Underlining the need to focus on better and efficient subsidy management and plug leakages while rationalising its outflow, Union finance minister Arun Jaitley proposed to reduce the bill on food, fertiliser and petroleum subsidies by over 10% to Rs. 2.27 lakh crore in 2015-16.
The bill for 2014-15 was Rs. 2,53,913.12 crore.
“Well intentioned schemes introduced in the past have often been ill targeted riddled with leakages and delivered with inefficiency… what we need is a well targeted system of subsidy delivery,” Jaitley said while presenting the first full budget of the National Democratic Alliance government.
The government has brought down petroleum subsidy to Rs. 30,000 crore for the next financial year from the estimated Rs. 60,270 crore earmarked in the current fiscal.
A sum of Rs. 22,000 crore out of the Rs. 30,000 has been earmarked for LPG subsidy while the remaining amount is reserved for kerosene.
Food subsidy has been pegged at Rs. 1,24,419 crore for the next fiscal as against Rs. 1,22,675.81 crore in the revised estimate of the current fiscal and about Rs. 65,000 crore would be directed towards the implementation of the National Food Security Act, 2013 (NFSA).
Subsidy management would be crucial to adhere to the fiscal deficit target of 3.9% of the Gross Domestic Product in the coming financial year.
Perhaps with an eye on upcoming assembly elections, including in the largely poor and rural state of Bihar, Jaitley said that “all our schemes should centre around the poor.”
“We need to cut subsidy leakages, not subsidies themselves,” he said, adding that the subsidies needed to be targeted better.
The government has also been advised by the 14th Finance Commission, which had placed its report a few days ago to rationalise subsidy outflow to 1.4%, 1.2% and 1% of GDP in 2017-18, 2018-19 and 2019-20, respectively, an exercise, if implemented, would help the Centre save a large amount of money.
“Rationalisation and proper distribution of subsidies would be crucial and this would also push public investment,” chief economic adviser Arvind Subramanian said after presenting the Economic Survey on Friday.
The finance minister further said that opening of 115 million savings bank accounts under the Pradhan Mantri Jan Dhan Yojana would significantly help in plugging leakages as all subsidy amounts would be directed to the accounts of the beneficiaries.