Unpaid subsidy dues: True FY17 fiscal deficit at 4.2%?

By: | Published: January 5, 2018 6:43 AM

The Centre’s fiscal deficit for FY17 would have been 4.2% of the gross domestic product against the 3.5% reported had it paid the subsidy claims for the first three quarters of the year in full.

unpaid subsidy, unpaid subsidy dues, true fy17, fiscal deficit, gross domestic product, subsidy claimsThe Centre’s fiscal deficit for FY17 would have been 4.2% of the gross domestic product against the 3.5% reported had it paid the subsidy claims for the first three quarters of the year in full. (Image: Reuters)

The Centre’s fiscal deficit for FY17 would have been 4.2% of the gross domestic product against the 3.5% reported had it paid the subsidy claims for the first three quarters of the year in full. “Examination brought out that an amount of Rs 1,03,331 crore of subsidy claims (Rs 92,254 crore to FCI, Rs 7,174 crore to Petroleum and Rs 3,903 crore to undertakings in the fertiliser sectors) have not been paid by the government during 2016-17,” the Comptroller and Auditor General of India said in a report. Though it is acceptable practice to defer payment of the fourth-quarter subsidy bill to the next year, the first nine months’ claims are supposed to be met. Of course, this norm has not been unfailingly followed by governments, but the unpaid amount for FY17 is far higher than in the previous two years. The lapse by the Modi government is despite it having had the benefit of the overall subsidy bill declining thanks to benign global crude and other commodity prices, decontrol of oil products and the widening of the DBT scheme.

Had the claims of the first three quarters been paid during the financial year, the expenditure on subsidies would have been 2.21% of GDP in 2016-17, against 1.53% shown. Further, if outstanding subsidy claims are considered in totality including the past unpaid claims, but excluding the fourth quarter claims amounting to Rs 1,87,863 crore, then the total subsidy expenditure would have been Rs 4,20,665 crore in 2016-17, which works out to 2.77% of GDP.

Total subsidy was almost at the same level in 2014-15 and 2015-16 but declined to Rs 2,32,802 crore in 2016-17 from Rs 2,58,471 crore in 2015- 16 and declined 9.93% in 2016-17. The level of subsidy reported in 2016-17 was the lowest in the last five years. Out of the subsidy expenditure of Rs 2,32,802 crore in 2016-17, 47.32% was on food, 28.48% on fertilisers, 11.83% on petroleum and 12.36% on other subsidies.

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