People watch the Sensex movement in Mumbai on Thursday. (AFP)
New Delhi, Feb. 28: The kitchen budget is likely to take a hit with the price of domestic LPG cylinder and diesel poised for a hike following a 32 per cent reduction in the subsidy allocation for petroleum products to Rs 65,000 crore for 2013-14.
The government has cut the subsidy outgo for petroleum products by more than 32 per cent from the revised estimate of Rs 96,879.87 crore for 2012-13. The revised estimate is almost 122 per cent higher than the budgeted estimate of Rs 43,580 crore.
“The fuel subsidy bill will be low as we have capped the number of subsidised LPG cylinders to nine a year and the correction in diesel prices with the decision to periodically increase it,” finance minister P. Chidambaram said.
He has reduced the outlay for subsidies on fuel, food and fertilisers by 10.3 per cent to over Rs 2.31 lakh crore in 2013-14 compared with the revised estimates for this fiscal to bring down the fiscal deficit.
“The fiscal deficit for 2012-13 has been contained at 5.2 per cent. I propose to bring it down to 4.8 per cent by 2013-14,” Chidambaram said while unveiling the budget proposals in the Lok Sabha.
According to the budget proposals, the government’s subsidy bill on food, petroleum and fertilisers is estimated at Rs 2,31,083.52 crore for 2013-14 against Rs 2,57,654 crore in the revised estimates for this fiscal. Food subsidy has been raised to Rs 90,000 crore for 2013-14 and the outlay has been revised by Rs 10,000 crore to Rs 85,000 crore for this fiscal.
The revised estimates for this fiscal are 38 per cent higher compared with the budget estimate of Rs 1,79,554 crore.
“It would be quite a task to meet the subsidy needs as the outgo for food subsidy has been hiked marginally, while the government intends to roll out food security programme. The outlay is substantially low, but has been kept at that figure with the larger intent of lowering fiscal deficit,” said Anis Chakravarty, an analyst with Deloitte.
“The increase (food subsidy) is mainly towards the provision for National Food Security,” the document said on food subsidy, which is to meet the difference between the economic cost of foodgrains and their sales realisation at the central issue price fixed under the public distribution system and other welfare schemes.
The allocation for food security could be increased once the finance bill is passed by Parliament, he said.
The fertiliser subsidy is also pegged slightly lower at Rs 65,971.50 crore in the next fiscal against the revised estimate of Rs 65,974.10 crore in 2012-13.
To check the increasing subsidy burden, the government had raised diesel prices by Rs 5 per litre and capped the number of subsidised cylinders at six per household in a year in September, 2012.
In January, 2013, the government also allowed oil marketing companies to raise diesel prices in small measures periodically. However, in order to protect household budgets, it simultaneously raised the annual LPG cap from six to nine cylinders.
But with international crude oil prices averaging at $107.52 a barrel in the first three quarters this fiscal, the government's payout to keep domestic retail price of auto, cooking fuels and fertilisers will see a substantial rise.
IOC finance director P K Goyal said the revised estimate has increased the petroleum subsidy allocation by Rs 53,000 crore from the budgeted estimate, which would meet much of the revenue loss for selling as government stipulated price. Some portion of the under recovery could be paid compensated from the next fiscal allocation.
Total under-recoveries—the difference between market prices and fuel retail rates—to be borne by oil marketing firms this fiscal year is expected at Rs 167,000 crore, according to the petroleum ministry. The retailers lost Rs 124,000 crore until December on account of selling diesel, kerosene and cooking gas at government-fixed prices. The total loss from selling fuel below cost in the fiscal year 2011-12 was Rs 14,400 crore.