In what could be finance minister P Chidambaram’s boldest move in Budget 2007-08, a chunk of the government’s total off-Budget liabilities may be shown as real expenditure for the first time ever.
According to finance ministry officials, the government plans to transparently account for the food subsidy–a major part of which is borrowing by the Food Corporation of India, a government agency, to procure foodgrain from the market–in next year’s Budget. The total food subsidy for the current fiscal is estimated at Rs 24,200 crore.
At present, FCI borrows from a clutch of banks and financial institutions to procure foodgrain to be supplied to the rural development ministry for the food for work programme. The government compensates FCI by issuing it special bonds. As and when required, FCI sells these bonds to provident funds, insurance companies, and the like to raise money.
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In the current fiscal, the government has issued Rs 16,200 crore worth of special bonds to FCI in three tranches: two tranches of Rs 5,000 crore each in October 2006 and December 2006 and the third and final tranche of Rs 6,200 crore early this month.
The officials said the government would show the entire FCI liability of Rs 15,000 crore to Rs 20,000 crore in the expenditure Budget of next fiscal. The buoyancy in revenues has allowed the finance ministry such flexibility, they added.
The revenue department is bullish about exceeding its target by Rs 25,000 crore to Rs 30,000 crore this fiscal. “While we can take advantage of this and show a better fiscal deficit, we will use it to extinguish some of the off-budget liabilities,” an official said.
There is also demand by the petroleum ministry to account for another major off-Budget liability item transparently in the Budget: bonds issued to public sector oil companies to compensate them for selling petroleum products at lower than market prices.
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In the current fiscal, the Cabinet has approved the issue of oil bonds to the tune of Rs 28,000 crore to oil PSUs. This might, however, be postponed for coming years, the officials said. If this is also accounted for, the government might not be able to stick to its fiscal deficit target as mandated under the Fiscal Responsibility & Budget Management Act.
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