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PM calls subsidies a drain on economy, calls for all-party meet to form policy

Prime Minister Atal Bihari Vajpayee today said he will soon convene an all-party meeting to formulate a policy on subsidies because it increased inflation which was the biggest enemy of the poor.

Addressing a meeting in Lucknow, Vajpayee said his government believed that subsidies should be restricted only to the poor while the other sections of the society should pay the actual prices.

Following this, the coordination committee of the Bharatiya Janata Party and its supporting parties yesterday decided to roll back the hike in the prices of wheat and rice being sold through the public distribution system for these sections only.

Vajpayee said it was natural for the prices of various commodities to go up when the support price was increased to help the farmers. The Congress and the United Front governments had also taken similar steps. In 1997, the PDS sugar prices were raised twice and the price of urea was also increased by ten per cent.

Justifying the increase in the prices of cooking gas, urea and others, the prime minister said it was in the interest of the economy. The government was also trying to tackle the economic problems it had inherited and it wanted the poor to benefit from such measures.

He said his government had taken many steps to improve the lot of the poor. Employment opportunities had been made available to them and administrative problems removed to expedite development. Yet the desired results could not be achieved till the government improved the economy.

Vajpayee said direct and indirect subsidies amounting to Rs 1.4 trillion were being offered in the country at present. But our economy cannot stand such a big burden because the tax sources are very few, he said.

Citing the example of urea, the prime minister said its cost of production had gone up in the recent years. As a result, the subsidy of Rs 50 billion being offered in 1994-95 increased to Rs 75 billion in 1997-98. Despite the present price hike, the government would still have to pay Rs 60 billion as the subsidy amount.

He said no subsidy was being offered on sugar in the past few years but because of its increased cost of production. The government would have to pay the burden of Rs 4 billion as subsidy. Similarly, in spite of making cooking gas costlier, the government would bear the burden of Rs 20 billion as subsidy on it which amounted to Rs 50 per cylinder.

He said a dual pricing system could not be followed for most of the things which meant the rich also benefitted along with the poor even though the former were in a better position to pay more.

Vajpayee said greater subsidy increased the amount of deficit. The world economy was going through a phase of recession and we would have to decrease our fiscal deficit as well.

Vajpayee said the prices of wheat and rice sold through PDS had not been increased since 1994 even though the procurement price had gone up by 66 per cent. The difference between the purchase and sale price was then made up through subsidies.

He said the previous government had decided that the price of items sold through the PDS should be 30 per cent of the cost of production for those living below poverty line and 50 per cent of it for those living above the poverty line. The recent hike had been made following this formula, he said.

UNI

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