Ahead of the Budget, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia today talked tough on subsidy.
His views are being taken as a strong indicator of the Government’s intentions to bring down the subsidy to 1.75 per cent over the next three years. The then Finance Minister Pranab Mukherjee while presenting Budget for 2012-13, had expressed his endeavour to restrict the expenditure on Central subsidies to under two per cent of GDP in 2012-13.
The Planning Commission, on its part, has targeted to bring down the subsidy to 1.4 per cent from 2.4 per cent in the 12th Five-Year Plan (2012-2017) compared with 2.4 per cent at the end of 2011-12.
With these intentions, Ahluwalia said, “If subsidy is going to be fed into an overall resource constraint situation then what I worry is we may get locked in into a subsidy system that is open ended. If this happens we can be sure that five years later, the percentage of subsidies to GDP will be higher and the percentage of non-subsidies plans will be that much lower.”
Talking to reporters after meeting with State Plan Boards, he reiterated the need to ‘squeeze’ subsidies including those on energy and fertilisers as it could elbow out non-subsidised plans linked to investments.
In October, a Government appointed committee on fiscal consolidation, led by Vijay Kelkar, had said subsidies may overshoot the budgeted ‘within two per cent’ aim at 2.6 in the current fiscal.
For reducing subsidies in 2013-14 and the following year, the panel had suggested small adjustments in prices of diesel, liquefied petroleum gas prices and kerosene with eventual deregulation of diesel prices. With this the Government authorised the three oil marketing companies to make minor price corrections from time to time in diesel. These companies are expected to hike diesel prices by 45-50 paise a litre every month till domestic prices align with the international level.
Ahluwalia also said that the Planning Commission’s Plans must reflect the Centre’s fiscal consolidation roadmap.
“Balancing the fiscal does not mean zero fiscal deficit, but maintaining a target deficit is extremely important for the health of the economy. We (Planning Commission) ourselves want to do a kind of planning which is consistent with fiscal responsibilities,” he added.