New Delhi – The government needs to subsidise kerosene and food for poor, former finance secretary Vijay Kelkar said observing that the committee on fiscal consolidation headed by him was not against elimination of all subsidies.
“I agree with people who argue that we cannot eliminate subsidies, we shouldn’t eliminate subsidies. Food subsidy is defensible. For undernourished children or lactating mothers food subsidy is not only defensible, it is ethically right and morally correct”, Kelkar said in an interview to CNBC TV18.
“Subsidy must be continued for kerosene as long as it is affordable (for the government),” he added.
Responding to the report of Kelkar committee, the government had earlier said that panel’s suggestions on removal of subsidy were contrary to government’s policy of protecting poor.
“The government is of the view that in a developing country where a significant proportion of the population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable sections of the society”, Department of Economic Affairs (DEA) secretary Arvind Mayaram had said.
Mayaram had further said Committee’s recommendation of withdrawal of certain subsidies is in divergence with the stated policy of the government.
The final view on the recommendations of the committee, set up by Finance Minister P Chidambaram to suggest fiscal consolidation road map, will be taken by the government after receiving feedback from stake holders.
The Kelkar committee wanted that implementation of the Food Security Bill to provide cheap grains to persons below poverty line, be “appropriately phased” in view of difficult fiscal challenges.
The government’s proposed Food Security Bill which is being given the final touches by the Cabinet is estimated to cost the exchequer at least Rs 1.19 lakh crore by way of subsidy.
In case of food and fertiliser subsidies, it wanted the government to increase the urea price and raise issue price of foodgrains at ration shops.
Kelkar, in his interview, said that he has suggested phasing out of subsidy on diesel and LPG.
“We mentioned to remove inequitable subsidies like LPG. LPG subsidies do not go to our people who fall in the low income bracket,” Kelkar said.
The Committee has suggested phased elimination of subsidy on diesel and LPG in the next four years and reduction in kerosene subsidy by one-third by 2014-15.
It had cautioned that in absence of these measures, the fiscal deficit of the government could shoot up to 6.1 per cent of the Gross Domestic Product ( GDP) in the current financial year. It can be contained to 5.2 per cent with the proposed reforms, the report had said.
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