The Hindu Business Line : Subsidy tackle leads to cut in non-Plan spending

As against the Rs 3,17,821 crore budgeted for 2003-04, the revised estimates for non-Plan expenditure is expected at only Rs 3,06,145 crore, translating into savings of Rs 11,676 crore.

The lower-than-budgeted spending has come despite the Centre shelling out an amount of Rs 4,080 crore as pre-payment premium for retirement of high cost loans from the World Bank and the Asian Development Bank (ADB) and also on account of its buyback of high coupon securities issued to banks.

The 2003-04 Budget had not made any provision on these counts. Further, an extra Rs 2,528 crore has been spent to support restructuring of the Industrial Development Bank of India and the Industrial Finance Corporation of India (IFCI).

How has the Finance Minister, then, managed to pull out the trick? The main contributor has been the overall subsidy bill, which, as compared to the budgeted figure of Rs 48,636 crore, has been contained at Rs 43,569 crore in the revised estimates. In other words, a saving of Rs 5,067 crore.

The subsidy on food has been limited to Rs 25,200 crore against the budgeted Rs 27,800 crore.

The impetus for this has come from exports and food-for-work programmes initiated in the wake last year's drought, which has helped bring down public foodgrain stocks and the carrying cost of maintaining these inventories.

The total fertiliser subsidy has also been limited to Rs 11,797 crore, Rs 923 crore less than the budget estimate, courtesy lower import of urea and reduction in requirement under concessional sale of decontrolled fertilisers. The subsidy on petroleum products (kerosene and LPG) has also turned out to be Rs 1,543 crore below the budgetary provision of Rs 8,116, which has been ascribed to the decision of phase out these subsidies over a period of time.

The other big expenditure saver has been defence, with the revised estimate of Rs 60,300 crore being Rs 5,000 crore below the budgeted figure. And here, the contraction has come mainly in defence capital spending (down Rs 4,047 crore), which may not be a particularly encouraging development.

Mr Singh has, in fact, referred to the problems arising from the process of defence procurement often extending to over three years and the need to commit sufficient funds for the purpose.

Accordingly, he has announced the establishment of a non-lapsable `defence modernisation fund' of Rs 25,000 crore and the defence capital spending for 2004-05 is budgeted to be Rs 5,577 crore higher than the revised estimate of Rs 16,906 crore for the current fiscal.

Besides subsidies and defence, the Centre is expected to save Rs 2,748 crore on account of less than budgeted interest outgo (courtesy, the softening of interest rates, thereby partially offsetting the Rs 4,080 crore pre-payment premium that was not budgeted) and Rs 3,018 crore due to lower grants/loans to States.

The latter, ironically, has been because of non-implementation of the Value Added Tax (VAT) regime by States, as a result of which the Centre has not had to spend a pie out of the Rs 700 crore it had provided for compensating them for potential revenue losses.