Plan panel for halving oil, food, fert subsidies

The Planning Commission today pitched for halving the government's subsidy bill, a proposal, if accepted, could push up the prices of fertilisers, cooking gas and food grains being sold through ration shops.

At budgeted level, subsidy, non-Plan expenditure, is around Rs 1.90 lakh crore, including that on food, fertiliser and petroleum products, in 2009-10.

"If all the subsidies were cash-based and given to the Planning Commission... Subsidies would be halved without any effort. With those Rs a top official of the Commission said when asked whether the government's decision to compress fiscal deficit could hit allocations in the last two years of the Eleventh Plan (2007-12).

Planning Commission Deputy Chairman Montek Singh Ahluwalia in a presentation before Prime Minister Manmohan Singh last week had made a case for increasing prices of food, fertiliser and petroleum products to contain subsidy.

"Success (of fiscal consolidation programme) depends on subsidies not exceeding the 2009-10 BE (Budget Estimates) level. However, to contain food, fertilizer and petroleum subsidies at BE level, prices will have to be raised," he had said at the meeting of the full Planning Commission called to approve the Mid-Term Appraisal (MTA) of the Eleventh Plan.

The government proposes to bring down the fiscal deficit from 6.8 per cent of the Gross Domestic Product (GDP) in the current fiscal to 5.5 per cent during 2010-11 and 4.8 per cent during 2011-12 which can have implications for funding the Plan.

"The projected compression in the fiscal deficit will pose financing challenge to find resources needed for Plan expenditure", said the MTA document which was placed before the full Planning Commission.

The government, the Commission official, added should look at disinvestment to raise resources, besides introducing the Goods and Services Tax (GST).

The government proposes to raise Rs 40,000 crore next fiscal through disinvestment, the official said and hoped there will be appetite for PSU shares in the market.

Although the government during the current fiscal has risen about Rs 25,000 crore from sale of equity of public sector companies, the public offerings from blue chip PSUs like NTPC, REC and NMDC did not evoke good response from retail investors.

Answering questions on the need to raise investment in infrastructure sector to USD one trillion during the Twelfth Plan (2012-17), the official said, about half the amount would have to come from private sector through direct investments or through Public Private Partnership (PPP) mode.