Modi govt moves to reduce subsidies

Prime-Ministers-OfficeNEW DELHI: Government sources said the finance ministry, under the active supervision of the PMO, was working on a multi-pronged strategy to keep the subsidy burden under “a manageable level”, and this will be unveiled in next year’s Budget.

A senior official claimed the Centre has identified “a few of the low-hanging fruit”, adding: “Petroleum products and fertilisers are the focus area of subsidy reforms, that the government wants to bring in from next year.

“The total annual subsidy burden on three petroleum products LPG, kerosene and diesel is Rs 1,35,000 crores, and has been increasing every year. In case of fertilisers, the government has to shell out over `70,000 crores, and this also increases year after year.

“As part of subsidy reforms, the government got an opportunity on account of the dip in prices of crude oil in the international market, and thus decided to deregulate the price of diesel; now it is linked with market forces,” a source said, adding that the process was on to put a cap on the subsidy outgo on LPG, which currently burdens the government with around Rs 92,000 crores.

“The Cabinet has already agreed in principle to cap the LPG subsidy on the basis of per kg. The quantum Rs 20 per kg has been suggested to a committee headed by PMO principal secretary Nripendra Mishra, with an additional support of the same sum by oil companies like ONGC, that gets windfall gain due to import parity price given to them on crude oil, and this has been accepted,” a source said.

Thus the subsidy on domestic LPG of 14.2 kg is going to be fixed at Rs 568 per cylinder, thereby the stage is set for deregulating the pricing of domestic cooking gas from the next financial year, sources said, adding that under the new system, people will get the benefit of subsidy on smaller size cylinders, as it will be provided on a per kg basis.

In the case of kerosene, the Centre has chalked out a roadmap to phase out subsidies altogether, as the Narendra Modi government plans to provide 24×7 power supply across the entire country in the next five years in a phased manner.

“As states get fully electrified and also assured power supply, the kerosene quota on subsidy to those states will be discontinued,” sources said.

In case of fertilisers, sources said, the LPG model is being worked out, as most of them are now “nutrient based”, barring urea.

“We are working on a draft note to bring even urea under a nutrient-based formula so that subsidy could be capped on a per kg basis. However, the work on this is at a very initial stage, but we are sure to settle the issue soon,” a source noted. – Excerpt from The Asian Age  

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