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The National Common Minimum Programme (NCMP) mandates the Government to target all subsidies to the poor and truly needy sections of the society. In pursuance of this mandate, Government has submitted a report on subsidies to the Parliament. This Report was discussed in a meeting of the Consultative Committee of the Ministry of Finance on February 8, 2005. Based on wider discussions with stakeholders and after due consultations, a policy on targeting subsidies, mainly explicit subsidies on food, fertiliser and petroleum would be evolved.
While food subsidies are designed to be targeted to people below the poverty line, the other two subsidies, namely, fertiliser and petroleum are universal subsidies available to all consumers. Many reviews and evaluation studies have pointed out that even in the case of food subsidies, benefits have accrued to the non-needy sections as well, apart from illegal diversion of food grains to the market. Government has not quantified the extra expenditure on account of such diversion as much of these are clandestine activities and any estimate would be somewhat subjective.
Providing minimum consumption entitlements to the poor by subsidising the essential items consumed by them is an extremely important welfare dimension. Subsidies can correct the under consumption of goods with positive externalities. While the Government is committed to fulfilling its welfare obligation, the present efforts are directed to ensure that the benefits of subsidies are maximised by making them transparent, well designed and targeted.
This information was given by Shri S.S. Palanimanickam, Minister of State for Finance in reply to a question raised by S/Shri R.K. Anand, Santosh Bagrodia and Harish Rawat in Rajya Sabha today.
BSC/BY/DN-187/05
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