Controlling Expenditure on Subsidies Crucial; Need to Raise Diesel and LPG Prices in Line with Global Markets

The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today called for checking expenditure on subsidies. The Survey says, “Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and liquefied petroleum gas (LPG) need to be raised in line with the prices prevailing in the international markets”.

The Survey states that a beginning has already been made with the decision in September, 2012 to raise the prices of diesel and again in January, 2013 to allow oil marketing companies to increase prices in small increments at regular intervals. The number of subsidised gas cylinders has also been capped at nine.

The Economic Survey further emphasizes that efforts will have to be made to contain subsidies through better targeting and for reducing leakages involved in their delivery. One such initiative is Direct Benefit Transfer (DBT) Scheme.

The high level of crude oil prices also has a significant bearing on the level of fertilizers subsidies as it is not only a key input as feedstock but also because of inadequate pass through in urea prices. The Government has been calibrating pricing policies to address the issue of burgeoning fertilizer subsidies. One of the important decisions taken was to fix per tonne subsidy on key non-nitrogenous fertilizers, thereby limiting the increasing the subsidy outgo to the extent of increase in consumption.

The Survey underlines the need for according priority to food subsidy in view of the under consumption of basic food by the poor and the extent of malnutrition in the country. Government has sought to correct this through National Food Security Act, though concerns have been expressed that this will lead to a higher subsidy outgo. “However, it is a part of the challenge of prioritization to provide for this basic need even as other items of expenditure are minimised”, the Survey advocates.

DS: UM:RCJ:CP: subsidy (27.2.2013)

(Release ID :92591)