Subsidies Are for Ever

SUBSIDIES, quite unlike motherhood and apple pie, are universally unpopular, Everyone is for doing away with them. Pointing out that direct subsidies, not counting indirect ones like duty drawback, etc, paid out of the Central government's budget on fertilisers, food exports and other items had amounted to Rs 1,930 crore in 1979-80 and that at this rate they would absorb Rs 12,400 crore of the Centre's resources over the Sixth Plan period, the Planning Commission has urged that "a significant reduction in the amount of subsidies ... is essential for the implementation of the Sixth Plan", The trouble is that continuation, and even enlargement, of subsidies is also essential for the implementation of the Plan, for the achievement of the Plan's targets of growth of output in different sectors. Take agriculture. The bulk of the subsidies paid out by the Centre goes for fertiliser sales to farmers and purchase and sale of foodgrains by government agencies. Earlier this year the sale price of fertilisers was raised to meet the rise in the1 cost of both domestically produced and imported fertilisers following the sharp rise in oil prices. Had the sale price not been raised, the amount of subsidy on fertilisers would have gone up intolerably. (Even at the higher prices, the subsidy is estimated to come to over Rs 500 crore in the current year.) However, even as the subsidy on fertilisers was sought to be restricted, the government had to immediately announce that procurement prices of food- grains would be raised to compensate the farmer for the higher fertiliser prices. Clearly, therefore, the reduction in the fertiliser subsidy will be offset, largely if not fully, by a much larger subsidy on the government's foodgrain procurement operations.