Govt roadmap to recoup loss from tax cuts: Sale of land, stake in firms

INDIAN EXPRESS
SEPTEMBER 26, 2019
SUNNY VERMA

The reduction in corporate tax rates is set to cost Rs 1.45 lakh crore annually. The government has maintained that it would keep its fiscal deficit target of 3.3 per cent of GDP by March 2020.

In a bid to compensate for revenue loss due to last week’s corporate tax rate cuts, the Centre is working on a three-pronged strategy: fast-track monetisation of idle state-owned land, strategic stake sale in key companies, and sale of residual stake in other state-run firms, sources told The Indian Express.

The reduction in corporate tax rates is set to cost Rs 1.45 lakh crore annually. The government has maintained that it would keep its fiscal deficit target of 3.3 per cent of GDP by March 2020.

The companies identified for strategic stake sale include BPCL, Container Corporation of India (CONCOR) and Air India. A complete sale of government holding in BPCL and CONCOR alone can fetch the government Rs 73,745 crore at Wednesday’s closing price.

The government holds 53.29 per cent stake in BPCL with current market capitalization of Rs 100,816 crore, and 54.8 per cent in CONCOR with market capitalization of Rs 36,536 crore.

As for Air India, sources said, the disinvestment department is already in the process of inviting interest.

The government also aims to partially compensate lower tax collections through residual stake sale and land monetisation.

Assets of nearly three dozen public sector enterprises in various sectors, including power, textiles and fertilisers, are likely to be put up for monetisation. Unused land and residential properties held by these companies, closed industrial units and plants of companies such as SAIL are among assets to be considered for sale.

The government may adopt different models for land monetisation, including securitising a pool of assets through structures like REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts). It may either get successful bidders to make large upfront payment for the assets combined with annual payments, or small or zero upfront payment with annual payments.

The Finance Ministry has already hired 11 consultancy firms for the process: RITES Ltd, JLL Property Consultants (India), KPMG Advisory Services, CBRE South Asia Private Ltd, The Boston Consulting Group, Cushman & Wakefield, Anarock Property Consultants, Feedback Infra Pvt Ltd, Deloitte Touche Tohmatsu India LLP, Pricewaterhouse Coopers and Knight Frank India.

The Ministry is also coming out with initial public offers for three companies: FCI Aravali Gypsum and Minerals India Ltd, Telecommunications Consultants India Ltd, and WAPCOS Ltd. The government, in consultation with NITI Aayog, has prepared a list of 29 companies that will be put up for strategic sale to private companies.

Residual stake sales, buybacks, strategic sales, land monetisation and complete exit from some of the companies would help the government raise more resources than the targets set out in the Budget, sources said.

Budget 2019 has set a high target of Rs 1.05 lakh crore from disinvestment for the current fiscal year, compared with Rs 90,000 crore in the Interim Budget.

Last Sunday, Finance Minister Nirmala Sitharaman had acknowledged that while tax cuts entailed a revenue loss of Rs 1,45,000 crore for the full year, the fiscal deficit target for 2019-20 was not being revised yet.

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