The burden of subsidy provided by the central government is expected to rise in 2018-19 by around 10 percent to Rs. 2.93 trillion. The substantial part of the total subsidy is via food subsidy that rose about 21 percent.
The Minimum Support Price (MSP) scheme has been extended to summer (kharif) crops. Arun Jaitley has said it would be ensured that the beneficiary of the farmers at least 50 percent more the cost of producing the crops. “We have decided to implement this as a principle…to keep MSP for all unannounced crops of kharif at least at one and half times of their production cost,” he said.
- However, Price Stabilisation Fund in relation to subsidy has been halved to Rs 15 billion in 2018-19.
- The expected close of the current year is with Rs 35 billion, down by Rs 34 billion over 2016-17.
- The buffer stock of pulses is maintained by the fund in ensuring sufficient market availability.
- It is expected that Fertilizer subsidy would be hiked by 8 percent and petroleum subsidy only marginally.
- Interest subsidy would go down by 11 per cent to Rs 209.2 billion.
Other features of the subsidy framework for 2018-19:
- The petroleum subsidy is kept at a conservative Rs 249.3 billion
- This is marginally higher than Rs. 244.6 billion estimated for 2017-18
- It is surprising that Finance Minister has projected a cut in budgeted subsidy for both kerosene and cooking gas in current fiscal
- This is despite the rallying of the oil prices
- MoF budgeted it at Rs 250 billion at the beginning of FY18
K Ravichandran, senior vice-president at ratings agency ICRA said, “The subsidy provided could fall short by around Rs 110 billion if crude oil prices average $70 a barrel and the exchange range is Rs 65 to a dollar for 2018-19. The amount, however, is manageable and will not materially impact the liquidity and profitability of oil marketing companies and upstream companies.”
The price of Indian crude is on the rise as it reached $66.4 at Wednesday’s close after averaging $54 a barrel for nine months ending the year end.