 "Major subsidies to decline 11% in FY14")
The catch is that the RE was 38 per cent higher than the BE of Rs 1.79 lakh crore.
The finance minister hoped that the government’s measure allow ingoil marketing companies to increase diesel prices in baby steps every month would help him reduce oil subsidies to Rs 65,000 against around Rs 97,000 crore in the RE. How much of this confidence will be justified only time will tell but it should be noted that petroleum subsidies have been rising much faster than budgeted estimates in recent years. It was pegged at just Rs 43,580 crore in 2012-13 BE. In 2011-12, it was projected at Rs 23,640 crore but finally turned out to be Rs 68,484 crore.
The Economic Survey for 2012-13, tabled in Parliament by Chidambaram yesterday, had cautioned against a rise in global oil prices. It had said if oil prices rise because of higher demand owing to a global recovery, then it may not be such a big concern since it would also lead to higher exports from India. However, if global crude prices rise because of geo-political tensions, then it is a matter of worry.
Chidambaram has the pegged food subsidy at just Rs 90,000 crore in 2013-14, higher by Rs 5,000 crore over the RE of 2012-13. Of this amount, Rs 10,000 crore is on account of the additional requirement for subsidy flowing from the proposed Food Security Law. Many analysts peg the total food subsidy to Rs 1.20 lakh crore for the next financial year, if the food law is implemented throughout the country. However, many opposition-ruled states have objected to the Centre’s plans on the law, raising expectations that it will not be implemented across the country and may not be implemented from the start of the next financial year either.
The finance minister also projected the fertiliser subsidy to be more or less intact at Rs 65,971 crore in 2013-14 over the RE of the current financial year. But industry players have pointed out that the subsidy estimates were also low in the BE at Rs 60,974 crore. The actual requirement, however, was Rs 80,000 crore which would be carried forward. This means that Rs 14,000 crore of the subsidy, pegged for 2013-14 would actually go towards meeting the requirements of 2012-13.
Chidambaram’s predecessor—Pranab Mukherjee—pegged total subsidies at 1.9 per cent of GDP for 2012-13. However, the finance ministry under Chidambaram disputed the math behind it and now projected it to be 2.26 per cent of GDP. For the next financial year, this figure will rise marginally to 2.30 per cent.