SUBSIDIES IN INDIA
A subsidy can be defined as a “money granted by state,public body etc to keep down the prices of commodities etc”.
Environmental economists define subsidies as uncompensated environmental damage arising from any flow of goods and services.
Subsidies in areas such as education,health and environment are advocated on grounds that their benefits are spread well beyond the immediate recipients and are shared by the population at large,present and future.
Subsidies are also used with re-distributive objective, particularly for ensuring minimum consumption levels of food and other basic needs
Subsidies in India
The expenditure on subsidies increased from Rs 129,722 crores in 2009-10 to 177,747 crores in 2010-11,an increase of 37% over the previous year
Subsidy on Food,Fertilizer and petroleum were Rs 63844 crores Rs 65,837 crores and Rs 38,371 crores respectively
Issues with Subsidies in India
The size,providence,allocation,distortions and recent upsurge in some subsidies are the key issues in the context of budgetary subsidies in India
1. They are budgetary subsidies provided for the right reasons;
2. There are many wrong goods/services being subsidized,
3. Over subsidization lead to harmful effects
4. Some subsidies are too large relative to resources
5. Subsides are regressive
Food Subsidy: A properly decentralized 2 tier intervention for food subsidization should be developed and Center would maintain only optimal buffer stock for strategic market intervention and for exigencies.Food subsidies should be delinked from policies to support agricultural incomes
Fertilizer Subsidy: In a period of 5 years,fertilizer subsidies in their present form should be done away with and proper exit policy formulated for inefficient units. A limited amount of subsidies targeted to marginal poop farmers could be linked to actual purchases through a reimbursement system
Irrigation Subsides:A significant portion of irrigation subsidies goes to finance excess staff n the irrigation departments. There is a need to drastically prune the existing staff, reduce costs and segment recoveries to cover least the operation and maintenance costs
Power Subsidies: Power subsidies largely subsidize inefficiencies.There is a need to reduce T&D losses,make subsidies more explicit,overhaul the Electricity Act and drastically prune staff strength in the SEBs
Subsidization of Agriculture: Input subsidization should be AVOIDED,SUPPORT TO AGRICULTURE INCOMES AND FOOD SUBSIDIZATION SHOULD BE DELINKED,AND THE TWO POLICY OBJECIVES AHOULD BE SERVED BY SEPARATE POLICY INSTRUMENTS
Managing User charges: User charges can be better linked to costs and more easily managed when inefficiency costs are minimized,quality of services improved, automatic cost-linked revision mechanisms are put in place,and new institutions are brought forth and look after the interests of the consumers as well as service providers