Subsidies set to be bitter for FM's palate

As union finance minister Arun Jaitley grapples to bring down the fiscal deficit in the Budget with the decline in oil prices providing much-needed headroom, it is the fertiliser and food sectors that pose a problem.

A senior official told MAIL TODAY that the fertiliser subsidy burden going into the next fiscal is projected at more than Rs 1 lakh crore.

"The fertiliser subsidy for 2015-16 is expected to go up to Rs 71,000 crore from Rs 65,00 crore in the previous year due to the increase in natural gas prices by $2 per million British thermal units (mmBtu) to $6 per mmBtu", the official explained.

Besides, another Rs 40,000 crore of the subsidy that has not been paid in 2014-15 will be carried over to the next financial year.

While the fertiliser ministry has asked the finance ministry to clear the subsidy by the end of this fiscal, the carrying over of Rs 40,000 crore forms part of the jugglery in numbers that is used in Budget.

Rs 1L cr fertiliser subsidy load to go into FY16 Jaitley will not be the first to play this number game as his predecessor P. Chidambaram had used the same sleight of hand to project a lower fiscal deficit than was actually the case.

Jaitley had in his Interim Budget for 2014-15 allocated Rs 1,15,000 crore as food subsidy but there seems to be little scope for reducing this populist step especially after the drubbing that the Bharatiya Janata Party (BJP) got in the Delhi Assembly elections.

Jaitley is in favour of rationalising subsidies and transferring more public spending into investment in highways, ports and Railways to spur economic growth.

The crash in international oil prices has brought down the subsidy bill for 2014-15 to one-third of last year's bill of Rs 1.4 lakh crore.

According to senior officials, major cut in subsidies in the 2015-16 Budget will come in the petroleum subsidy, for which Rs 63,426 crore was allocated in the 2014-15 Budget.

"With the decline in international crude prices and oil sector reforms such as the deregulation of diesel and direct transfer of LPG subsidy, the subsidy could be scaled down to around Rs 25,000 crore," a senior official said.

In association with Mail Today