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INDIRECT TAXES
Govt seeks 12k cr extra, primarily for subsidies
Fri, 04 Mar 2011 22:39:54 GMT
NEW DELHI: Within a week of presenting the Budget for the next fiscal and revised estimates for 2010-11, the government has proposed an additional expenditure of about 12,000 crore, mostly on subsidies.

Finance ministry officials say this extra requirement will be met from savings elsewhere and the fiscal deficit for the current year will be maintained at 5.1% of gross domestic product (GDP).

The extra spending was included in the third supplementary demand of about 80,000 crore for 2010-11 tabled by the government in Parliament on Friday.

The government said the demand involved a net cash outgo of 68,919 crore, but it would not affect the overall expenditure as most of it has been included in the revised estimates for 2010-11.

The balance, 11,000cr, will be met from technical savings of ministries, or shifting of plan expenditure to non-plan and vice-versa.

Of the extra spending, 8,000 crore has been provided towards subsidy on decontrolled fertilizer -- 4,350 core for imported and 3,650 crore for locally made.

The balance of 3,972 crore has been earmarked for food subsidy.

With the extra provisioning, the food subsidy bill will rise to 1.76 lakh crore as against 1.64 lakh crore calculated in the revised estimates for 2009-10.

This will further increase the gulf between the spend on subsidies in the current year and the 1.43 lakh crore budgeted for the next fiscal, a divide experts see as a big risk to the fiscal deficit, which has been pegged at 4.6% of GDP for 2011-12.

"With rising oil prices, and a Food Security Bill potentially to be introduced later in 2011, to us, these subsidy numbers look ambitious at best," Tushar Poddar, chief India economist at Goldman Sachs had said in a note after the Budget. The higher subsidy burden is likely to raise more doubts about the government staying within the 3.4% rise in expenditure budgeted for the next fiscal over the revised estimates of last year.

Finance ministry officials say the subsidy provision for next year is not strictly comparable with that of the current fiscal.

They say the current year's bill is higher because the government has cleared the dues of the previous year and the rollover to the next year is low. "With urea expected to come into the nutrient-based subsidy regime, we expect fertiliser subsidy to stabilise," said a senior official in the finance ministry.

The official said the Food Subsidy Bill was inflated because of the release of additional subsidised grain, approved by the government last calendar in view of the high food inflation.

The expenditure numbers mentioned in the supplementary demand for grants do not match with those in the expenditure numbers presented in the Budget because of the differences in presentation.

The total demands for grants in the supplementary demand are presented on a gross basis, while the spending numbers mentioned in the expenditure budget are after removing the receipts.

This is done to give a fair view of spending, to avoid inflating the expenditure numbers.

Some of the big items of expenditure already included in the revised estimates for 2010-11 are 9,000 crore for defence pensions, 21,000 crore towards under recoveries of oil marketing companies and 2,030 crore for sops provided to exporters by the commerce department.
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