Does the Finance Bill say it all?

By Vivian Fernandes, CNBC-TV18

The Finance Minister P Chidambaram has said that the subsidy bill is grim and it is beyond him to fix it.

Finance Minister P Chidambaram presented the budget this year with taxpayers giving him more than he had expected. Instead of fixing subsidies, he wrote off loans to farmers.

Now he says the subsidy bill is more than the budget can bear.

Chidambaram said, “The subsidy bill is large. The subsidies put together are reaching a point where they become unsustainable. The current budget cannot bear the burden. It has to be deferred.”

The finance minister seeks praise for reducing the revenue deficit from 3.6 percent to 1.4 percent of GDP. 

But he also wants to be complemented despite a greater propensity of the UPA government to dress up the balance sheet and park liabilities outside the balance sheet as compared to the NDA government. “We must complement ourselves,” Chidambaram said.

The oil and fertiliser bonds that the government has issued are not shown in the balance sheet, except to the extent of interest paid on them. They are only partial compensation for the losses incurred by state-owned companies and understate the government's actual liabilities. The situation is worse this year because of higher food grain, fertiliser and fuel prices. Govinda Rao, Director of the National institute of Public Finance and Policy estimates that if these are included, the revenue deficit should rise by another 1.5 percentage points.