Cut subsidies,or review fiscal deficit target: Kelkar panel

The Centre must cut down its subsidy burden or review its fiscal deficit for 2012-13 — this is the central message of the report of the high level committee headed by Thirteenth Finance Commission chairman Vijay Kelkar

Written by ENS Economic Bureau | New Delhi | Published: September 5, 2012 12:47 am

The Centre must cut down its subsidy burden or review its fiscal deficit for 2012-13 — this is the central message of the report of the high level committee headed by Thirteenth Finance Commission chairman Vijay Kelkar.

The committee,which submitted its report on Monday to finance minister P Chidambaram,is understood to have pitched for a hike in the price of diesel,if not a full deregulation,as well as swiftly moving to a system of direct cash transfer of subsidies in order to plug leakages and weed out ghost beneficiaries.

Sources said that the report has underlined that the step is essential to meet the fiscal deficit target for 2012-13,which could otherwise overshoot the present goalpost of 5.1 per cent by at least 50 basis points.

The issue of diesel price was also addressed by the Prime Minister’s Economic Advisory Council in its Economic Outlook for 2012-13. Under-recoveries of state-owned oil marketing companies from sale of subsidised diesel,PDS kerosene and LPG have touched Rs 47,811 crore in the first quarter of the fiscal,and the government is likely to exceed its budgeted Rs 44,000 crore as petroleum subsidy.

The Kelkar panel was set up by Chidambaram last month to devise a road map for fiscal consolidation through adjustments in revenue and expenditure.

The panel has pointed out that additional receipts from 2G spectrum auction would help bail out the finances in this fiscal,but in the long run the Centre must go through with its commitment to fiscal reforms,according to sources.

In this regard,it is also understood to have stressed on the need to achieve budgeted targets for disinvestment of public sector firms.

The committee is also understood to have pressed for timely roll-out of the Goods and Services Tax to improve tax compliance,resulting in greater collections.

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