this year. What buttresses this notion is that the global demand outlook remains subdued for most commodities including crude, fertiliser inputs and vegetable oil and, so, their prices are unlikely to flare up in the second half of this fiscal and push up subsidy claims.
Which means the 2012-13 budget estimate (BE) of subsidies — R1,90,000 crore including R1,79,554 crore major subsidies — is not as unrealistic as it would seem at first glance.
This is despite Parliament's approval sought last week for an additional expenditure of Rs 32,120 crore (cash outgo Rs 30,804 crore) mainly to meet the oil subsidy bill.
The three major subsidies accounted for some 11.5% of the 2011-12 budget. Since there is a big external factor about the size of subsidies (oil and key fertiliser inputs are largely imported), these constitute an expenditure head much less amenable to the finance minister's discretion than other items. And here, the minister has got a much-needed reprieve.
The practice of issuing bonds to oil and fertiliser firms was dispensed with in Budget 2010-11, and these firms are now being compensated for sale of goods at subsidised rates only in cash. However, it continues the custom of deferring roughly a quarter of the subsidy bill in a year (after making good the arrears) to the following year. Yet the revised estimate on any major expenditure/receipts item hasn't been so far removed from reality any time in recent history as in 2011-12. Many would find inexcusable a 30% difference between the RE and the actuals estimated soon after.
There is already a proposal to allow fertiliser companies to raise Rs 40,000 crore from banks, till the government can foot the pending subsidy bill. The expected flat growth in subsidy claims in H2 coupled with the oft-used option of deferring payment of a quarter of the year's subsidy bill to the next year would come handy for Chidambaram.
Of course, the fiscal deficit in the April-October period reached 71.6% of the budgeted level for the full year and 20% above the level in the same period last year at Rs 3,67,920 crore. This slippage is, however, attributable