Centre’s subsidy bill may rise only marginally

Surabhi New Delhi | Updated on January 23, 2018

Direct transfer to curb sharp rise sops for fuel, fertiliser

The Centre’s subsidy bill in 2018-19 is unlikely to see a sharp increase with only a marginal rise expected in the food subsidy payments.

Sources said that the subsidy outgo for the fiscal may remain at the same level as ₹2.4 lakh crore in 2017-18 or could see a hike of 10-15 per cent.

This could be primarily due to higher allocation of about 15 per cent in the food subsidy bill, which is currently at ₹1.45 lakh crore. “The minimum support price for some crops is expected to rise and this would be reflected,” noted an official source.

However, with efforts for better coverage through the cash transfer or direct benefit transfer scheme, the fuel and fertiliser subsidy is unlikely to see a sharp rise.

“With DBT in fertilisers now expected to cover all districts of the country by March end, it could prevent leakages and generate some savings,” said another official, adding that efforts are also on to fade out use of kerosene by encouraging use of alternative fuels.

For 2017-18, the fertiliser subsidy has been pegged at ₹70,000 crore while the petroleum subsidy is estimated at ₹25,000 crore.

Crude worries

Though rising global crude oil prices are a source of concern but the government is hopeful that it will manage to keep its subsidy payments in check.

A final decision is expected over the next few days as the Budget calculations are finalised. The Union Budget 2018-19 will be presented by Finance Minister Arun Jaitley on February 1.

A subsidy outgo, which is only marginally higher, may provide comfort for the Exchequer which is staring at increasing crude oil prices as well as uncertain tax revenues in 2018-19.

Further, with the General Elections just a year away, expectations are that the government would want to give some tax or welfare give-aways.

However, analysts remain cautious about the subsidy spending given the rise in crude prices.

“ICRA expects the Budget Estimate for 2018-19 for fuel subsidies to rise by up to ₹88 to ₹93 billion relative to the Budget Estimate for 2017-18… We also expect the government to retain the subsidy allocation for the fertiliser sector at ₹70,000 crore for 2018-19,” said ICRA, adding that the the food subsidy bill is likely to rise in the coming fiscal.

Published on January 23, 2018

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