A likely trade deficit of around $200 billion during the current year ($110 billion during April-October 2012) — exceeding last year’s all-time record of $185 billion — is ringing alarm bells. When viewed against the backdrop of deceleration in industrial output — in particular, the capital goods sector — this shows that excessive imports are being resorted to for supporting consumption, instead of growth. Crude petroleum, fertilisers, edible oils, pulses, account for a major share of our import bill. Their imports remain high, irrespective of the prevailing international prices. Thus, even when prices shoot up, imports do not go down. We import 80 per cent of our crude requirement. In phosphate, this is 80-85 per cent; potash 100 per cent...
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Let’s not delay direct cash transfer of subsidy
A National Committee (NC) under the Prime Minister has been constituted on ‘direct cash transfer’ of subsidy. Will this prove to be more potent than the present dispensation? What is wrong with the latter? The present system does not differentiate between rich and poor; breeds inefficiencies and distortions, undermines competition and gives an easy platform to all and sundry — producers, suppliers, traders — to make unjust gains. SUBSIDY REGIME Urea MRP is controlled at a low level unrelated to cost of supply, which is much higher. A differential amount is reimbursed to the producer as subsidy. It varies depending on source of supply, whether it is import or indigenous. Decontrolled P&K fertilisers, too, are subsidised. Unlike urea, all producers/suppliers...
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Fertilisers policies pull in opposite directions
The Union Budget for 2012-13 generated huge expectation about the Union Government’s keenness to reduce ballooning subsidies that have been a major source of its fiscal targets going awry. The then Finance Minister promised to contain the total subsidy bill within 2 per cent of the GDP in the current fiscal and at 1.75 per cent in the next three fiscals. However, there is little to show for any credible action plan in this regard. The recent measures to restrain subsidies in diesel and LPG are too little and too late. As far as fertilisers go, the powers-that-be have not even demonstrated a basic intention to walk the talk. The Cabinet Committee on Economic Affairs has recently approved a meagre...
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