Cut subsidies on fuel: Kelkar panel
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Painting a grim picture of government finances, a high-level panel tasked to chart a roadmap for fiscal consolidation has recommended that the Centre eliminate subsidies on diesel and cooking gas over the next two years, raise prices of kerosene and urea regularly and switch to direct transfer of cash subsidies for the poor.
The committee headed by former finance secretary Vijay Kelkar has also suggested that the government needs to improve tax mobilisation, cut plan expenditure and focus on disinvestment of state-run firms. The government's "do-nothing" approach, it has warned, could push the fiscal deficit to as high as 6.1 per cent in 2012-13.
Adherence to measures listed by the panel could, however, help keep the deficit at about 5.2 per cent of the GDP. A high fiscal deficit also leaves little space for monetary policy intervention, it has said. The report, which was submitted to Finance Minister P Chidambaram on September 3, was made public on Friday to seek comments.
But the Finance Ministry, which had pegged the fiscal deficit at 5.1 per cent of the GDP in this year's budget, was quick to announce that it may not be possible to take on board some of the suggestions. "Some suggestions seem contrary to the declared objective of the government of sustained and inclusive growth," Department of Economic Affairs Secretary Arvind Mayaram said on Friday.
Warning that the absence of credible measures could lead to a sovereign credit downgrade and flight of foreign capital, the Kelkar committee has said the economy is in a state of "high fiscal stress". It has projected a shortfall in gross tax revenues by Rs 60,000 crore and has also lowered the GDP forecast to 6 per cent with nominal growth of 13.5 per cent due to the current economic slowdown and depressed global economy.
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