Economic Survey 2015: Subsidy is Rs 3.77 lakh crore, targeted beneficiaries very few

NEW DELHI: Subsidies on food, fuel, railway fertiliser and others amount to staggering Rs 3.77 lakh crore but reach only a few of the targeted poor, the Economic Survey said.
"Price subsidies are regressive. By regressive, we mean that a rich household benefits more from the subsidy than a poor household," the survey pointed.

It also added that price subsidies have formed an important part of the anti-poverty discourse in India, but a closer look at it reveals that why they are not government's best weapon.

Pitching for direct transfer of subsidies the survey said implementing this will take time but it should not slow down the pace of reforms. The survey also raised a question, "In the interim, is the goal of maintaining subsidies while cutting leakages achievable?"

Raising concerns over current subsidy regime, the government offers, and juxtaposes the intended beneficiaries with simple data computations that suggest how much of these benefits actually reach the poor.

Pointing out the loopholes in current subsidy regime, the survey pointed that government spent Rs 1,29,000 crore on account of food subsidy whereas 54 per cent wheat, 48 per cent sugar and 15 per cent rice allocated under the public distribution system (PDS) is lost as leakages.

Similarly, the government spent close to Rs 74,000 crore on fertiliser subsidy, the pre-budget economic document said, and added, "Urea and P&K manufacturers derive most economic benefit from the subsidy, since commodities specific is determined farmers, especially poor farmers, have elastic demand for fertiliser".

Though the government has started DBT for LPG subsidy, the document pointed that the bottom 50 percent of households only consume 25 percent of LPG.

The same case is in Railways, where fiscal expenditure of government on account of subsidised passenger fares is Rs 51,000 crore, but bottom 80 per cent of households constitute only 28.1 per cent of total passenger through fare on railways.

The survey has pointed similar leakages and loopholes in case of kerosene, pulses, electricity and water also.