Not enough for food, fertiliser, fuel

The expenditure on subsidies for food, fertiliser and fuel for 2014-15 is budgeted at Rs 2,46,397 crore, as against Rs 2,45,452 crore in the revised estimates

The biggest mystery on the day of the interim Budget had to do with the rollovers for the next financial year on the subsidy front. While the fertiliser, food and petroleum sectors were demanding more money, Finance Minister P Chidambaram insisted that there would be no rollovers, except for Rs 35,000 crore on fuel subsidy.

The expenditure on subsidies for food, fertiliser and fuel for 2014-15 is budgeted at Rs 2,46,397 crore, as against Rs 2,45,451.5 crore in the revised estimates. These three sectors have been demanding Rs 1,13,000 crore more than what has been provided for this year. But since Chidambaram has by and large ruled out rollovers, it remains unclear how these ministries will arrange this amount to meet their expenses.

Meanwhile, with Chidambaram saying that India’s total spending on food subsidies will touch Rs 1,15,000 crore in 2014-15 — a jump of 25 per cent from the Rs 92,000 crore revised estimate for 2013-14 — the impact of the National Food Security Act on subsidy was evident in the interim Budget. Food subsidy includes a provision of Rs 88,500 crore for the implementation of the National Food Security Act, which provides for highly subsidised foodgrain for 75 per cent of the rural and 50 per cent of the urban population through the public distribution system.

On the other hand, fuel subsidy, another major headache for the government, has been kept at Rs 63,426.95 crore, down 25 per cent from the revised estimate of Rs 85,480 crore in 2013-14 and a 0.68 per cent drop compared to the budget estimate of Rs 65,000 crore last year.

The government would roll over only Rs 35,000 crore on fuel subsidy for the next Budget. This would mean that the government would be left with just over Rs 28,426 crore for fuel subsidy for the next finan-cial year.

“On food and fertilisers together, the rollover would be in the range of Rs 80,000 crore, given that the Food Corporation of India and the fertiliser industry haven’t met the backlog as they claimed they would,” says Ashok Gulati, chairman of the Commission for Agriculture Costs and Prices.

The allocation for fertiliser subsidy remains flat at Rs 67,970.3 crore for 2014-15. The revised estimate for 2013-14 was Rs 67,971.5 crore. “The allocation for fuel subsidy, it appears, will backfire as diesel under-recovery alone would be around Rs 80,000 crore,” says Debashish Mishra, senior director, Deloitte India. “With the overall under-recovery of over Rs 1,30,000 crore and with GAIL being out of the subsidy burden, Oil and Natural Gas Corporation and Oil India are likely to feel the pinch of additional burden,” Mishra adds.