The Telegraph
Since 1st March, 1999
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Get ready for the summer sting

New Delhi, Jan 9: Get real! There are never ever any free lunches — not from the government anyway. If January is the month of free tax sops, June — when the real budget is likely to be placed by the new government — promises to be the payback month when the heat may be turned on taxpayers.

The government, which already faces a huge revenue shortfall of over Rs 1,12,000 crore, to which will be added tax giveaways worth Rs 8,000-10,000 promised on Thursday, plans to heft the axe to lop the subsidies on fertiliser bought by farmers, food sold by a nationwide chain of ration shops and cheap cooking gas and kerosene bought by the middle and low income groups.

At the same time, government servants, who are likely to be lured by additional sops to be announced soon, including another instalment of annual leave travel allowance, will have to bear the brunt of moves to trim the bureaucracy.

Finance minister Jaswant Singh is not going to back down from his last year’s promise: “Deficit will be controlled through revenue increase and expenditure control.”

Bureaucrats over 50 years of age with a minimum of 15 years of service are likely to be offered a package deal to stay at home and steps taken to abolish larger numbers of jobs in government. The BJP government has already scrapped fresh recruitment to the grade of peons and junior clerks.

Top finance ministry officials confirmed that the prices of kerosene and cooking gas were sure to go up in June. “We have prepared a note which will come with the actual budget, increasing kerosene prices by 80 paise and cooking gas by Rs 22.50 a cylinder,” officials confirmed.

Currently, cooking gas is subsidised by Rs 90 and kerosene by Rs 2.35 a litre. The total bill for this subsidy comes to a huge Rs 8,116 crore. Officials also said the government would try pare the whopping Rs 28,000-crore food subsidy bill by at least Rs 8,000 crore.

The brunt of this cut will be borne by the middle class, which is likely to be taken out of the purview of the rationing system.

At the same time, the government will slowly reduce the purchase of wheat and rice from farmers to ensure it does not accumulate another food mountain, whose holding costs, besides buying price, adds up to the lion’s share of the total subsidy bill.

The government holds a mammoth food store of more than 30 million tonnes. The BJP-led government is naturally loathe to buy more wheat to add to a stock, which embarrassingly refuses to disappear even as it costs some Rs 8,000 crore a year just to keep in the silos. Urea and other fertiliser subsidies, which total nearly Rs 20,000 crore, are likely to be pared by half. The government wants all fertiliser firms to shift to using gas from naphtha to make urea and stop the old system of subsidy based on production costs.

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