Power sector, local body reforms can aid states avoiding potential revenue shortfall: SBI

State governments could avoid a potential revenue shortfall in 2021-22, if they implement reforms in the power sector and local bodies as recommended by the 15th Finance Commission for 2021-26, the State Bank of India’s economic research department in its report on Friday.

SBI Ecowrap said states' revenues could see a shortfall of Rs 1.05 lakh crore in the current financial year as compared to the estimates in the government's budget for 2021-22 due to lower goods and services tax (GST) collection and oil excise.

It said at the current rate of consumption, GST collections are estimated to come in at Rs 7.59 lakh crore for 2021-22 as against the government's allocation of Rs 7.98 lakh crore in the Budget of 2021-22. This means a shortfall of Rs 40,000 crore.


Similarly, based on the current rate and consumption trends of oil and petroleum products, states could see a shortfall of Rs 53,000 crore to Rs 65,000 crore in 2021-22 from oil excise.

However, if the states could carry out the reforms in power sector and the local bodies, a potential amount of Rs 1.77 lakh crores could still be available to them.

“This implies that Indian states could still end 2021-22 with an additional Rs 72,000 crore in their kitty (as compared to the estimates in the government's budget for 2021-22),” SBI Ecowrap said.

The Commission recommended that 60% of the grants to rural local bodies and for urban local bodies in non-Million- Plus cities should be tied to supporting and strengthening the delivery of two categories of basic services: sanitation and drinking water.