Budget Impact

Despite hype, 2005-06 will see least hike in subsidies KG NARENDRANATH New Delhi, March 1  Even as finance minister P Chidambaram has said in his Budget speech that the government shall “continue to provide subsidies” as an ostensible assertion of the national common minimum programme (NCMP) objectives, the next fiscal (2005-06) would see the smallest year-on-year increase in central subsidies ever. The Budget estimate for subsidies for next fiscal is pegged at Rs 47,432 crore, which is just Rs 918 crore higher than the revised estimates of subsidies for this fiscal (Rs 46,514 crore). This represents an increase of 2%, as against 10-15% year-on-year increase in subsidies in recent years. Speaking to FE, expenditure secretary D Swarup said the consumer, however, has not been affected by the containment of subsidies. “The PDS price for foodgrain has remained unaltered. So have been fertilizer prices to the consumer,” he said. The recent bond market operations by the Food Corporation of India had enabled the corporation to cut down costs. Interest cost came down from 10.9% two years ago to 8.15% now, he said. A programme is already underway to make foodgrain procurement more cost-effective, through decentralised. This is intended to be done without impairing government procurement. The idea is that the benefits of subsidies are not usurped by unintended beneficiaries, said Mr Swarup. An extra Rs 3,000 crore was budgeted for fertilizer subsidy in the current year itself, he said. This was over and above Rs 12,600 crore initially budgeted. This apart, the subsidy for fertilizers for the next fiscal has been raised to Rs 16,300 crore. The Alag committee would come out with the policy prescriptions for incentivising the conversion. Also, the fertiliser subsidy could be severely pruned of naphtha and fuel oil, now used as feedstock, are replaced by less expensive natural gas. Mr Swarup said the government would stick to the target of phasing out petroleum subsidies—Rs 3,600 crore per annum— by 2006-07.

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