Suggest ways to trim rising subsidy bill: govt to CAG

The government today asked the Comptroller and Auditor General (CAG) to suggest ways to curb its rising subsidy bill on food, fertiliser and petroleum products without hurting the targeted population.

"Subsidies on fertiliser, petroleum and food, both explicit and implicit, impose high burden on public finance and reduces the public money available for developmental work... I would like you (CAG) to focus on how expenditure on subsidies can be contained without adversely impacting targetted beneficiaries," Finance Minister Pranab Mukherjee said while addressing the 25th conference of the accountants general.

The Government's subsidy bill crossed Rs 1 lakh crore mark in 2008-09 and was estimated at Rs 1.31 lakh crore in the previous fiscal.

The government intends to bring down the subsidies to Rs 1.16 lakh crore during 2010-11.

Subsidies, which are aimed at providing cheap fertiliser, food and fuel to the needy, account for more than 10 per cent of the total expenditure of the government.

Mukherjee also asked the CAG to prepare a report on quality of expenditure to help the government improve effectiveness of the development programmes.

Following the global crisis in September 2008, the government had significantly stepped up expenditure on development projects to perk up the economy.

"Government of India has been allocating huge volume of funds for various developmental programmes, which received significant boost from stimulus packages... We would like to have your (CAG's) detailed report on quality of expenditure being incurred at the grassroots level," he said.

As a result of the measures taken by the government, the growth rate rose from 6.7 per cent during 2008-09 to 7.2 per cent in 2009-10 and is expected to go up further to 8.5 per cent in the current fiscal.

The issue of rising subsidy bill was also raised at the recent meeting of the full Planning Commission, which was chaired by Prime Minister Manmohan Singh.

Raising the issue, Planning Commission Deputy Chairman Montek Singh Ahluwalia had said, "success (of fiscal consolidation programme) depends on subsidies not exceeding the 2009-10 BE (budget estimates) level...To contain food, fertilsier and petroleum subsidies at BE level, prices will have to be raised."

The government aims to reduce fiscal deficit, the difference between the total receipt and total expenditure, to 5.5 per cent of the Gross Domestic Product (GDP) in the current year from 6.7 per cent during 2009-10.

It also plans to sale it down further to 4.8 per cent during 2011-12 and 4.1 per cent a year after that.