The Telegraph
Since 1st March, 1999
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Food & gas doles on cutting edge

New Delhi, Jan. 23: The government will try to cut down its burgeoning subsidy bill by rationalising subsidies on food and cooking gas even as it phases out many of the industrial doles falling foul of WTO norms.

The plan, which is sure to attract a lot of flak within the coalition government, calls for rationalising the food grain procurement and distribution system before price insurance for farmers to ensure food security is formalised.

The government's total implicit and explicit subsidy bill has bloated to a huge Rs 1,15,824 crore, or 44 per cent, of its net revenues. Direct subsidies to consumers on food, kerosene, cooking gas and fertiliser alone account for a whopping Rs 50,000 crore.

The plan also calls for raising the price of cooking gas marginally to prune subsidies on this count, but this has met with stiff political resistance. Although elections to Bihar and Jharkhand will be over before the budget, several states still have to go to polls in the months ahead. Many coalition partners, therefore, do not favour tinkering with cooking gas prices. The Left parties, for instance, are against the idea.

Some officials say Prime Minister Manmohan Singh may well go along with the advice of the finance ministry for a small increase. 'But this, like all subsidy-cut decisions, will be a political one,' officials said.

In order to eventually replace the current 'uneconomic' system of subsidising grains, a pilot project of issuing food stamps to the poor is being mulled. 'The stamps could be a pilot project tested out in a small area but not all over the country,' said officials.

In the area selected for testing, the price of grain would remain the same for everyone. However, poor families would be given coupons to cover part of the price. The coupons could then be encashed by storekeepers who would buy grain for both poor and rich at the same price. The government feels this will eliminate leakages, which are now rampant in the dual pricing set-up.

Bowing to pressures from RJD and CPM, which have been pointing out that the existing grain-procurement policy only focuses on Uttar Pradesh, Punjab and Haryana, the government may give an indication in the forthcoming budget that it will ultimately stop its open-ended grain purchase in the three states. This will be replaced with purchase quotas for various markets.

'This will be a big step towards rationalising the MSP'prices will not be reduced but the total amount bought will be controlled,' officials said. The government also wants to shift grain silos to food-scarce areas and cut down excess stocks in north India. This move alone is expected to save the exchequer Rs 5,000 crore from the Rs 24,000-crore food subsidy bill.

The government also hopes to start phasing out the contentious fertiliser subsidy this year, a move it hopes will help spare Rs 2,000 crore for other uses.

The report of a group of ministers on this is expected to be ready soon and, despite opposition to the policy from both industry and certain political quarters, a start to rationalising the policy of paying out a retention price to urea manufacturers might be made.

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