The Economic Survey has called for addressing the key issues of petroleum subsidies, clarity on gas pricing policy, petroleum price distortion and concerns over various disputes pertaining to the New Exploration Licensing Policy (NELP).
“Addressing the key fiscal risk of petroleum subsidies is critical in better fiscal marksmanship,” the Survey said. The overall subsidy bill of the government, it said, was likely to overshoot the target of Rs.1.79 lakh crore this financial year due to higher crude oil prices. The government had put the petroleum products subsidy at Rs.43,580 crore, food subsidy at Rs.75,000 crore and fertiliser subsidy at Rs.60,974 crore, taking the total subsidy bill to Rs.1,79,554 crore for 2012-13. “With recent reforms in diesel prices and efforts at expenditure re-prioritisation, the medium-term fiscal consolidation plan is credible, and could yet again yield macro-economic dividends in terms of higher growth and price stability,” the survey said.
“The short-run action needed to remove impediments to implementation of projects in infrastructure, especially in the area of energy, includes clarity in terms of NELP. The long-term strategy should focus on issues like petroleum price distortion and natural gas pricing. The government appreciates the economic role of rational energy pricing. Rational energy prices provide the right signals to both the producers and consumers and lead to a demand-supply match, providing incentives for reducing consumption on one hand and stimulating production on the other,’’ it stated.
Over the years, India’s energy prices had become misaligned and were now much lower than global prices for many products, it said. The extent of misalignment was substantial, leading to large untargeted subsidies, it added. The high level of global crude oil prices also had a bearing on fertiliser subsidy as there was inadequate pass through in urea prices, it said. Food subsidy had been growing at an average annual rate of 25.4 per cent in the last five years, and the bulk of it was accounted for by the targeted public distribution system (TPDS), it pointed out.