The Hindu : National : Steps to reduce subsidy bill

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Tuesday, Jul 07, 2009
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National

Steps to reduce subsidy bill

Sujay Mehdudia

NEW DELHI: Union Finance Minister Pranab Mukherjee on Monday announced measures that would reduce the government subsidy bill on food, fertilizer and petroleum and other things by about Rs.18,000 crore at Rs.1,11,275 crore this fiscal. This has been possible only due to reduction in the urea dole outs.

The government also announced a shift to nutrient-based subsidy regime to facilitate balanced use of fertilizers and bring in fresh investment to the sector.

While, the fertilizer subsidy will fall to Rs.49,980 crore in 2009-10 from the Rs. 75,848 crore in the revised estimate for 2008-09, the food subsidy bill is estimated to increase by 20 per cent to Rs.52,489 crore from Rs.43,627 crore in the last financial year. The total subsidy outgo in 2008-09 was Rs.1,29, 242 crore.

Food subsidy is provided to meet the difference between the economic cost of foodgrains and their sales realisation at Central issue price fixed for the public distribution system (PDS) and other welfare schemes.

Petroleum subsidy, which is given to State-run oil firms for selling domestic LPG to households and kerosene to PDS system at below cost, is projected to rise to Rs. 3,109 crore in 2009-10 from Rs.2, 876 crore in the revised estimates for 2008-09. Expenditure under interest subsidies and other subvention is estimated at Rs.5,696 crore, taking the government’s total subsidy bill to Rs.1,11,275 crore in this fiscal.

Under the fertilizer subsidy, the government would provide Rs.9,780.25 crore for indigenous (urea) fertilizers, Rs. 5,947.94 crore for imported (urea) fertilizers and Rs.34,252.06 crore for sale of decontrolled fertilizers with concession to farmers.

Mr. Mukherjee said that to ensure balanced application of fertilizers, the government intends to move towards a nutrient-based subsidy regime instead of the current product pricing regime. The move will result in the supply of innovative fertilizer products in the market at reasonable prices, he said.

Fresh investment

The unshackling of the fertilizer manufacturing sector is expected to attract fresh investment to the segment that has not witnessed any significant inflow of funds, he added.

The government aims to provide subsidy directly to farmers instead of companies that sell them.

“In due course, it is also intended to move to a system of direct transfer of subsidy to the farmers,” Mr. Mukherjee said.

Indian Farmers Fertiliser Coperative Limited (IFFCO), the major fertilizer cooperative, has welcomed the move to shift fertilizer subsidy from product pricing regime to nutrient-based subsidy regime.

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