Govt to focus on reducing kerosene subsidy: Mid-Term Expenditure Framework

After taking a decision to eliminate subsidy on LPG cylinders by March next year, the Centre is now focussed on reducing kerosene subsidy, the government on Thursday said that through its Mid-Term Expenditure Framework tabled in Parliament.

“In continuation of the efforts of the government to rationalise subsidies, it has decided to increase the cost of LPG cylinders by Rs 4 per month. The ultimate aim of the government is to eliminate the subsidy on LPG cylinders by end of March 2018. After successful implementation of paying subsidies directly into bank accounts of LPG users, the government is now focused on reducing kerosene subsidies,” the five-page framework said.

Through this move, the government aims at substantially reducing its petroleum subsidy bill to Rs 18,000 crore next fiscal (2019) from Rs 25,000 crore at present. The fuel subsidy bill is expected to come down to Rs 10,000 crore by 2019-20.

For fertilizer, the estimate has been kept at Rs 70,000 crore each for 2018-19 and 2019-20. The fertilizer subsidy has been kept unchanged.

According to the expenditure framework, the government has estimated the food subsidy bill for the year 2018-19 to be at Rs 1.75 lakh crore and for 2019-20 at Rs 2 lakh crore. The food subsidy is estimated to rise from Rs 1.45 lakh crore earmarked for the current financial year 2017-18.
 
The defence bill is expected to rise from Rs 91,580 crore at present to over Rs one lakh crore in 2018-19.

With these major heads of subsidies, the government’s total expenditure is projected to increase to Rs 23.4 lakh crore in 2018-19, the framework said.

It said the government's capital expenditure will rise by 25% to Rs 3.9 lakh crore by 2019-20. The framework projected an increase of 30 basis points in the tax to GDP ratio in 2018-19 and 2019-20.

It said the revenue deficit target of 2% of GDP will be met in current fiscal, the deficit would be 1.9% to the next. "However the elimination of effective revenue deficit will have to be recalibrated," it said. The fiscal deficit target of the government will also be met this year.