Payment of AGR dues to bring down fiscal deficit to 3.5% in FY20

Payment of adjusted gross revenue dues of Rs 1.20 lakh crore by telcos will reduce the fiscal deficit for 2019-20 to 3.5 per cent of the GDP from the revised estimate of 3.8 per cent of the GDP, economists at SBI said on Monday.

However, one will have to wait till March 16 - the payment deadline - before the picture gets clear, they said.

After facing the Supreme Court's ire over non-compliance with its AGR order,

the telecom department is pressing for the payment of dues by the telcos.

"The fiscal arithmetic will change significantly post March 16, 2020, (the date till which telecom companies have to pay their AGR dues). If we assume that the government is able to collect Rs 1.20 lakh crore through AGR dues, the fiscal deficit for FY20 will reduce to 3.5 per cent of GDP," the economists at SBI said.

According to the revised budget estimates, the government expects a fiscal deficit of 3.8 per cent in 2019-20.

Meanwhile, the economists also said that increase in LPG cylinder prices has forced people back to unclean cooking fuel alternatives, and the government's focus should now be on making cylinders affordable.

The report comes days after a steep hike in prices of LPG cylinder which were accompanied with a rise in subsidy burden taken by the government which provides 12 cylinders of 14.2 kg at subsidised rates.

To drive rural women away from traditional sources of fuel for cooking which were unclean and hazardous, the government has also launched the PM Ujjwala Yojana (PMUJ), under which free LPG connections are given to beneficiaries.

Economists at the country's largest lender SBI said they had analysed data on the scheme, which they welcomed as an excellent step to promote clean energy.

"The beneficiaries (PMUY) are going back to use of unclean fuel (hazardous to their health also) as soon as the free cylinders get exhausted. Though, PMUY has solved the problem of availability but the affordability barrier still exists," they said.

"Government should now focus on the 'affordability' issue," it recommended.

At present, 96.5 per cent of the households in the country have an LPG connection and only over a half of them consumed only up to three cylinders in a year or more, whereas logically a family of four requires more, it said.

In parallel, it said that contribution of LPG to overall inflation has increased 0.31 per cent reflecting the rise in gas bottle prices, while the same for firewood and cakes has also gone up by 0.10 per cent.

This hike in the firewood and cake prices suggests that demand is more than the supply, SBI noted.

Its recommendations to the government for making the cylinders affordable include an increased and graded subsidy may be provided to PMUY and poor consumers which can be tapered off over a period of, say, four years, it said.