Cash transfers the way to fertilisers subsidy: Economic Survey

Calling for a complete overhaul of the subsidy regime, Finance Minister Arun Jaitley Wednesday said direct cash transfers was the right way to subsidise soil nutrients and that fuel prices must be market-driven.

"In cases, such as the fertilizer subsidy, the expenditures generate a distorted resource allocation that hampers productivity," said a finance ministry official after Jaitley presented the Economic Survey for 2013-14.

"Besides, not all the money put into subsidy schemes reaches the poor," he added.

With fuel subsidies estimated at Rs.140,000 crore for 2014-15, cutting subsidies is one of the top priorities of the new NDA government.

On account of fertilisers subsidy for 2013-14, the government had made a budgetary provision of Rs.65,971.50 crore, while the Fertiliser Association of India had estimated subsidy requirement for the current fiscal at upwards of Rs.100,000 crore.

The Kelkar Committee on Roadmap for Fiscal Consolidation had suggested that the government should restrict the fiscal deficit to 3.9 percent for 2014-15.

Finance Minister Arun Jaitley is expected to unveil details of diesel deregulation in the Union Budget 2014-15 scheduled to be presented July 10.

The government had, in January 2013, permitted OMCs to increase the diesel price by small doses of up to 50 paise per litre every month till their losses on this account are completely eliminated.

Even after the latest increase on June 30, under-recovery, or losses, on sale of diesel below cost stand at Rs.3.40 per litre.