Gambit or gamble?

Not only do Indian villages, and some cities, have too many cows, but there are far too many holy cows as well. Every finance minister in re...

Not only do Indian villages, and some cities, have too many cows, but there are far too many holy cows as well. Every finance minister in recent times has been forced to roll back his decision to reduce the fertiliser subsidy, ostensibly in the name of farmers. And so has Jaswant Singh.

First, the facts. The price impact of what Singh proposed was marginal. Second, it would not have hurt 8220;drought-affected8221; farmers as much as it would have affected water-guzzling farmers who don8217;t pay anything for that water, or not much anyway.

Third, it is bad for the environment since low cost fertilisers have encouraged over-use and this has damaged the soil. Fourth, the fertiliser subsidy is more a subsidy to inefficient fertiliser units than to poor farmers.

The time has come for the government to go in for the complete decontrol of fertiliser subsidy and enable free import so as to ensure price competitiveness.

Some fertiliser units will have to close shop and so be it. Better to wind up inefficient units than to continually bear the fiscal burden of their inefficiency in the name of the farmer and food security.

Finally, anyone who thinks funding the fertiliser subsidy can help governments win elections must ask why the Congress government lost in 1996 and the United Front followed suit in 1998.

Indeed, how come no fertiliser subsidy demanding kulak leader has not had as much luck in staying in power in Punjab or Uttar Pradesh as land reforming communists have had in West Bengal? The advocacy of the fertiliser subsidy is a political ploy as much as the decision to roll back the cut in subsidy has been.

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Even before the Opposition got its act together in demanding a rollback, agriculture minister Ajit Singh and Bharatiya Janata Party President Venkaiah Naidu, one from the wheat-cultivating Gangetic plain and the other from the rice-growing Krishna-Godavari delta, rose up against the finance minister8217;s move. So much for party discipline and a cabinet form of governance.

While Singh has not really given up too much, since the estimated cost of this rollback decision is just Rs 700 crore, he will also not gain much politically. Rather, a compromise has been made on one front that may encourage other vested interests to demand more compromises on other fronts.

A soft budget will become softer and the job at hand of fiscal management will become harder. On the other hand, if the fertiliser issue was viewed as a magnet aimed at attracting all opposition to the budget, so that the rest of the package can go through, Singh may yet be able to salvage his budget from the politics of populism.