$75 billion subsidy bill!
An unbelievable subsidy bill has been piled up by the UPA government that Finance Minister P Chidambaram has cleverly hidden to take credit for reducing the revenue deficit of the Central Government from 3.6 to 1.4 per cent of the GDP (gross domestic product).
The new finance, minister will face immense problem to rejig this burden. Sources in the Finance Ministry admit that the government’s balance sheet would be still worse because of the farm loan waiver of $160 million this year and hefty sums spent on the rural employment guarantee scheme.
Even while admitting in his budget reply on April 30 that the subsidies on oil, food and fertilizers put together are reaching a point where they become unsustainable, he covered up the actual burden by excluding a major part of it from the budget and simply stated that “it has to be deferred”. Deferred for whom? Obviously, for the next finance minister in the new government after the parliamentary elections in 2009!
Chidambaram did not even give estimate of the subsidy burden he has kept out of the budget. Insiders, however, say that the subsidy burden has already hit $57.7 billions and may touch $75 billion by the time the country goes to polls as the UPA Government would try to be more liberal in the election year to gift more subsidies to the people.
But for parking most of the subsidy liability outside the budget, the deficit would have remained where it was last year and as such more subsidies that the government provides now for electoral gains would put a big hole in the Union Budget and much bigger deficit, the sources admit. A higher deficit means the government pumping in more money in the market than it’s earning and that is bound to push up the prices.
A source, however, disclosed that the oil, FCI (Food Corporation of India) and fertilizer bonds that the government has issued are not shown in the budget except to the extent of interest paid on them.
The present UPA government is, however, not bothered about this future scenario as it is now busy finding ways to put under check the prices, no matter if the exercise results in the economy bursting and prices skyrocketing after the polls. The Finance Ministry officials are not ready to divulge as to where Chidambaram has hidden the subsidies and how much he has actually deferred for his successor to handle.
Consumers who the government wants to target for benefit of the subsidies will be certainly happy but the economists say the actual effect would be further rise of prices of everything else not covered by the subsidies because of more money chasing lesser goods in the market.
The actual subsidy that the government will have to pay for is right now parked in the balance sheets of the state owned oil and fertilizer companies and FCI as compensation paid to them from the taxpayer’s money to bear the losses.
Even while admitting in his budget reply on April 30 that the subsidies on oil, food and fertilizers put together are reaching a point where they become unsustainable, he covered up the actual burden by excluding a major part of it from the budget and simply stated that “it has to be deferred”. Deferred for whom? Obviously, for the next finance minister in the new government after the parliamentary elections in 2009!
-BY LAVANYA GARIKINA
