The deficit for the previous fiscal year came in at 6.71 percent, or 15.86 lakh crore rupees, which was lower than the revised forecasts of 6.9 percent due to increased tax revenue collection.
The Expenditure Department has recommended that the free food grain for poor initiative PM-GKAY not be extended beyond the month of September since doing so might put a strain on the finances of the government.
In addition, the agency stated that the high food security cover has already “caused a major economic issue” and that it is unnecessary in periods when there is not a pandemic.
In March, the government announced that it will be extending the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) programme for an additional six months, which would bring the program’s expiration date to September 2022.
The government would spend an additional Rs 80,000 crore through September 2022, bringing the total spending under PM-GKAY to about Rs 3.40 lakh crore. As of March, the government has spent approximately Rs 2.60 lakh crore. Nearly 80 crore people are eligible to benefit from the plan.
In its monthly report, the department cited the adverse financial position of the Centre and said that recent decisions on continuing PMGKAY, a huge increase in fertiliser subsidy burden (both urea and non-urea), the re-introduction of subsidy on cooking gas, reduction of excise duty on petrol and diesel, and reduction of customs duty on various products have created a serious fiscal situation. The department also cited recent decisions on re-introducing subsidy on various products.
“It is imperative that significant increases in subsidies are not combined with tax reductions. In particular, it is not advisable to extend the PMGKAY beyond its current extension, both for reasons pertaining to the safety of the food supply as well as for reasons pertaining to the finances. As things stand, every household receives fifty kilogrammes of grain, of which twenty-five kilogrammes are sold at a discount for two or three rupees apiece, and the remaining twenty-five kilogrammes are given away for nothing. According to the paper, “this is considerably beyond the necessity at a time when there is not a pandemic.”
The expenditure department also stated that the budgeted fiscal deficit for this fiscal year was extremely high by historical standards, and that any deterioration in that deficit poses a risk of serious unfavourable consequences. The fiscal deficit was projected to be 6.4% of GDP for this fiscal year.
According to the budget, the fiscal deficit, which is the gap between the amount of money the government brings in and the amount of money it spends, is expected to be 6.4%, or 16.61 lakh crore. In April, the first month of the current fiscal year, the deficit amounted at Rs. 74,846 crore, which is equivalent to 4.5 percent of the planned deficit for the whole year.
The deficit for the previous fiscal year came in at 6.71 percent, or 15.86 lakh crore rupees, which was lower than the revised forecasts of 6.9 percent due to increased tax revenue collection.
The increased cost of providing fertiliser subsidies, which totaled Rs 60,939.23 crore for the first six months of the current fiscal year, has already put a strain on the government’s resources.
The lowering of excise tax on gasoline and diesel would cost the government an additional Rs 1 lakh crore by itself, whereas the cooking gas subsidy for the poor would cost the government Rs 6100 crore.
In addition, the government anticipates a revenue loss in the range of 10,000-15,000 crore as a result of the recalculation of the customs charge on iron and steel as well as plastic.
Last month, Finance Minister Nirmala Sitharaman had announced that the excise duty on petrol would be cut by a record Rs 8 per litre, and that on diesel it would be cut by Rs 6. She also stated that beneficiaries of the Ujjwala scheme would receive a subsidy of Rs 200 per cylinder for a total of 12 bottles in a year to help alleviate some of the burden that has been caused by the rise in cooking gas prices to record levels.
In the nation’s capital, the price of an LPG cylinder weighing 14.2 kilogrammes is 1,003 rupees. Beneficiaries of the Pradhan Mantri Ujjwala Yojana would each get a subsidy of Rs. 200 instantly deposited into their bank accounts, resulting in an effective price of Rs. 803 for each 14.2 kilogramme cylinder purchased.
Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) was a programme that was initiated by the Central Government in March 2020 with the intention of providing free foodgrains to more than 80 crore beneficiaries who were covered by the National Food Security Act (NFSA). This was done as part of the government’s efforts to alleviate the hardships that people were experiencing as a result of the coronavirus pandemic.
As part of this programme, the Center will give you a free monthly supply of 5 kilogrammes of foodgrains.
The additional free grains are given out in addition to the standard quota that is distributed under the NFSA at a substantially subsidised rate of 1-2 rupees per kilogramme.