The Government has drawn up a comprehensive plan to reduce the outgo on subsides from 2.6 per cent of GDP in 2011-12 to 1.5 per cent by the end of the 12th Plan (2012-17).
“It is planned to reduce the expenditure on subsidies through various reforms. The objective of the move is not to eliminate subsidies, but such subsidies should be contained within a pre-determined level of affordability. It should be possible to do this without hurting the poor. Some subsidies such as under the proposed Food Security Act will be pre-determined. Others such as on fertilizers can be redesigned to serve their purpose at less cost. Subsidies as on fertilizers can be redesigned to serve their purpose at less cost. Subsidies on petroleum products which are untargeted and do not benefit the poor and the most needy, would need to be reduced,” according to a written reply by the Minister of State for Parliamentary Affairs and Planning Rajeev Shukla in the Rajya Sabha.
He said expenditure on subsidies during the XI Plan (2007-12) increased by 207 per cent from Rs. 70,926 crore to Rs. 2,17,941 crore in 2011-12. The government had made a provision for Rs. 1,90,015 crore in the Budget for 2012-13. However, it was later revised to Rs. 2,57,654 crore for the current fiscal.
The government has effected a major cut in food, fuel and fertilizer subsidies by over 11 per cent at Rs. 2.20 lakh crore for 2013-14 as against the revised estimates of Rs. 2.47 lakh crore this fiscal.
The government’s subsidy bill on food, petroleum and fertilizers is estimated at Rs. 2,20,971.50 crore for the 2013-14 fiscal as against Rs. 2,47,854 crore in the revised estimates (RE) for this fiscal. The RE for this fiscal is higher by 38 per cent compared to the budget estimate of Rs. 1,79,554 crore.
The oil subsidy is estimated lower at Rs. 65,000 crore for next fiscal against the revised estimate (RE) of Rs. 96,880 crore in 2013-13 fiscal.
The food subsidy given to run the public distribution system is estimated to rise to Rs. 90,000 crore next fiscal from the RE of Rs. 85,000 crore in 2012-13. Increase in food subsidy is mainly towards provision for National Food Security. The fertilizer subsidy has also been pegged slightly lower at Rs. 65,971.50 crore in the next fiscal, as against the RE of Rs. 65,974 crore in 2012-13 fiscal. Under the fertilizer subsidy, the government would provide Rs. 15,544.44 crore for imported urea, Rs. 21,000 crore for indigenous urea fertilizers and Rs. 29426.86 crore for the sale of decontrolled fertilizers (DAP, MOP and complexes) at a subsidised rate to farmers.