Defaulting PSEs sour PC's fiscal dreams

NEW DELHI: Even as the fiscal responsibility and Budget management (FRBM) targets loom large on the government, according to which revenue deficit has to be brought down to nil by 2008-09, arrears of non-tax revenue receipts of the central exchequer show a deteriorating trend.

Defaults in loan repayments and interest payments by public sector enterprises (PSEs) have risen by 6% and 9%, respectively, in the last fiscal compared to the corresponding period in 2005.

In a recent review, the government found that of the total defaults of Rs 54,207 crore outstanding at the end of March 2006, PSEs accounted for a whopping 83%. Defaults in loans repayments and interest payments adversely impact the Centre’s non-tax revenue receipts. The finance ministry has written to all administrative departments, seeking a review of individual cases, government sources said.

“All nodal departments have been asked to undertake a review of individual cases and put in place appropriate measures to ensure timely repayments to reduce outstanding dues,” a government official said. Any further budgetary support to defaulters will be considered only under a specific revival scheme after Cabinet approval, the official added.

The FRBM Act of 2004 requires the government to reduce revenue deficit by 0.5% of GDP and fiscal deficit by 0.3% every year (beginning 2004-05). According to the original targets, revenue deficit had to be brought down to nil by 2007-08 while fiscal deficit was to be reduced to 3% of GDP. Later, the government set 2008-09 as the deadline.

Given that the fiscal deficit has fallen to 3.5% of GDP in 2006-07 and revenue deficit is down at 2%, the government is on course to achieving its targets.