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Fiscal deficit served with some fudge
Mon, 5 Nov Pre-Open

Prime Minister Manmohan Singh cautioned about the high fiscal deficit levels as they actas a deterrent for domestic and foreign investment. He opined that respective ministers should help inresolving issues related to aspects that are 'dragging' the economic and infrastructural growth. These drags include fuel supply arrangements, security & environment clearances and financing issues.

As reported by the Business Standard recently, the fiscal deficit - the difference between the government receipts and spending - during the six month (April to September) period ended September 2012 reduced by 65.6% of the budget estimate.

However, what is interesting that this figure is 'believed' to be lower by 0.1% as compared to the figure of 65.7% of budgeted deficit during the first five months (April to August) of the year. This indirectly indicates that there was no deficit in the month of September 2012.

If this continues to be the trend for the rest of the year, then the government does not really have areason to worry. But as reported by firstpost.com, the figures are seemingly fudged! This is because the government has held back overdue subsidy payments. The expenditure part of the fiscal deficit has beena lower figure there by keeping the overall fiscal deficit as a percentage of the budgeted target lower. It is believed that the finance ministry has not paid the oil marketing companies (OMCs) dues of about Rs 700 bn (excluding of what subsidies other energy companies would be needed to pay up) of subsidies that were due to them for the first half of the current year.

OMCs - Indian Oil Company, Bharat Petroleum Corporation Ltd. and Hindustan PetroleumCorporation Ltd - have reported under-recoveries of about Rs 856 bn during 1HFY13. The government would mostly likely be pressurized to pay these dues soon, else the OMCs would report massive writeoffs from their books, similar to what has taken place in the quarter ended June 2012.

Keeping all the above in mind and after including the payments of Rs 700 bn in the calculation of subsidies, the fiscal deficit figure comes to Rs 4,060 bn, which is about 79% of the budgeted estimate of fiscal deficit target of 5.3%. Given that we are only six months in the financial year, it is anyone's guess what it would be at year end.

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