Cut subsidies and raise tax revenue to fund Plan: Montek

Subsidies must be cut and tax mop up has to increase to fund priority areas of education, infrastructure, health and skill development in the 12th Plan, Plan Panel Deputy Chairman Montek Singh Ahluwalia said today.

Listing the priorities and challenges for the next Five Year Plan (2012-17) at the meeting of the National Development Council (NDC), he said the gross budgetary support for the country's development has to increase, along side reducing gap between expenditure and revenue.

The NDC, headed by the Prime Minister, also comprising senior Cabinet ministers and all chief ministers, is the highest body for formulating the country's five year plans. The blueprint or Approach Paper of the 12th Plan is under consideration of the NDC.

It also underscores ways of improving governance by use of technology. Initiatives like UIDAI's Aadhaar smart card, are underway to monitor centrally sponsored schemes.

Ahluwalia said that higher resources for the priority areas can be mobilised "only if the Centre can raise the ratio of tax revenues to GDP (Gross Domestic Product) and cut untargeted subsidies.

"The states too must reduce fiscal deficit since the debt position has become very difficult in many states. The Centre's ability to provide resources is limited. The states have to aim at much better revenue performance and exercise progressive control over subsidies."

Ahluwalia particularly targeted the power sector where, he said, "situation is deeply distressing" with distribution losses of Rs 70,000 crore.

These losses are being funded by the banking system, which "cannot evergreen loan indefinitely."