Kelkar committee suggests phased withdrawal of subsidies

New Delhi, Sept 29 (ANI): Former Finance Secretary Vijay Kelkar-led committee, formed by Finance Minister P. Chidambaram to pull the country out of economic doldrums has suggested phased termination of subsidies by hiking the prices of LPG, kerosene, diesel and foodgrains in ration shops to deal with deteriorating fiscal situation.

"Indian economy is presently poised on the edge of a fiscal precipice, making corrective measures aimed at speedy fiscal consolidation an imperative necessity," said the committee that includes Indira Rajaraman and Sanjeev Mishra, besides Kelkar.

The government has, however, said the suggestions were contrary to its established policy of protecting the poor.

The Centre will take the final view on the recommendations of the committee after receiving feedback from stakeholders.

Observing that Indian economy may be encountering a "perfect storm" on account of various domestic and global problems, the Committee suggested tough measures to bring down fiscal deficit to 3.9 percent of the Gross Domestic Product (GDP) in 2014-15 from 5.2 percent expected in the current financial year.

Its recommendations include selling of surplus PSU land, fast tracking disinvestment and expanding the service tax net to raise revenue.

It suggested phased implementation of the Food Security Bill to provide cheap foodgrains to families below poverty line (BPL), and pitched for hiking urea prices.

Reacting to the committee's suggestion of eliminating major subsidies, Arvind Mayaram, Secretary in the Department of Economic Affairs said, "The government is of the view that in a developing country where a significant proportion of the population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable sections of the society."

The committee has also suggested a roadmap for fiscal consolidation and also wants the government to pursue reforms in other sector, like infrastructure, finance, taxation and regulation to improve business climate and spur investment. (ANI)