Suggesting a virtual overhaul of the food, oil and fertiliser subsidy regime in the country, the Economic Survey 2008-09 today asked the UPA government to consider direct cash transfers to contain leakages in the system.

This comes even as India’s food subsidy burden shot up by about 40 per cent.

“There is a merit in reviewing their (subsidies’) impact vis-a-vis cash transfers that are targeted and avoid leakages and systemic failures in the present subsidy regime,” the survey said. It also pitched for converting fertiliser subsidy from a part-producer subsidy to a wholly farmer-user nutrient related subsidy, granting freedom to producers to set prices of formulations with different mix of nutrients.

“Decontrol sugar and fertiliser subsidy, simultaneously converting any producer subsidies into direct consumer subsidies,” the survey said. It said government should reform petroleum, fertiliser and food subsidies to reduce leakages and ensure targeting in order to provide benefit to the needy.

“Limit LPG subsidy to a maximum of 6-8 cylinders per annum per household. Phase out kerosene-supply subsidy by ensuring that every rural household has a solar cooker and solar lantern,” it said. Food subsidy during 2008-09 has shot up 40 per cent to Rs 43,668 crore (provisional), over Rs 31,260 crore in the previous fiscal. The total amount of subsidy has continued to rise at the national level. “ In fulfilling its obligation towards distributive justice, the government incurs food subsidy” the survey said.

Likewise, Rs 2,500 crore was provided as oil subsidy during 2008-09, which thereafter rose as a result of the issuing of oil bonds, etc, to Rs 60,000 crore.

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