum auction early next month.
- The DoT expects to raise at least ₹40,000 crore from the auction based on the earnest money deposited by telecom service providers (TSPs) last week.
- A total of 10,513.15 MHz of spectrum worth ₹96,317.65 crore is being auctioned.
- Major TSPs such as Bharti Airtel, Reliance Jio, and Vodafone-Idea have pre-qualified as bidders with earnest money deposits of ₹1,050 crore, ₹3,000 crore, and ₹300 crore respectively.
- Critical Mineral Auction:
- The government plans to generate revenue from the sale of critical mineral blocks.
- New rules propose a cap on upfront payments and performance-security payments at ₹500 crore.
- Performance security for a composite license is capped at ₹250 crore before issuing the license and ₹500 crore before issuing a mining lease.
- The first tranche of 20 critical-mineral blocks was put up for auction in November, with winners of 6-7 blocks expected to be announced around July. Another seven blocks received fewer than three bidders and were re-auctioned in March. The Centre values the first 20 blocks at ₹45,000 crore.
- Dividends from CPSUs and PSBs:
- Enhanced profitability of CPSUs and a consistent dividend policy are expected to yield substantial dividends for the government.
- According to Finance Ministry guidelines from 2016, CPSUs should pay an annual dividend of 30% of profit after tax (PAT) or 30% of the government’s equity, whichever is higher.
- A 2020 advisory suggests that CPSUs making higher payouts may consider paying quarterly dividends.
Implications for Fiscal Consolidation:
- These anticipated cash inflows will likely be factored into the full Budget expected in July after the new government is sworn in.
- Economists suggest that these revenues will aid in fiscal consolidation, potentially revising the projected fiscal deficit for FY25 from 5.1% of GDP as outlined in the Interim Budget.
The combination of these financial strategies underscores the government’s proactive measures to bolster its fiscal position through diversified revenue streams, enhancing economic stability and growth prospects.
Components of Government Budget
The government budget is broadly divided into two main components: the Revenue Budget and the Capital Budget.
- Revenue Budget
The Revenue Budget consists of Revenue Receipts and Revenue Expenditure. These are related to the regular functioning of the government and do not directly impact its assets or liabilities.
Revenue Receipts: Income earned by the government through its routine operations.
- Components:
- Tax Revenues:
- Direct Taxes: Taxes directly levied on individuals and corporations, such as income tax, corporate tax, and wealth tax.
- Indirect Taxes: Taxes on goods and services, such as excise duty, customs duty, and GST (Goods and Services Tax).
- Non-Tax Revenues:
- Interest Receipts: Income from loans given by the government to states, public sector enterprises, and other governments.
- Dividends and Profits: Earnings from public sector enterprises where the government has an equity stake.
- Fees and Charges: Income from various services provided by the government.
- Fines and Penalties: Revenue from fines and penalties imposed by various government agencies.
- Grants and Contributions: Financial assistance received from other governments and international organizations.
- Tax Revenues:
Revenue Expenditure:
- These are expenditures that do not result in the creation of assets or reduction of liabilities. They are incurred for the normal functioning of government departments and maintenance of existing assets.
- Components:
- Salaries and Wages: Payments to government employees for their services.
- Interest Payments: Payments on the interest for government borrowings.
- Subsidies: Financial assistance to support specific sectors, such as agriculture, food, and fuel.
- Pensions: Payments to retired government employees.
- Administrative Expenses: Costs associated with the day-to-day administration and operation of government departments.
- Grants: Financial assistance given to state governments, local bodies, and other institutions.
- Capital Budget
The Capital Budget includes Capital Receipts and Capital Expenditure. These are related to the investment activities of the government and have a direct impact on its assets and liabilities.
Capital Receipts:
- These are receipts that either create liabilities or reduce assets. They are mainly obtained through borrowing or asset sales.
- Components:
- Borrowings:
- Market Loans: Loans raised by issuing government securities in the domestic or international markets.
- External Loans: Loans from foreign governments and international organizations.
- Short-term Borrowings: Borrowings through treasury bills and other short-term instruments.
- Disinvestment Receipts: Proceeds from the sale of government’s stake in public sector enterprises.
- Recovery of Loans: Repayments received from states, public sector enterprises, and other entities.
- Small Savings and Provident Funds: Funds mobilized through small savings schemes and provident funds.
- Borrowings:
Capital Expenditure:
- These are expenditures that lead to the creation of assets or reduction of liabilities. They are typically long-term investments in infrastructure and development projects.
- Components:
- Infrastructure Projects: Investments in building and upgrading physical infrastructure like roads, bridges, ports, airports, and railways.
- Public Health and Education: Investments in hospitals, schools, colleges, and universities.
- Defence: Expenditure on acquiring new defense equipment and infrastructure.
- Loans to States and UTs: Financial assistance provided to state governments and union territories for various development projects.
- Repayment of Borrowings: Payments made to reduce the principal amount of government debt.
- Equity Investments: Capital infusion in public sector enterprises and financial institutions.
Summary
The Revenue Budget focuses on the regular income and routine expenditure of the government, ensuring smooth functioning and maintenance of services. The Capital Budget deals with investment in long-term assets and infrastructure, crucial for the economic development and growth of the country.