Unpalatable experience of the last budget when he had to roll back certain measures on account of political pressure would prompt the finance ministry to take calibrated steps to streamline subsidies and make it more efficacious and better targeted.

According to finance ministry officials, the subsidy bill for the current fiscal was not likely to exceed the budget estimates chiefly because of low import prices and softened inflation rate. Although there will be appropriations from one account to the other, the bill, by and large, will be within the overall target. The Government has provided for Rs 19,883 crore in the budget for subsidy and in the revised estimates, it was more or less likely to be maintained at that level. The majorsubsidies cover food, sugar, fertiliser and so on. The outgo for the major subsidies will anyway be up by about Rs 1,500 crore, compared with the revised estimates for the last fiscal.

However, the fact that the government has managed to contain the subsidy in the current fiscal provides only cold comfort when viewed against the conscious decision of the finance ministry to cut non-Plan expenditure by 10 per cent in the current fiscal. Taking into account the mid-year corrective step, the subsidy bill for the current year ought to be around Rs 18,000 crore - less than the revised estimate of Rs 18,366 crore for 1997-98.

Since this will not happen and the next fiscal might not be as good as the current one from the point of view of subsidy management, sources say that the finance ministry was contemplating steps to effectively compress the bill. Secondly, low inflation rate will give added strength to the finance minister to push through some of the unpopular yet necessary measures.

The expendituremanagement exercise for the next fiscal will draw on the experience of the decision of the finance ministry to cut 10 per cent non-Plan expenditure which was moderately successful, though not in case of subsidies.

Officials pointed out that though it was a tough and unpopular expenditure control exercise, it has yielded some worthwhile results. Though not officially termed as the mid-term correction exercise, the finance ministry wrote to the different ministries to observe utmost financial prudence.

The 10 per cent cut in non-Plan expenditure should have resulted in a saving of about Rs 20,000 crore. However, the finance ministry officials knew the limitations of the exercise and were fully aware that it was impossible to impose 10 per cent cut uniformally. The non-Plan expenditure which was estimated at Rs 1,95,925 crore during 1998-99, covers areas like interest payment, defence, salaries of government employees, subsidies, establishment expenditure and various other expenses.

The bulk of thenon-Plan expenditure like interest, wages and defence, is committed and cannot be curtailed. The effort in the next fiscal will be to compress subsidy bill and reduce establishment cost as part of the broad expenditure management exercise.