India's subsidy bill up by over 100% in four years

India's subsidy bill will jump by more than 100% during the four-year period ending 2011-12 to Rs1.43 lakh crore mainly on account of rising outgo towards petroleum and food items.

As per the budget presented by finance minister Pranab Mukherjee yesterday, the non-plan expenditure on subsidies for the next fiscal is projected at Rs1,43,570 crore, which is over 102% more than the actual expenditure of Rs70,926 crore during 2007-08.

The non-plan expenditure on subsidy has been constantly showing an upward trend. It was Rs1,29,708 crore in 2008-09 and Rs1,41,351 crore in 2009-10.

However, next year's projection is lower than the Rs1,64,153 crore revised estimate for the current fiscal.

The government had recently set up a task-force headed by Nandan Nilekani to work out the modalities for the proposed system of direct transfer of subsidy for kerosene, LPG and fertilisers. The interim report of the task force is expected by June 2011 and the system is expected to be in place by March 2012.

"To ensure greater efficiency, cost effectiveness and better delivery for both kerosene and fertilisers, the government will move towards direct transfer of cash subsidy to people living below poverty line in a phased manner," Mukherjee had said in his budget speech.

The greatest share of subsidy allocation is for the three segments -- food, fertiliser and petroleum.

While the projected subsidy for food in 2011-12 is Rs60,573 crore, for fertiliser and petroleum it is Rs49,998 crore and Rs23,640 crore, respectively.

"During 2010-11, the nutrient-based Subsidy (NBS) policy was successfully implemented for all fertilisers except urea. The policy has been well received by all stakeholders, and the availability of fertilisers has improved," Mukherjee had said, adding that the extension of the NBS regime to cover urea is under consideration.

In 2007-08, the actual subsidy on food was Rs31,328 crore, for fertiliser it was Rs32,490 crore and for petroleum only Rs2,820 crore.

Thus petroleum products saw the biggest jump in subsidies during the four year period, while food subsidy bill has almost doubled.

This reflects the growing demand for energy as well as rising crude oil prices, even as the government is doing its best to reduce expenditure on fertilisers.

However, the projections for 2011-12 are less than the revised estimates for the current fiscal.

According to the revised estimates for 2010-11, the subsidy on food stands at Rs60,600 crore. At the same time for fertiliser and petroleum, it is as high as Rs54,976 crore and Rs38,386 crore, respectively.

"In my last budget, I had stated that the government would avoid issuing bonds in lieu of subsidies to oil and fertiliser companies. I have adhered to this decision, thereby bringing all subsidy related liabilities into our fiscal accounting," Mukherjee had said.