GOI recently announced Budget2023. This captures the receipts and expenditures of the government for FY23–24. The purpose of this note is to drill out on the details of items for the Department of Telecommunication (DOT).
Expenditure Budget
The expenditure budget for DoT is listed under Demand №15 on Page 49 of the budget document embedded here. I have extracted these numbers and uploaded them to my site under the head — “BudgetFy24 — DOT’s Expenditure”. The Top 15 items (Capital+Revenue) are listed in the picture below.
Note the big ticket 3 items are — a) Capital infusion in BSNL (Capital); b) Pensions (Revenue); c) USOF (Revenue). The PLI spend is bucketed under S.No 11 for FY24 as Rs 915 Cr.
The capital infusion for BSNL will be mainly on the 4G/5G spectrum, which is non-cash items (Rs 33 K Cr for FY23, and Rs 53 K Cr for FY24), with entry just in books (at the current value of spectrum). As DoT does not expect any payment from BSNL for such allocations.
Receipt Budget
DoT’s receipt budget is listed under item SNo 6.06.01 (page 9) in the document which shows the “NonTax Revenue” collection of the GOI. The extracts are reproduced under.
One can see that the receipts from communication services for FY23 are projected to be Rs 68 K Cr and for FY24 to Rs 89 K Cr. These receipts emanate from license fees (LF), spectrum fees (SF), and deferred payment for spectrum auctions held in earlier years. Now LF+SUC projections are unambiguous, as DoT keeps updating them in its Saras Portal. The number updated up till 1st Feb 23 shows — Rs 18.9 K Cr, and this is likely to increase to a max Rs 24 K Cr by the end of this fiscal. Now you can add another Rs 20 K Cr collection from the deferred payment receipt on account of the Auctions of 2021 & 2022, as for the rest of the years the same is under moratorium (till Sept 2025).
Numbers Don’t Add
Now if we add these two items we have a total of Rs 44 K Cr — which is Rs 24 K Cr less than what is being reported in the receipt budget for FY23, and Rs 45 Cr less for FY24. But what is the possible reason for this discrepancy? A) DoT could be expecting more revenues out of another round of auctions. Now given the payment condition of the last auction- NIA June 2022 (page 37) of 20 equal installments. Hence for the DoT to collect an additional amount of Rs 24K it will need the auction receipts of approximately — Rs 4.5 Lakh Cr!
Hence, the question is — is it possible to enable an auction with that kind of outflow in the current economic environment given the fact the last auction only generated only Rs 1.5 Lakh Cr?
The other reason for this discrepancy could be the possible accounting practice where the capital infusion on BSNL can be shown as a receipt in the books due to the need for a double entry. Is this the reason? Possibly given that the GOI is showing a capital infusion in BSNL for Rs 33 K Cr in FY23 and Rs 53 K Cr in FY24. The next question that comes to our mind is — shouldn't such capital infusion be part of the Non-Debt capital receipt? For that, I looked into the document which is extracted below for reference.
One can see that there is no item under which this entry can be linked. Hence, the Capex investment in BSNL is most likely shown as an accounting entry under item SNo 6.06.01 (page 9) of the document showing the Non-Tax Revenue collection of the GOI.
What About VI Investment?
The above analysis raises a very important question. What about the recent DOT investment in VI of Rs 16.3 K Cr? See the Press Release under.
As per the above press release, VI has been directed to issue shares to GoI for Rs 16 K Cr. Now if this process gets completed in FY23 (which is most likely), then will it not enhance DoT’s budget collection for FY23 by that amount? This shall mean the Non-Tax collection for FY23 (shown in S.No 6.06.01) should get enhanced by that amount to Rs 84.8 K Cr. No? Ideally, it should as the receipt on shares has to be shown in the books in some form for the purpose of accounting.
Summary
For the above analysis, it is clear that hard cash in DoT’s hand for FY23 and FY24 will be less than the total shown as receipt, as a large proportion will be book value which gets converted into cash only when a transaction to that effect occurs. For BSNL this is most unlikely, and for VI possible but not in near future. Also, DoT’s ability to bridge the shortfall through another round of spectrum auctions is difficult as the payment conditions are highly relaxed and macroeconomic conditions are not that conducive.
(Views expressed are my own and do not reflect that of my employer)
PS: Find the list of other relevant articles in the embedded link.
