Govt for recasting subsidies

In a pointer to the budget, a government report today suggested far-reaching reforms to cut burgeoning subsidies, now at a whopping Rs 1,16,000 crore, by restructuring subsidies related to food and fertiliser, reducing it on LPG and a cautious approach on kerosene.

A report on central government subsidies tabled in the Parliament by finance minister P Chidambaram said subsidy reforms should be aimed at eliminating non-merit subsidies and introducing a uniform price policy with a system of food coupons for BPL families as the present system of dual pricing under PDS encouraged leakages.

Stressing that fertiliser subsidy in its present form be done away with, the report said urea imports should be decanalised, a flat-rate subsidy system be introduced and a mechanism to increase farm-gate price of urea at regular intervals be considered.

The report said the domestic LPG and PDS kerosene subsidies seem to be ineffective in serving the desired objective, and hence suggested that the LPG subsidy may be gradually reduced and a cautious approach pursued in the reduction of kerosene subsidies.

On user charges, it said appropriate upward adjustment of these charges would directly reduce the subsidy bill.

Prepared in collaboration with the National Institute of Public Finance and Policy, the report said the total subsidies at Rs 1,15,824 crore in 2003-04 accounted for 4.18% of GDP of which non-merit subsidies at Rs 67,250 crore accounted for 58% of the total bill.