Approach paper for cuts in non-plan subsidies

Calling for effective check on non-Plan expenditure by controlling untargeted subsidies not aimed at the poor and vulnerable sections of society, the final approach paper for the Eleventh Five Year Plan (2007-2012) argues for levy of rational user charges in many areas.

This, it states, is aimed at keeping the demands for budgetary support from these areas within limits.

In the overall sectoral policies for the Eleventh Plan period, the emphasis is on achieving an increase in tax revenues as a proportion of gross domestic product and a fall in non-Plan expenditure as a percentage of the gross domestic product (GDP).

"Determined action on both fronts should make it possible to achieve the gross budgetary support for the Plan (Centre and states combined), which is higher than the Tenth Plan," the paper says.

The total average budgetary support for the Plan period is pegged at 9.67 per cent, with the first year (2007-08) figure at 8.02 per cent, rising steadily year on year to 11.77 per cent by 2012.

For the Centre alone, the Plan average for gross budgetary support is at 5.17 per cent, rising from 4.37 per cent in 2007-08 to 6.22 per cent in 2011-12.

For states, the Plan average is pegged at 6.02 per cent rising from 4.98 per cent in 2007-08 to 7.54 per cent by 2012.

The Planning Commission has further argued that given the constraints on the fiscal deficit imposed by the Fiscal Responsibility and Budget Management Act, achievement of the desired Plan size will depend on increasing tax collection and curbing non-Plan expenditure.

"The increase in tax revenues depends critically upon achievement of growth targets and good revenue buoyancy. Fortunately, the experience in recent years holds good promise for revenue buoyancy, both for states and central government," it states.

The Tenth Plan had projected the gross budgetary support of the Centre to grow from 4.33 per cent in 2001-02 to 5.39 per cent in 2006-07, taking the projected average gross budgetary support at 4.93 per cent of the GDP, against the Ninth Plan realisation of 4.02 per cent.