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Food, fertliser tough issues; FY16 Budget to be tight

According to CNBC-TV18’s Sapna Das, the expenditure estimates are routinely put out by the finance ministry once a year. This is a mandate under the FRBM Act. However, the numbers pertaining to petroleum subsidy is revealing. On the other hand there is some kind of a pressure that is evident for fertiliser and food.

Finance Minister Arun Jaitley on Friday met state finance ministers ahead of the first full-fledged Budget of the Modi government scheduled for February. While fuel is expected to provide for a major cushion for the Centre, sources tols CNBC-Tv18 that the government charted out the full expenditure roadmap fore next fiscal.

According to CNBC-TV18’s Sapna Das, the expenditure estimates are routinely put out by the finance ministry once a year. This is a mandate under the FRBM Act. However, the numbers pertaining to petroleum subsidy is revealing. The government is estimating it to be at around Rs 40000 crore by FY17. The government has not mentioned what will happen if the global crude prices start going up since the estimates are done assuming it to remain on the lower side; hence it is such a low projection.

On the other hand there is some kind of a pressure that is evident for fertiliser and food.

Under National Food Security Act, they expect expenditure to go up as states come onboard in terms of rolling out the Food Security Act. This year they are going to have a big saving since most states have not really rolled out the Food Security Act; once that starts happening the pressure on the government exchequer is going to go up. Hence there is higher projection for food subsidy. The mid term expenditure framework which has been presented by the finance minister some time in Parliament in the month of December states that there is a requirement for pricing reforms in the urea sector. But fertilizer is one area where not much attention has gone, the government has been busy trying to tackle fuel subsidies. So, pricing reforms are required for the urea sector. That completes the subsidy side of it.

The timeline for effective revenue deficit has been pushed by around one year to March 31 2016. The government was expecting the effective revenue deficit to be at nil. The government is facing revenue collection pressures not just in tax revenues but also in the non-tax side. However, that can be tackled by expenditure cuts or better rationalisation measures for expenditure management. We also know that the expenditure management commission will give its interim report hopefully by January 15. So, the government may have some time to implement some of those recommendations in the coming Budget and one might see a tighter fiscal rollout for Budget FY16 because there are lots of pressures in terms of the 14th Finance Commission recommendations which are most likely being discussed by the Union finance minister with the state finance ministers.

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