In a briefing, Finance Secretary Ashok Chawla said that the government’s borrowing figure was indeed a matter of concern. The Finance Secretary said the government could tackle the issue of fiscal deficit with lower expenditure and higher revenues. "The average borrowing for the first quarter would be around Rs 15,000 crore per week that would include T-bills and short-term borrowings as well," Chawla said, adding that the full amount of borrowing may not to be through the market route.

Further, Chawla has indicated that expected disinvestment receipts could be in the range of 10-15,000 crore in this fiscal. He also indicated that the Finance Ministry is talking to several ministries to firm up the disinvestment programmes.

Here is a verbatim transcript of Abhijit Neogy’s comments on CNBC-TV18. Also watch the accompanying video.

I think the government is now seriously getting cracking on disinvestment. Ashok Chawla has indicated that Rs 10, 000-15,000 crore is what he expects in terms of disinvestment receipts for this particular fiscal. This amount is tentative depending on the market conditions. The Finance Ministry is right now talking to seven ministries including coal, mines, petroleum, natural gas, power and heavy industries among others. We understand that the Finance Ministry essentially wants to first go for stake sales of those public sector units (PSUs) where the government stake is more than 90% or which are unlisted completely.

Of course, fresh equity offerings in these companies or follow on public offerings will be accompanied by government stake sales. We also understand that the Finance Minster replied to the parliament saying that disinvestment process in NTPC and OIL would be over by the end of this fiscal. BSNL is another one that the government is eyeing. This is yet unlisted.

So this is the first figure which is coming out of government quarters and I can tell you that Ashok Chawala has indicated to us that three or four weeks is the time, the government will take to firm up the roadmap. There are inter-ministerial consultations being held at this point in time. But three to four weeks is the time we have to wait and see what the final list of disinvestment is that the government draws up and what is the sequence going to be like.

On the govt’s borrowing plan

I did speak to the Finance Secretary after he made those comments. He clarified that the meeting tomorrow between the Reserve Bank of India (RBI) and the Finance Ministry is essentially going to focus on how the government is going to manage its borrowing programme for the remainder part of the first half of the current financial year that is till September. The government has already borrowed about Rs 1, 77,000 crore of the targeted Rs 2, 41,000 crore. The Finance Secretary indicating to me that the government is keen going for incremental borrowing that is front loading a lot more borrowing in this particular half of the current fiscal and that is very significant for the bond markets.

Also, what is going to be discussed tomorrow is how to make the borrowings as non-disruptive as possible. There is a possibility that the Finance Minister and the RBI may talk about issuing or going in for a short term paper like treasury bills (T-Bills), like 91 or 180 days T-Bills just to ensure that bond yields don’t rise beyond the comfort level. So essentially what is the incremental borrowing going to happen?—We already heard the finance secretary saying that on an average, about Rs 15,000 crore is the target for the government to set for itself per week. So essentially how its going to manage the borrowing program without making it very disruptive is something which is going to be on the agenda tomorrow.

Commenting on the same, Chawla had said, “You have seen a borrowing figure of Rs 4 lakh crore which is almost 40% of the total expenditure of the government this year. We have tried to clarify that the entire amount need not and will not come from the full complete market borrowing, that’s the market does not have that kind of appetite.”

This meeting is going to be extremely significant coming as it does on the back of severe criticism by some bankers including the leading bank State /bank of India (SBI) that the huge borrowing program would lead to rise in interest rates.

This is precisely one of the reasons that the government finds itself in a dilemma, though it has to borrow more and the Finance Secretary making no bones about incremental borrowing particularly even for this half of the fiscal and the contradiction is that it has to some how make it as nondestructive as possible.

Can the government and the RBI walk the tight rope, we will have to wait and watch till tomorrow.