After kerosene, it is now time for food and fert subsidy reforms

After bringing kerosene under the direct benefit scheme (DBT), the government is now working on food and fertiliser subsidy reforms.

In an interview to The Economic Times, Economic Affairs Secretary Shaktikanta Das said various possibilities are under consideration for food and fertiliser. "There is a need for subsidy reform, at the same time you have to take into account the state of rural economy, as well as the state of farming community."

The ET report further said food and fertiliser subsidy is pegged at Rs 2 lakh crore this year, accounting for about 80 percent of the total subsidy bill.

India's food subsidy for 2015-16 was estimated at around Rs 1.24 trillion. The government believes food subsidy savings through DBT will be much higher than that for LPG. To put things into perspective, the government hopes to save Rs 15000 crore in LPG subsidy leakages every year.

After two consecutive years of bad monsoon, the government has no other option but to give special attention to agriculture sector. "Agriculture sector is very important because the rural purchasing power comes from there," Das said.

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Devika Ghosh

Assistant News Editor|Moneycontrol.com

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Bringing down subsidy payout has been a constant endeavour of the NDA government since coming to power. Cleaning up of the subsidized public distribution system (PDS) has resulted in the government managing to weed out over 6 million bogus ration cards, which will aid in saving around Rs 4200 crore in two years, a Mint report said.

As far as fertiliser subsidy is concerned, lobby group Fertiliser Association of India had pegged pending dues to the sector to touch Rs 45000 crore by the end of this fiscal year, due to insufficient allocation in Union Budget 2015-16. Despite fertiliser subsidy being the second-largest payout, the government had allocated just Rs 72,659 crore for 2015-16, out of which Rs 7000 crore was used to repay bank loans for 2014-15, another Mint report said.

The second Mint report further said urea is provided to farmers at a subsidised price of Rs 5360 per tonne. The difference between production cost and retail price is given as subsidy to manufacturers. Currently, the government gives fertiliser subsidy to manufacturers, who then pass it on to farmers. The government now intends to directly pass on the subsidy amount to farmers through the direct benefit transfer (DBT) route.