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Subsidy bill shoots up 5-fold to Rs 48,636 cr

July 07, 2004 13:31 IST

Alarmed at the over five-fold rise in subsidy bill to Rs 48,636 crore (Rs 486.36 billion) since the onset of reforms in early 1990s, the Economic Survey on Wednesday pitched for better targeting of subsidies to improve the fiscal health of government.

"Expenditure on major subsidies has increased in nominal terms from Rs 9,581 crore (Rs 95.81 billion) in 1990-91 to Rs 40,416 crore (Rs 404.16 billion) in 2002-03. It was budgeted to increase to Rs 48,636 crore (Rs 486.36 billion) in 2003-04," the Survey, tabled in Parliament a day ahead of the Union Budget, said.

Economic Survey 2003-2004: Complete Coverage

The government spendings on subsidies as a percentage of revenue expenditure, after declining from 13 per cent in 1990-91 to 8.7 per cent in 1995-96, started rising to touch 9.6 per cent in 1998-99 and further to 11.9 per cent in 2002-03, it noted.

After the dismantling of administered price mechanism for petroleum products from April 2002, the subsidies in respect of LPG and kerosene sold through the public distribution system are now explicitly reflected in the Budget, which partially explains the 35.3 per cent spurt in subsidy bill in 2002-03, it said.

The surge in subsidy bill was also on account of the increase in food subsidy by Rs 6,677 crore (Rs 66.77 billion) necessitated by the widespread drought in the country, it said.

"Improperly targeted" subsidies along with higher spending on salaries, pension, interest outgo and lower tax-GDP ratio contributed to higher fiscal deficit, it said.

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