Centre dips into small savers money

The Centre has dipped into the deposits of small savers yet again and handed out Rs 2,000 crore to Air India to keep the debt-laden national carrier afloat after it failed to raise funds from bids.

Official sources told DH that the government has infused Rs 3,630 crore into Air India in 2018-19, of which more than half or Rs 2,000 crore is from National Small Savings Funds (NSSF).

The move comes after the Centre raised interest rates on small savings by 40 basis points to 8% late last year apparently to ensure fund flow to NSSF.

Sources said that the Centre is also planning to take out a large chunk of money from small savings to finance part fiscal deficit as it has reduced its market borrowings for this year.

Deposits under small saving schemes such as public provident fund, kisan vikas patra and others are credited to NSSF. The NSSF invests the net collection of small savings into government securities. Over the years, the government's dependence on NSSF has increased significantly.

The centre's payout to state-owned companies from the kitty of small savings has been increasing over the years. Last year, small savings bailout to Food Corporation of India, National Highway Authority of India and Air India was nearly Rs 1 lakh crore.

Financing of fiscal deficit from small savings has been rising since 2015-16 but reached its peak in 2017-18.

According to the 2018-19 Budget projections, the Centre is likely to finance Rs 75,000 crore of fiscal deficit from the small savings.

Analysts said keeping rates high on small savings just to finance deficits distorts the interest rate culture. Recently, the government had linked the small savings rate with G-Sec yields but after the September hike, the rates on most of the small savings at 8% or above are much more than the yields on 10-year government bonds.