3G Revenue to Help Cut Market Borrowings

The Indian government said on Monday that higher-than-expected revenue from the auction of the third generation (3G) spectrum will help lower the record market borrowings that it had announced in general budget for the current fiscal year.

Cabinet Secretary K.M. Chandrasekhar said in this context that revenue from the 3G auction was much ahead of all the expectations and will boost government’s total revenue, thus lowering the need for sovereign borrowings towards bridging the gap between income and expenditure.

The government had budgeted Rs 35,000 crore of revenue from the auctions of spectrum for 3G and BWA (broadband wireless access). However, owing to bullish bidding by private companies, it is all set to receive over Rs 67,000 crore from the 3G auction alone. The auction for the BWA spectrum has just started and together, the revenue from the two auctions is now likely to touch Rs 80,000 crore.

The finance ministry had presented a budget of Rs 1,108,749 crore for FGY11, up nearly 8% from the last year. However, the total revenue (sum of tax receipts and non-debt creating capital receipts) was budgeted at Rs 727,341 crore. As a result, after accounting for redemptions of government securities issued in past, total borrowing requirement (gross) for current fiscal was put at Rs 4.57 lakh crore.

While there is a possibility that the substantially higher revenue from telecom auctions will help cut the fiscal deficit and hence market borrowings, some analysts have also raised concerns that government might exceed the fuel subsidy bill substantially compared with its budget estimates, if no reforms in petro-pricing policies are done. As such, the potential decline in market borrowings will be linked to the extent to which the government can hike the fuel prices to keep its fuel subsidy bill close to budgeted amount.