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dna exclusive: Chidambaram refuses to toe Sonia Gandhi's line on subsidies

Friday, 13 December 2013 - 6:48am IST | Place: New Delhi | Agency: DNA
Says he speaks for the govt and that there will be no compromise on fiscal prudence.
  • Puneet Chandhok DNA

Finance minister P Chidambaram is refusing to toe the 10 Janpath/24 Akbar Road line on the economic reforms front, firm on not letting political motifs jeopardise the fiscal consolidation plan.

This, despite the dressing down he got at the meeting of senior party functionaries on Monday.

Notwithstanding the electoral debacle in four states, the finance ministry is not likely to retreat on the fuel subsidy front. This means diesel and petrol prices will keep rising as planned by the ministry. Diesel will grow by 50 paise–rupee 1 per month, and petrol as per market determined prices.

A senior ministry official told dna: “No official or unofficial communication has been sent as of now to the departments regarding any change in the subsidy plan for the current financial year. So there is no plan for enhanced subsidy to oil marketing companies as of now to bring fuel prices down. Consumers will have to continue to share the cost.”

Interestingly, even as finance ministry is staring at colossal requirements to foot the fuel and food subsidy bills, Chidambaram has expressed confidence that the fiscal consolidation roadmap will be adhered to without compromise.

Speaking at the Delhi Economic Conclave on Wednesday, Chidambaram said: “Top of the list is fiscal consolidation. I speak for the government when I say there will be no compromise — on the decision to walk on the path of fiscal prudence and contain the fiscal deficit, year by year, until we reach the goal of 3% of the GDP in 2016-17.” It was not clear though how the requirements would be met.

The government plans to reach a fiscal deficit target of 3% of the GDP by 2017. This is as per the recommendations of the Kelkar Committee submitted to the ministry last year. Fiscal deficit is the difference between the government’s total revenue and the total expenditure.

On Monday, Congress president Sonia Gandhi had convened a meeting of senior party functionaries at 10 Janpath to discuss the party’s defeat in the four state assembly elections. At the meeting, all the general secretaries moaned the fact that ever since the party adopted economic reforms, its popularity with the electorate went down. “Reforms have impacted weaker sections, which are the core vote bank of the Congress,” said a party functionary. This was taken note of, and a call was given to roll back the decision to cut subsidies to fuel, including diesel and LPG.

But four days later, finance ministry mandarins said there was no way the government will retreat on the fuel subsidy front. “We have to fund schemes such as food security. These schemes require colossal funds. Where is the question of going soft on fuel subsidies,” said an official.

Figures, meanwhile, tell a different story. The government made an allocation of Rs61,000 crore for fuel subsidy in the current financial year. Of this, Rs44,000 crore due from the last financial year was paid to oil marketing companies. The balance of Rs17,000 crore was paid in the first six months of the current fiscal. The ministry also made an allocation of Rs9,000 crore to meet further requirements.

Chidambaram has also of late made rounds to the offices of the key opposition party leaders to garner support on Direct Tax Code Bill — a major tax reform, which aims at replacing the Income Tax Act, 1961.

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