Budget subsidy maths make FM see red

After retrospective amendments in the tax law and the General Anti-Avoidance Rules (GAAR), the Budget 2012-13 subsidy calculations done under former finance minister Pranab Mukherjee are  in the spotlight, as his successor P Chidambaram is not happy with the ministry's handling of the subsidy regime.

A senior ministry official in the know of the development said Chidambaram had expressed unhappiness over the manner in which the two major contributors to the subsidy bill, petroleum and fertilisers, were handled prior to his appointment.

Interestingly, the minister had switched the portfolios of the then expenditure secretary Sumit Bose and revenue secretary R S Gujral as one of his first major steps in the ministry. Bose was instrumental in preparing the subsidy blueprint for 2012-13.

The official said the suggestions of a committee led by former finance secretary Vijay Kelkar to draw a fiscal consolidation road map would be taken into consideration while making changes in the projected subsidy outgo.

Officials indicated the idea was to make the projections more realistic and the targets achievable.

The petroleum subsidy has been estimated in the Budget for 2012-13 at Rs 43,580 crore (Rs 435.8 billion), compared with Rs 68,481 crore (Rs 684.81 billion) in 2011-12. The actual outgo on this count in the current fiscal is expected to be much higher.

The fertiliser subsidy is also pegged lower at Rs 60,974 crore (Rs 609.74 billion) in the current financial year as against Rs 67,199 crore (Rs 671.99 billion) in the previous one. Under this head, the Budget allocated Rs 13,398 crore (Rs 133.98 billion) for imported urea, Rs 19,000 crore (Rs 190 billion) for indigenous (urea) fertilisers, and Rs 28,576 crore (Rs 285.76 billion) for the sale of decontrolled fertilisers at subsidised rates.

In the case of food subsidy, the Budget 2012-13 bill to run the public distribution system is estimated at Rs 75,000 crore (Rs 750 billion) this fiscal as against Rs 72,823 crore (Rs 728.23 billion) in 2011-12. Total subsidies are estimated to decline to Rs 1,90,015 crore (Rs 1,900.15 billion) in 2012-13 from Rs 2,16,297 crore (Rs 2,162.97 billion) in 2011-12.

While presenting the Budget, Mukherjee had said the government had decided that from 2012-13, subsidies related to food and for administering the Food Security Act would be fully provided for.

Photograph: B Mathur/Reuters