Five ways to raise Government resources

The Government has come out with packages to aid different sectors and segments of society to deal with the challenges posed by the Covid-19 pandemic. Last week, the Centre announced a programme to transfer ₹500 each directly into the accounts of 200 million women accountholders under the Pradhan Mantri Jan Dhan Yojana.

This is on top of another programme — the PM Garib Kalyan Yojna — to distribute ₹1.7 lakh crore to the poor and needy to assist them in the fight against Covid-19. The Government is to also release ₹18,000-crore tax refunds.

The Government’s tax revenues will come down and the economic impact of the lockdown will be felt over several months. So the Government must start thinking of ways to raise resources.

Global debt markets are already overstretched; the global debt is $250 trillion, which is three times the global GDP. So how can the Government of India raise resources? Here are some ideas:

Propose a scheme for religious institutions : Religious institutions like temples have huge resources, donated by the public. These are meant for use by society. There has never been a greater need for these resources to be used, than at the time of this pandemic. The government should convince these institutions to donate to the PM CARES Fund and, in return, grant 100 per cent tax deduction (against the 50 per cent now) for donations made, over the next, say, five years.

Launch an amnesty scheme: Amnesty schemes are frowned upon, as they create a moral hazard. But these are very tough times, so perhaps morality can take a back seat to pragmatism. A ‘no questions asked’ scheme by depositing, say, 25 per cent of the declared wealth, could fetch a substantial amount. After all, despite automatic exchange of information, insignificant sums have been brought back from the funds stashed away abroad. The amnesty scheme can be for any funds lying domestically or overseas.

Offer tax-free NRI bonds: India had offered tax-free bonds to NRIs earlier, but had made a mistake in not stopping the NRIs from doing arbitrage (borrowing cheap abroad to invest in high-yield tax-free bonds). Globally interest rates are low, sometimes negative, so a government guaranteed, dollar-denominated bond, ought to attract investment.

Settle disputes like the one in the telecom sector: The Government’s claim of share of revenue based on telcos AGR (adjusted gross revenue) of ₹1.3 lakh crore is based, according to telcos, on a miscalculation, and is, with interest and penalties, hugely miscalculated. The Supreme Court has agreed with the Government’s contention and is compelling telcos to pay. Telcos like Idea Vodafone cannot pay it and will shut shop. Thisis against the interest of all. Consumers will be deprived, call and data charges will shoot up, and banks will be stuck with NPAs. So the Government must sit across the table, settle at a mutually acceptable figure/payment schedule, raise resources to fight Covid, and move on. Similarly for other disputes.

Get State governments to be more pragmatic: State Governments will also need resources, and will go to the Centre for help. They should be asked to do their part. For example, the Municipal Corporation of Greater Mumbai has a ‘ready reckoner’ rate for assessing tax. These rates are unrelated to reality. This has killed the sector. Review the rates; resolve pending issues such as renewal of leases, in order to generate revenue. Do not use permissions/disputes/renewals for personal gains when there is a huge national crisis.

Symptomatic of this is the mushrooming of slums. The Dharavi slum, in which 1.5 million people are cramped into 2.16 sq km is an example of the dangers [3]. It is likely to become a contaminated area and that is a ticking time bomb, as there can be no social distancing in such a cramped area.

Why were these allowed to grow and become such a threat? Is it because they represent vote banks? If so, it is criminal misgovernance.

The global effort will succeed in first containing the spread of Covid; Abbott Laboratories has created a test kit for a 5-minute test to detect Covid and faster testing, together with tracking, will help curb the spread. Simultaneously, testing of different lines of treatment, including the use of hydroxychloroquine, an anti-malarial drug which is allowed for emergency use, gives hope to a quick resolution. The Government has outlined a containment plan, based largely on its experience in Bhilwara, where the containment has been successful.

So, the Government must now plan for a post-Covid economic recovery plan, including the raising of resources.

(The writer is India-Head-Finance, Asia/Haymarket. The views are personal)

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