The government on Thursday said it will reduce outgo on subsides from 2.6 per cent of GDP in 2011-12 to 1.5 per cent by the end of 12th Plan (2012-17) to contain the expenditure within a "pre-determined level of affordability".

"It is planned to reduce the expenditure on subsidies from 2.6 per cent of GDP in 2011-12 to 1.5 per cent of GDP by the terminal year (2016-17) of the 12th Plan through various reforms," Minister of State for Parliamentary Affairs and Planning Rajeev Shukla said in a written reply to the Rajya Sabha.

"The objective is not to eliminate subsidies. There is a role for targeted subsidies that advance the cause of inclusiveness but such subsidies should be contained within a pre-determined level of affordability," he added.

"It should be possible to do this without hurting the poor. Some subsidies such as under the proposed Food Security Act will be predetermined."

"Others such as on fertilisers can be redesigned to serve their purpose at less cost. Subsidies as on fertilisers can be redesigned to serve their purpose at less cost. Subsidies on petroleum products which are untargeted and do not benefit the poor and the most needy, would need to be reduced," he added. The Minister of State for Parliamentary Affairs and Planning informed the House that the expenditure on subsidies during the 11th Plan (2007-12) increased by 207 per cent from Rs 70,926 crore to Rs 2,17,941 crore in 2011-12.

According to the information available, the government had made a provision for Rs 1,90,015 crore in the Budget for 2012-13. The estimate was revised to Rs 2,57,654 crore for the current fiscal in the Budget this year. The government has made a provision of Rs 2,31,084 crore on account of subsidy outgo in the Budget for 2013-14. The Finance Ministry has pegged the overall fiscal deficit in 2013-14 at 4.8 per cent lower than the estimated 5.2 per cent of GDP in current financial year.