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Details in the Budget documents reveal that the Government wants to control expenditure on subsidy by lowering the number of subsidised domestic gas cylinders and revising urea prices.
The medium-term fiscal statement, as part of the Budget documents laid in Parliament, said, “With rising fuel subsidy, there is a need to cap the subsidised cylinders at a more realistic level.”
Although, the documents do not specify the realistic number, reports say the Government is considering pruning the cap to nine. Currently, around 14 crore domestic LPG consumers get 12 cylinders of 14.2 kg each at subsidised rates of ₹414 in Delhi while the cost (excluding distributor commission) is ₹885.75.
Out of the difference, ₹22.58 is paid as subsidy and the remaining by upstream companies such as ONGC, Oil India and GAIL, and the Government.
Fiscal statementThe fiscal statement is tabled under the provisions of the Fiscal Responsibility and Budget Management (FRBM) Act 2003. According to the provisions, it will “set forth a three-year rolling target for prescribed fiscal indicators with specification of underlying assumptions.” These indicators include fiscal deficit, revenue deficit, tax to GDP ratio and total outstanding debt at the end of the year. It sets a target for fiscal deficit at 4.1 per cent in 2014-15, 3.6 per cent in 2015-16 and 3 per cent in 2016-17.
The statement mentions that major subsidies (food, fuel and fertiliser) are extremely critical for fiscal consolidation and are key to the Government meeting its fiscal targets.
UreaCurrently, urea is the only controlled fertiliser where the difference between the costs of production as assessed by Fertilizer Industry Coordination Committee (known as the retention price) and the statutorily fixed sale price is paid as subsidy under the Retention Price-cum Subsidy Scheme.
The fixed sale price currently is ₹5,360 a tonne and is unchanged since 2010, even though the cost is around ₹9,000.
The statement has advocated a nutrient-based subsidy regime for urea.
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