 "No internal dispute on spending cuts: R S Gujral")
Before the Budget was tabled, no one was ready to buy the finance ministry's argument that the fiscal deficit would be contained at 5.3 per cent or less. How did you manage that?
We only scrupulously implemented existing instructions. In a few cases, we found certain funds were going to societies or public sector units (PSUs) with huge cash balances. If a ministry wants to give them additional money, it's ridiculous because the government pays over eight per cent interest on its borrowing and those agencies are parking the funds in banks and earning eight to 10 per cent.
We were very particular not to cut any expenditure pertaining to any scholarship or scheme, particularly where it goes for a vulnerable section. Even if more was required, we provided that. So, wherever the money was in the pipeline or where organisations were sitting with high cash bank balances or where there was very low expenditure, we said No to fresh funds.
In 2011-12 when there was no curtailment and instructions were not really followed, the actual expenditure was only nine per cent over the previous year's actual. In 2012-13, the Budget Estimate (BE) was 25 per cent more than the actual of 2011-12. Clearly, if they were able to spend only nine per cent more without any restriction, 25 per cent extra was, in many cases, beyond the spending capacity of the ministries.
Guidelines were changed in the middle of the year, by linking allocations with schemes instead of ministries. To what extent did it help the expenditure cut?
We did not make any such change for funds going to state governments. There, we continue to examine scheme-wise. However, independent agencies take the money and put it in a bank. There the money does not have a tag for schemes. I don't think it would have impacted much.
There has been criticism that you cut a lot of Plan expenditure at the expense of growth.
That's not fair. We did restrict in terms of both Plan and non-Plan. It was not an arbitrary cut. Wherever we have reduced the money in the pipeline, the programme or the scheme has not been impacted at all.
This year you had the option to cut expenditure and reduce the fiscal deficit. Don't you think that next year the ministries would be cautious in utilising the funds early?
They should (be cautious). The categories where ministries spend less till November-December, they should learn this is a standard instruction of the finance ministry that they should evenly spend throughout the year. They must get their act together.
Would the government be able to release funds at the beginning of the year?
Why not? The finance minister had mentioned that in the month of March and April, we do have extra expenditure and we have provided for that adequately.
There were differences between the finance ministry and the Planning commission over the Plan expenditure.
There were no disputes. Everyone was on board that fiscal consolidation was the topmost priority. Consequently, if it was necessary to ensure that if the fiscal deficit is kept below 5.3 per cent and for the next year at 4.8 per cent, then where is the adjustment to be made? Plan expenditure is related to how much funds you have. If you feel that is inadequate, what is the option? Then you have to increase your revenue. At a time when the economy is seeing slow growth, there are certain constraints regarding that.
Does the finance ministry have a contingency plan if there is a shortfall in revenue and increase in subsidies next year, too?
Why talk of that? There has been an endeavour on the part of the minister to be very upfront in terms of budgeting for expenditure, including subsidies. This year on the petroleum subsidy, we went way beyond the original. That was predominantly because the action was initiated towards the end of the year. If you can raise the price of diesel by Rs 5 a litre, under-recoveries will come down by about Rs 40,000 crore. Second, bulk consumers now get diesel at market price. The proposal was mooted four years ago by the petroleum ministry. It did not go through at that time but they had indicated the savings would be close to Rs 18,000 crore. Even if 50 per cent of the bulk consumers get it at market rates now, it will be a saving of Rs 8,000-9,000 crore. For LPG (cooking gas), the cap of nine cylinders (a year, for each household) also gives a saving of at least Rs 3,000 crore. So, clearly, the Rs 65,000 crore we are providing seems an over-provision.
Don't you think here is an under-provision for the food subsidy, since the food ministry is saying their demand is over Rs 1 lakh crore?
Every ministry gives its own computations. Ultimately, these are examined and then it is decided what is the quantity to be given. This year, the budgeted food subsidy figure was Rs 70,000 crore and Rs 15,000 crore became additional because of extra releases under the open market sales scheme and exports. We don't anticipate that it is going to be anywhere near that level next year. For 2013-14, the provision is Rs 90,000 crore and it includes Rs 10,000 crore for the Food Security Bill. So, you have to compare the BE of next year with Rs 70,000 crore. Even if you assume some releases, say Rs 5,000 crore, even then you are providing Rs 75,000 crore. So, it's not an under-provision. Similarly, on fertiliser, the international prices of urea and NPK have gone down. The reduction in the subsidy should be close to about Rs 5,000 crore. Urea prices have also gone down.
What is the crude oil price you have estimated?
$110 dollar a barrel is the price estimated for the Indian basket, which is generally about $3-3.5 below Brent crude. Today, Brent crude is close to $110 and the Indian basket would be close to $107. That way, we are absolutely in order. We have assumed the rupee at 55 to a dollar. Some flexibility has to be left, that if the crude price goes up to $117-118, would we be absolutely off-target? The answer would be no.
What expenditure reforms will be taken by the government?
There is no new reform needing to be done. It's a question of implementation of what are the existing policies, which are time-tested. It is unfortunate these have not been implemented so rigorously in the past few years.
What is stopping the government from acting upon the Rangarajan panel recommendation to abolish the Plan/non-Plan distinction?
I don't think it has been looked into in great detail so far. It needs further examination.