A committee, formed to suggest a path of fiscal consolidation, is understood to have identified oil subsidies as a major factor in the way of bridging the widening gap between government expenditure and receipts.
Officials in the finance ministry said if urgent steps were not taken to curtail oil subsidies, fiscal deficit could even breach six per cent of GDP mark for the current financial year, against the Budget estimates of 5.1 per cent.
The government has to take bold steps to raise diesel prices and limit subsidies on LPG; even then it may be difficult to rein in fiscal deficit at the targeted level of 5.1 per cent, the panel said.
Meanwhile, Cabinet Secretary Ajit Kumar Seth said the government was very keen on ensuring fiscal consolidation.
“I think there is no choice, considering the extent of the fiscal deficit and the current account deficit, there has to be consolidation,” Seth said.
A panel, comprising 13th Finance Commission Chairman Vijay Kelkar and its members, Indira Rajaraman and Sanjiv Misra, had submitted its report to Finance Minister P Chidambaram on fiscal consolidation road map last night.