Direct transfers to slash subsidies by up to 60%: FM

Jan 31 2013, 04:07 IST
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SummaryFinance minister P Chidambaram has said he is hopeful of achieving 20-60% savings on subsidies a year through better distribution under the new direct benefit transfer scheme that he expects to roll out completely by end-2013.

as per the note. Chidambaram said the government was seriously considering suggestions of the Rangarajan committee to review gas prices after 2014. But he hinted that the short-term capital gains tax (STCG) on listed securities is unlikely to be removed, as the government was unable to narrow the tax base. A panel led by Parthasarathi Shome, which reviewed the General Anti-Avoidance Rules, recommended abolition of STCG on listed securities.

The minister, said the note, believed India’s potential growth is 8% and above, and that the country cannot afford to have less than 7% growth.

On issuing sovereign bonds abroad, Chidambaram said the finance ministry is considering different options and has not yet chosen any particular route. He stressed on pursuing fiscal consolidation, with the fiscal deficit being reduced to 4.8% of GDP in 2013-14.

“I have drawn the red lines. The red lines are that the fiscal deficit for the current year will be no more than 5.3% (of the GDP) and the fiscal deficit for the next year will be no more than 4.8%. That’s a red line and I will not breach that red line,” he said in an interview to Financial Times.

Asked whether the government would be strong enough to cut fuel subsidies, he said he would not make any “declarations from the pulpit”. The government has already corrected diesel prices and allowed oil companies to make small corrections periodically over a period of time.

Maintaining that the government has to still correct about Rs 10 a litre on diesel, Chidambaram said a beginning has been made this month and the government should be judged by the steps it took.

Asked whether the government would like to abandon fuel subsidies as a long-term goal, he said not all subsidies can be abandoned. Citing the example of kerosene, Chidambaram said if the subsidy on it is removed completely, it would make the fuel unaffordable to the rural poor and they would demand wood for cooking purpose that could lead to destruction of forest.

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