Outlining its intention of cutting down the ballooning subsidy bill and bringing it under 2 per cent of GDP in 2012-13, the Government pegged the subsidy for food, fuel and fertiliser subsidies for 2012-13 at over Rs 1.79 lakh crore, nearly 14 per cent lower than the revised estimates for the current fiscal.

The government has proposed reimbursement of subsidy on LPG cylinders and kerosene directly into the bank account of the beneficiary to improve customer service and reduce leakage. A pilot project for LPG is presently being run in Mysore. A similar project on direct transfer of subsidy for kerosene into the bank accounts of beneficiaries has been initiated in Alwar district of Rajasthan. The Aadhaar platform has also been successfully used to validate PDS ration cards in Jharkhand. Such a scheme is likely to be rolled out in 50 districts of the country over six months.

According to the Budget proposals, the government’s subsidy bill on food, petroleum and fertilisers is estimated at Rs 1,79,554 crore for the 2012-13 fiscal as against Rs. 2,08,503 crore in the revised estimates for this fiscal. Of this, Rs. 75,000 crore has been provided for food, Rs. 61,000 crore for fertilizer and around Rs. 40,000 crore for petroleum subsidy.

Interestingly, the revised estimate for this fiscal is higher by 55 per cent compared to the budget estimate of nearly Rs. 1,34,211 crore. The oil subsidy, which is given to state-run oil marketing firms, such as Indian Oil Corporation, BPCL and HPCL, for selling diesel, domestic LPG to households and kerosene through the PDS system, below cost, is estimated lower at Rs. 43,580 crore in 2012-13, compared to Rs. 68,481 crore in this fiscal.

The government’s food subsidy, given towards running the public distribution system is estimated to marginally rise to Rs. 75,000 crore the next fiscal from Rs. 72,823 crore in 2011-12. The fertiliser subsidy is also pegged lower at Rs. 60,974 crore, as against Rs 67,199 crore in the current fiscal. Under the fertiliser subsidy, the government would provide Rs. 13,398 crore for imported urea, Rs. 19,000 crore for indigenous (urea) fertilisers, and Rs. 28,576 crore for the sale of decontrolled fertilisers (DAP, MOP and complexes) at a subsidised rate to farmers.

The Finance Minister said he would endeavour to restrict the expenditure on Central subsidies to under two per cent of the GDP in 2012-13 and subsequently, further down to 1.75 per cent of the GDP.

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