DMPQ- Disinvestment as a source of revenue is not a viable and alternative option of increasing revenue. Do you agree with the statement.

Disinvestment means sale or liquidation of assets by the government, usually Central and state public sector enterprises, projects, or other fixed assets.The government undertakes disinvestment to reduce the fiscal burden on the exchequer, or to raise money for meeting specific needs, such as to bridge the revenue shortfall from other regular sources.

Indian non debt receipts contain tax revenue, non tax revenue and non debt capital receipts.

Disinvestment comes under the last one. But these as a source are not reliable as:

  • Government assets are limited and is on decline post 1991 reforms.
  • The revenue realisation estimate cannot be calculated for disinvestment as lot depends upon the market on the day of selling.
  • It has been seen that disinvestment is being used to bridge the fiscal deficit and to cover the lower collection of tax revenue.
  • High disinvestment target can lead to distress sale which will be more detrimental.

 

To conclude, more focus has to be on collection of Taxes. Tax reforms, increase in tax compliance, extension of tax base are the possible solution. And Government investment has to be in the sector which will generate revenue in the long run. The investment made will put pressure on fiscal deficit but it will generate revenue in the long run.

 

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