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| Switch to market-based subsidy |
| BS Repoter / Feb 26, 2010, 01:08 IST |
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The Economic Survey has asked the government to move to a system of direct transfer of subsidies for a targeted population, as the impact of product-based subsidies given for fertiliser production and use, foodgrain, diesel and kerosene is questionable. It also presses for decontrol of prices, saying it is a mistake to couple a subsidy scheme with price control.
As a proportion of GDP, major subsidies rose from 1.6 per cent in 2003-04 to 2.2 per cent in 2008-09 (provisional) and were budgeted at 1.7 per cent in 2009-10. Almost 92 per cent (Rs 96,740 crore) of the major subsidies in non-Plan expenditure in 2009-10 were used between April and December.
The 2009-10 Budget announced moving towards a nutrient-based subsidy regime for fertiliser, culminating in direct cash transfers and the setting up of an expert body to advise on a viable and sustainable system of pricing for petroleum products. Though fertiliser prices have been constant since 2002, the government gave a whopping Rs 76,606 crore in 2008-09 to the sector and though it’s expected to be lower this year, this subsidy remains large.
In the case of food, the survey calls for the gradual removal of Public Distribution System (PDS) outlets by directly handing over the subsidy to households through coupons worth a particular amount to buy food from a store of choice. It talks about distribution of imported pulses and edible oils through PDS at a subsidy of Rs 10 and 15 per kg to states. Similarly, fertiliser sellers who receive these coupons will be free to encash these at any bank, which, in turn, can give these coupons to the government and collect the cash.
The survey recommends working in tandem with the Unique Identification Authority of India to target a person’s particulars, including confirming income criteria, profession and related parameters.
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