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Ratiolizing Subsidies

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  21 Jan 2015 12:00 AM GMT

Now that the 2015–16 Budget date is not far off, Union Fince Minister Arun Jaitley is turally concerned about finding a means of ratiolizing all subsidies and ensuring stability in policies to attract investment and drive growth. This is hardly surprising in a country where subsidies have become so commonplace as to constitute a huge component of the tion’s budget. The government’s subsidy bill towards oil and fertilizers runs into lakhs of crores of rupees. There is also the subsidy on liquefied petroleum gas (LPG). However, these subsidies begin to look less significant than the astronomical sums spent year after year, decade after decade on subsidies doled out to keep all our sick public sector undertakings (PSUs) alive somehow. Subsidizing sick PSUs is a kind of economic trap that the tion has knowingly walked into and cannot get out of because of the political equations involved. As we have had occasion to mention in the past, one of the misfortunes of accepting the Soviet model of plan economy way back in the time of Pandit Jawaharlal Nehru was the creation of a large number of unprofitable public sector units that kept bleeding the exchequer white. To make matters worse, we had Pandit Nehru himself repeatedly insisting that profit was a dirty word and thereby encouraging his senior bureaucrats to keep investing the tion’s wealth on PSUs that were destined to go on making heavy losses. What exacerbated an alarming economic situation was the tendency of politicians to load far too many employees on every public sector undertaking that the government set up. Apart from handing over PSUs to IAS officers not qualified to run industries or business establishments, the exceptiolly large workforces foisted on them determined well in advance that the PSU concerned was destined to make huge losses. Unfortutely, most PSUs became means of providing unproductive employment to hundreds and thousands of workers who were also voters. And this is what has made it virtually impossible for PSUs in India to correct course (as Chi has done). The government is uble to close down sick PSUs that have no prospects of ever making any profits, because large–scale retrenchments are the surest ways of losing votes. So the exercise of flogging dead horses at the expense of public money will go on as it has done for decades. All measures directed at “ratiolizing subsidies” will remain cosmetic devices until the government can find a viable means of shutting down all sick PSUs and bringing to an end the endless and astronomical subsidies for flogging dead horses. According to reports, the Union government is expected to incorporate the suggestions of the Expenditure Fince Commission headed by former Reserve Bank of India Governor Bimal Jalan in the budget proposals for 2015–16. Jalan had submitted interim recommendations to the Fince Ministry suggesting various steps to ratiolize subsidies and the public expenditure. We are not aware as to whether the recommendations have anything by way of dealing with the huge subsidies that are routinely given to sick public sector undertakings. We are strongly opposed to this blatant and colossal waste of public money in the me of subsidies. If Fince Minister Arun Jaitley is really looking for an effective means of ratiolizing all subsidies, he will have to begin with subsidies to sick PSUs before he thinks of any other subsidies, however substantial they might be. Spending huge dollops of public money on flogging dead horses defies any kind of ratiolization. There ought to be a greater sense of public duty among newspaper editors and operators of television channels in demanding transparency and accountability in respect of the government’s annual and total outlay on subsidies to sick PSUs before we hear of any more talk about cosmetic measures for ratiolizing subsidies in a country that has been virtually undone by subsidies.

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