Should the government review fertiliser and food subsidy to curb expenditure?

I think government should definitely have a serious look over the way it provides food and fertiliser subsides and how these subsidies are utilised. If we observe, these subsidies have grown at a CAGR of 45 percent since 2003-03.In 2009-10 food subsidy bill is estimated at Rs.52489 cr.and fertiliser estimated at Rs.75000 cr.The purpose for which these subsidies are provided are not met. Food subsidy is provided to stabilise the price, adequate price to farmers and food security to the nation. But from the last two years food inflation continuously crossing up the double digit mark. In the same manner in case of fertiliser it is provided to increase production but rather these had gone to foreign players.

Because of these subsidies these sectors are not lucrative for private investment. Due to huge subsidies it’s very difficult to enter for private players. Fertiliser firms are being paid in bonds, resulting in a huge liquidity crisis.

These off balance sheet item create a huge problem by increasing fiscal deficit of the government. There is need to look over other innovative approach. Though the FM has said to transfer money directly in the account of farmer and providing subsidy on nutrition basis but it may be difficult to say anything whether when this step will be taken and how successful it will be.