Union Budget 2013: Fuel & final: Subsidy cuts are not just gas

NEW DELHI: However bumpy the road, fuel and fertilizer pricing reforms are here to stay.
That’s the immediate intent the government has projected by pegging the 2013-14 subsidy 11% lower than the revised estimates for the ongoing fiscal — especially against the backdrop of Chidambaram’s resolve to slash fiscal deficit to 4.8% of GDP. A little over Rs 220,971 crore has been provided to subsidize fuels, fertilizers and food in 2013-14 against Rs 247,854 crore in the revised estimates for 2012-13.
Oil subsidy, one of the major headaches for the government, has been projected at Rs 65,000 crore for 2013-14 against the revised estimate of Rs 96,880 crore in 2012-13 fiscal.
K Ravichandran of credit rating agency ICRA said the fuel subsidy is sufficient if the decision on partial decontrol of diesel price is fully implemented. “However, if crude prices were to rise further and under-recoveries (of state fuel retailers) persists on diesel, more subsidy would be required,” he said.
This could mean two things. The government would keep raising pump price of diesel till it’s on a par with market rate. Or, it could fix the subsidy at, say, Rs 3-4 a litre, and raise the retail price till the gap is bridged.
The government has already capped the number of subsidized domestic LPG cylinders in a year to nine. This would help control subsidy on this fuel, leaving kerosene as the main guzzler of subsidy.
Fertilizer subsidy, too, has been pegged slightly lower at Rs 65,971 crore for 2013-14 as against the revised estimate of Rs 65,974 crore in 2012-13.
Budget 2013> Union Budget 2013> Economic Survey