Even after raising diesel prices and capping the number of subsidised cylinders available to households, Finance Minister P. Chidambaram estimates that the outgo on major subsidies will still be higher than what was projected in the budget estimates.

Intervening during the full Planning Commission meeting chaired by Prime Minister Manmohan Singh, Chidambaram said: “On the Non-Plan expenditure side, the major subsidies are projected to decline from 1.9 per cent of GDP as per the Budget Estimates for 2012-13 to 1.2 per cent in 2016-17. The estimated major subsidies in 2012-13 would be around 2.4 per cent of GDP, and a sharp fall as assumed in the Plan may be over-optimistic.”

Chidambaram has recommended direct cash transfer of subsidies for food, fertilisers and petroleum to reduce the subsidy. “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,” he said.

He also informed that pilot projects are already under implementation for LPG and kerosene and that the Government intends to extend the direct transfer mechanism to the Union Territories in the first phase.

Budgetary Resources

The gross budgetary support during the entire 12th Plan period has been estimated at Rs 35.68 lakh crore. It is 5.23 per cent of the GDP over the 5-year period. The gross budgetary support (GBS) realised over the 11th Plan period was only 4.69 per cent of the GDP. Chidambaram said, “The assumptions of tax to GDP ratio seem to be highly optimistic.”

The Internal and Extra Budgetary Resources (IEBR) of the Central PSUs has been estimated at Rs 20.59 lakh crore, making the total resources available for the Central Plan at Rs 47.70 lakh crore. “Higher IEBR would be required to meet the shortfall, if any, in the GBS,” he said.


(This article was published on September 15, 2012)
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