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'Subsidy bill may touch 2.4% of GDP in current fiscal'

business Updated: Sep 15, 2012 20:43 IST

The subsidy bill in the current financial year is expected to rise to 2.4% of the GDP from 1.9% estimated in the budget, finance minister P Chidambaram said on Saturday.

"The estimated major subsidies in 2012-13 would be around 2.4% of GDP," he said while intervening in a discussion at the meeting of the planning commission to approve the 12th Plan draft document.

The subsidy during the current fiscal was estimated at 1.9% of GDP in the Budget.

The major subsidies, include fuel, fertiliser and food, and the government has been proposing direct cash transfer to prevent leakages.

In order to check fuel subsidy bill, the government has raised the price of diesel by Rs. 5.62 a litre and capped supply of subsidised LPG cylinders to six per family in a year.

Elaborating on the subject of subsidy in the meeting, Chidambaram said the 12th plan estimate of reducing subsidy bill from 1.9% of the GDP in the current fiscal to 1.2% in 2016-17 was "over-optimistic".

"A sharp fall as assumed in the Plan may be over-optimistic," he said, adding that direct cash transfer of subsidies in food, fertilisers and petroleum will help in this reduction.

"I would urge that by the end of the 12th Plan, these three major subsidies be rolled out across the country through direct cash transfers to the beneficiaries.

"Pilot projects are already under implementation for LPG and kerosene and it is our intention to extend the direct transfer mechanism to the UTs in the first phase," he said.

Later, talking to reporters, planning commission deputy chairman Montek Singh Ahluwalia said the panel would take follow-up action on the suggestions made by Chidambaram and hoped that by the end of the 12th Plan period all subsidies would be paid through direct transfer to the beneficiaries.