(BE) of subsidies — R1,90,000 crore including R1,79,554 crore major subsidies — is not as unrealistic as it would seem at first glance.
This is despite Parliament's approval sought last week for an additional expenditure of Rs 32,120 crore (cash outgo Rs 30,804 crore) mainly to meet the oil subsidy bill.
The three major subsidies accounted for some 11.5% of the 2011-12 budget. Since there is a big external factor about the size of subsidies (oil and key fertiliser inputs are largely imported), these constitute an expenditure head much less amenable to the finance minister's discretion than other items. And here, the minister has got a much-needed reprieve.
The practice of issuing bonds to oil and fertiliser firms was dispensed with in Budget 2010-11, and these firms are now being compensated for sale of goods at subsidised rates only in cash. However, it continues the custom of deferring roughly a quarter of the subsidy bill in a year (after making good the arrears) to the following year. Yet the revised estimate on any major expenditure/receipts item hasn't been so far removed from reality any time in recent history as in 2011-12. Many would find inexcusable a 30% difference between the RE and the actuals estimated soon after.
There is already a proposal to allow fertiliser companies to raise Rs 40,000 crore from banks, till the government can foot the pending subsidy bill. The expected flat growth in subsidy claims in H2 coupled with the oft-used option of deferring payment of a quarter of the year's subsidy bill to the next year would come handy for Chidambaram.
Of course, the fiscal deficit in the April-October period reached 71.6% of the budgeted level for the full year and 20% above the level in the same period last year at Rs 3,67,920 crore. This slippage is, however, attributable to a large extent to the fact that the bulk of the Rs 61,552 crore subsidy bill that Mukherjee avoided paying last year has been footed this year.
Gross tax revenue growth in 2012-13, to meet the Budget target of Rs. 10.78 lakh crore, should be 21%. Going by the pace of tax revenue growth, there could be a shortfall of Rs 30,000-40,000 crore on this front. Spectrum revenue too would be Rs 20,000 crore or so lower than the budgeted level. But Chidambaram can save more on the expenditure front – apart from the expected gain from the slow/flat growth