The expenditure division within the finance ministry has cautioned in opposition to extension of the free ration scheme past September or discount in any main tax charges. The nation’s fiscal well being is already below stress attributable to extra subsidies on fertilisers, cooking fuel and discount in excise responsibility on auto fuels and any additional reduction poses severe adversarial fiscal penalties, it stated.
“It is vital that major subsidy increase/tax reductions are not done. In particular, it is not advisable to continue the PMGKAY beyond its present extension, both on grounds of food security and on fiscal grounds,” the division wrote in its month-to-month abstract report for May.
“Recent decisions on continuation of PMGKAY, the huge increase in fertiliser subsidy burden (both urea & non-urea), re-introduction of subsidy on cooking gas, reduction of excise duty on petrol & diesel and customs duty on various products have created a serious fiscal situation. The budgeted fiscal deficit at 6.4% of GDP was itself extremely high by historical standards, and deterioration therein poses a risk of serious adverse consequences.”
On March 26, the federal government prolonged the PMGKAY by six months until September 2022 at a further value of Rs 80,000 crore. This was not factored into the Budget for FY23.
The division stated every household is getting 50 kg of grains, 25 kg at a nominal worth of Rs 2/Rs 3, and 25 kg free. “This is far beyond the need at a non-pandemic time.”
The authorities is scouting for added revenues as further expenditure over the Budget estimate is seen as about Rs 2 trillion on account of upper subsidies on fertiliser, free grains scheme and LPG subsidy for Ujjwala beneficiaries in FY23. The excise responsibility cuts on auto fuels and customs responsibility discount on a number of gadgets would additionally end in a income lack of about Rs 1 trillion the present monetary 12 months.
Besides some further borrowing, finance ministry officers are banking on extra tax revenues to cowl the majority of the additional expenditure and likewise partly by elevating extra assets through the federal government disinvestment programme in FY23.
The expenditure division’s remark appears to dissuade the federal government from extending the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) past September. An extension would imply that within the present monetary 12 months, it might find yourself spending a tidy sum of Rs 1.6 trillion to run the scheme.
Until the tip of FY22, the Centre had spent Rs 2.6 trillion on PMGKAY, which was rolled out as a Covid-19 reduction package deal for the low-income inhabitants in March 2020.
The scheme has yielded political dividends to the ruling National Democratic Alliance (NDA) within the current Assembly elections in 5 states, together with Uttar Pradesh. The provide of free grains as a part of the PMGKAY scheme was initially launched for the April-June interval of FY21 and it was later prolonged until November-end 2020.
In the wake of the second wave of the pandemic, it was reintroduced in May 2021 after which acquired prolonged until FY22-end.
Under the scheme, 814 million persons are eligible for five kg free wheat/rice per individual per thirty days, ie, a household of 5 will obtain about 25 kg grains freed from value in extra to 25 kg the household is entitled to obtain at Rs 2/kg below the National Food Security Act.
Source: www.financialexpress.com”