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Budget 2013: Do we really know what subsidies have been doled out at the national level?

Rs 1.90 trillion. That was the government's estimate of total subsidies for 2012/13, in the budget presented last March. This year, the number will be revised. Upwards, very likely, writes Sanjiv Shankaran.

Sanjiv Shankaran        Last Updated: February 4, 2013  | 11:40 IST

Sanjiv Shankaran
Rs 1.90 trillion. That was the government's estimate of total subsidies for 2012/13, in the budget presented last March. This year, the number will be revised. Upwards, very likely, as the oil subsidy has already overshot initial estimates.

Subsidies are one of the most contentious parts of the budget, as they reflect political choices of the government of the day.

If the United Progressive Alliance (UPA) regime chooses to sell diesel below its cost to both the owner of a high-end SUV and a farmer running a pumpset for irrigation, it represents a clear choice on where it wants to spend money to allow people to access something below cost.

MUST READ:Will diesel decontrol help oil subsidy projections?

These are called explicit subsidies, as they are accounted separately in budget documents, allowing interested people to discern the story behind the numbers.

There is another kind of subsidy that also reflects political choices.

It's the kind of subsidy where the government may decide to underwrite the losses of one of its companies. The national carrier, Air India, is an example. This kind of subsidy is an implicit subsidy, as it does not show up under the normal categorisation of a subsidy. One needs to find out from the budget documents if Air India has had more capital infused and subsequently reach a conclusion about the real level of subsidies.

FULL COVERAGE:Run-up to the Budget 2013

The 12th Finance Commission headed by C. Rangarajan, now the Chairman of the Prime Minister's Economic Advisory Council, had, for the sake of transparency, asked both states and the union government to clearly identify explicit and implicit subsidies. This was meant to make it easier for people to get a sense of the real level of subsidy.

At last count, more than 25 states had done so, but not the union government.

Hopefully, 2013 will see the union government learning something from the states.


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