Finance Minister Arun Jaitley’s maiden Budget remained conspicuously silent on the issue of the Government’s fuel subsidy burden. But his officials have endorsed the current mechanism of raising diesel prices by 45-50 paise a litre every month.
Defending the cut in the fuel subsidy, Finance Secretary Arvind Mayaram said: “The reduction in subsidy is quite realistic.”
The Budget stipulates a petroleum subsidy of ₹63,427 crore for 2014-15, down ₹2,000 crore from the previous fiscal year. The revised estimate for the previous year was ₹85,480 crore.
The Government controls the retail selling price of diesel, domestic LPG and kerosene to soften the impact of international price fluctuations on the common man. The oil companies are given a subsidy for selling the products below cost.
Mayaram said the Government anticipates that the diesel subsidy will come down as there is a general projection by experts that oil prices will remain stable.
Besides, when the rupee strengthens, the subsidy goes down since the purchasing price of crude oil becomes cheaper for India.
To calculate the current subsidy, the Government has used a crude price reference of $110 a barrel.
The price at which Indian refiners buy their crude is cruising above $104 a barrel. On July 9, it stood at $106.39 a barrel.
“We are setting up an expenditure management commission, which will also look into the three major subsidies — food, fuel, and fertiliser — Government money is spent on,” said Expenditure Secretary Ratan Wattal.
The Budget has increased the subsidy outgo on fertiliser and also talks about a new urea policy.