Ujjwala, DBT helped cut kerosene subsidy: TV Somanathan

Expenditure secretary TV Somanathan says the government has been prudent in its spending proposals and had refrained from splurging to ensure long-term stability.

Expenditure secretary TV Somanathan says the government has been prudent in its spending proposals and had refrained from splurging to ensure long-term stability. In an interview, he talks about reforms in kerosene and fertiliser subsidies, MNREGA and spending reforms: Excerpts:

What is the road map for cleaning up extra budgetary resources in Budget?
This is a year when there is universal agreement over the need for a fiscal boost to the economy. The question was, what is the size of that fiscal boost? We were clear that we did not want do something that compromises (stability) in the long run. There have been past cycles of huge press on the accelerator, which was not withdrawn fast enough, and that leads to macroeconomic instability. We have provided approximately Rs 1.8 lakh crore of extra budgetary resources, which is an increase over the previous year. It is from the National Small Savings Fund. A part of it is directed to the Food Corporation of India. Others are mainly productive projects like PM Awaas Yojana. It is well within our capacity to service (the liability) in long run and when growth picks up, we won’t need to do this. A time will come when we will taper this off. We have demonstrated that we are committed to long-term stability.

How big is this problem?
As a person inside the government, I would divide it into two parts — there is a market borrowings issue, where you have the government trying to borrow from a pool of funds, there the need for moderation is always there. Then we need to make sure that we don’t stop growth impulses coming from other sectors by crowding out the private sector. When it comes to the aggregate, one should not be alarmist at all. If the government values all its land assets, as a commercial unit does, we may actually turn out to have a net asset value higher than debt. Yes, the fiscal deficit is 3.8% (of GDP). Yes, there is some other borrowings. But the combined total is well within what India can afford. To use FM’s words, we are not splurging.

Is there some under-estimation on MNREGA scheme?
It is difficult for us to estimate outlays for some of these schemes where you have to provide according to demand. There are years when it goes up unexpectedly, and years when it doesn’t go up that much. We have kept it at the previous year’s Budget estimate. In this year’s revised estimate, we have provided substantial additionality because there was additional demand. We intend to honour our obligations under the Act and remain committed to provide for it next year, if the demand is higher.

Why has kerosene subsidy come down?
Genuine kerosene user is gradually getting eliminated by Ujjwala, because cooking gas is available every nook and corner. Fiddling element (leakage) is also coming down due to direct benefit transfer (DBT) and Aadhaar. Supply of kerosene in PDS is dropping. That is not an artificial curb on the subsidy, it is an actual fall in subsidy.

On fertiliser subsidy...
We have been a little conservative as we are hoping for some rationalisation through DBT for which pilot projects are underway. The FM made a reference to the fact that there is a huge skew in favour of urea. There is a move towards organic and natural fertilisers into that scheme in such a way that farmers don’t choose (urea) just because of subsidy. When that happens, we will see some rationalisation.
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