The Economic Survey sent out a strong message on Friday: Reduce bounties for the well-off. A major chunk of the “bounties” is enjoyed mostly by the relatively wealthy, and rationalisation and better targeting of subsidies would be crucial in carrying out fiscal consolidation, it said.
About Rs 1.03 lakh crore in subsidies, mostly directed through petroleum products, electricity, railway fares, LPG and tax benefits on small-savings scheme, were mainly enjoyed by the well-off.
The subsidy bill is expected to be below 2% of GDP in the current fiscal at Rs 2.44 lakh crore, according to budget estimates, due to the fall in global crude oil prices, the survey said.
Pitching for sweeping reforms in the fertiliser sector, including deregulation of the urea market through payment of fixed subsidy directly to farmers and freeing imports as stated in the survey, chief economic adviser Arvind Subramanian said: “Reduce bounties of the well-off and tax more people irrespective of their income sources.”
The survey has underlined the need for rationalising LPG subsidy and the supply of cooking gas below-market price to 10 cylinders per household annually.
Households are currently entitled to 12 cylinders of LPG at a subsidised rate of Rs 419.26 per annum. The market price is Rs 575.
In September 2012, the previous UPA government had brought down the number of subsidised domestic cylinders per household to six a year, but later revised it up to nine.
“Subsidy is revenue foregone. Give it Up scheme is a very successful exercise,” the CEA said.