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Kelkar Committee has recommended sharp reduction in subsidies on petroleum, food and fertiliser, which the government said was contrary to its policy of protecting the poor.

Kelkar Committee Report Uploaded on Finance Ministry Website to Invite Comments from all Sections of the People

On August 6, 2012, the Union Finance MinisterShri P.Chidambaram  had made a statement on the economic situation and on the policy measures that were under consideration of the Government. Referring to the fiscal situation, the Finance Minister had said:

“We intend to unveil, shortly, a path of fiscal consolidation. I would like to make it clear         that the burden of fiscal correction must be shared, fairly and equitably, by different    classes of stakeholders. The poor must be protected and others must bear their fair share         of the burden. Obviously, adjustments must be made both on the revenue side and on the   expenditure side. We have asked Dr. Vijay Kelkar, Dr. IndiraRajaraman and Dr. Sanjiv         Misra to assist the Government in formulating the path of fiscal consolidation and we             expect that the work will be completed in a few weeks.”

The aforesaid Kelkar Committee submitted its report on September 3, 2012.

The Committee has reached certain conclusions and has made a number of recommendations.

The main conclusion of the report is that “We cannot over-emphasize the need and the urgency of fiscal consolidation.”

The report is under consideration of the Government and the Government has not yet taken a view on the report or on any of the recommendations.

 

                   The Secretary, Department of Economic Affairs, ShriArvind Mayaram said that some recommendations appear contrary to the declared objective of the Government of ‘sustained and inclusive growth’. He said that the Government is of the view that in a developing country where a significant proportion of the population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable sections of the society. It is in this view that the Government has reiterated its intention to implement the promise of food security for all, he added. The Secretary Shri Mayaram further said while taking a final view on the various recommendations of the report, the Government will bear in mind that the goal is to achieve high growth, inclusive development, and economic and social justice for all.

                             The Secretary, Department of Economic Affairs, ShriArvind  Mayaram said that the Government welcomes an informed debate on the report submitted by the Kelkar Committee. Hence, this report is being uploaded on the website of the Ministry of Finance atwww.finmin.nic.in, he informed. Shri Mayaramsaid that the Government invites all sections of the people to send their comments to the email address: [email protected].

 

 MEANWHILE LATEST NEWS REPORTS SAYS

29 SEP, 2012, , ET BUREAU– The government appears to have developed cold feet over implementing Kelkar panel’s recommendations to slash subsidies drastically at a time when it is facing backlash for raising diesel prices and capping subsidised cooking cylinders.
The report, which has been put out for public comments, warns that India is on the edge of a fiscal precipice. A senior finance ministry official has said that the report has not been accepted so far and that some of the panel’s recommendations run contrary to the government’s larger objectives.

“Some recommendations appear contrary to the declared objective of the government of ‘sustained and inclusive’ growth,” Arvind Mayaram, secretary in thedepartment of economic affairs said, adding, “The government is of the view that in a developing country, where a significant proportion of population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable section of the society.”

Mayaram said the government is yet to take a call on the report which calls for abolition of subsidy on diesel by next year and on cooking gas by 2014-15, suggestions that the government has indicated will be difficult to accept. “While taking a final view on the various recommendations of the report, the government will bear in mind that the goal is to achieve high growth, inclusive development, and economic and social justice for all,” Mayaram added.

Kelkar Panel has issued a grim warning on India's fiscal deficitKelkar Panel has issued a grim warning on India's fiscal deficit

The committee had submitted its report on September 3, before the government unleashed the recent reforms that sparked a stock market rally and led to appreciation of the rupee. “The Indian economy is presently poised on the edge of a fiscal precipice, making corrective measures aimed at speedy fiscal consolidation an imperative necessity if serious adverse consequences stemming from this situation are to be averted in an efficient and timely manner,” the committee has said.

If no corrective measures are taken, India can face a crisis worse than the one in 1991, the committee has said. It has also cautioned that the deficit for the current fiscal can widen to 6.1% of the GDP against the budgeted 5.1%, but the government does not seem to agree with the grim prognosis.

Mayaram said the government is committed to keeping itsfiscal deficit target as close to its target even as the fiscal deficit in the first five months of 2012-13 has touched 65.7% of that budgeted for the entire fiscal. The panel has suggested that the government should eliminate half of the per unit diesel subsidy by the end of this fiscal and the rest over 2013-14. The subsidy on cooking gas should be reduced by 25% this year and completely eliminated over the next two years, it has said. In the case of kerosene, it has said that the objective should be to reduce the subsidy by one-thirds by 2014-15.