Despite a big drop in fuel subsidies, the Centre’s spending on the three major explicit subsidies — food, fertiliser and fuel — rose 7.4% in the first four months of the current fiscal year, as it liberally paid up arrears.
In the April-July period, these major subsidies cost the exchequer Rs 89,793 crore, up from Rs 83,577 crore in the same period last year. The Centre’s fiscal deficit was 69% and expenditure was nearly 34% of the full-year target during the period.
While subsidies on fuel declined an annual 62% to Rs 9,194 crore in April-July due to fall in crude prices, decontrol of diesel and direct benefit transfer (DBT) scheme for subsidised LPG, the fertiliser subsidy rose 73.5% to Rs 36,959 crore. Subsidy on food was up 14.3% to Rs 43,640 crore in the period.
The government had rolled over fuel subsidies worth Rs 5,000 crore to FY16 from FY15 due to lack of funds. The decision left subsidy arrears of Rs 60,000 crore claimed by Food Corporation of India unpaid and unpaid dues of Rs 30,000 crore to fertiliser companies.
For FY16, the Centre has budgeted Rs 1,24,419 crore subsidy for food, Rs 72,969 crore for fertiliser and Rs 30,000 crore for fuel as against Rs 1,22,676 crore, Rs 70,967 crore and Rs 60,270 crore, respectively, in FY15.
Given the fall in crude prices, the government could make some savings on fuel and fertiliser subsidies this year, giving some comfort to its stretched finances. It needs more funds to step up public investment to help accelerate economic growth as private investment may be weak.
Major subsidies — food, fertiliser and fuel — which were 2.3% of GDP in FY14, were brought down to 2% of GDP in FY15 and are estimated to be 1.6% in FY16.
To keep subsidies under check, the government-appointed Expenditure Management Commission in its interim report, has recommended that DBT be implemented in all government welfare schemes to ensure only the deserving get the benefits and leakages are plugged, sources said.
Enthused by the success of DBT-LPG that saved Rs 12,700 crore in fuel subsidies in FY15, the government plans to roll out DBT in food and kerosene by April next year.