Fix a per litre diesel subsidy to reduce bill says Economic Survey

The pre-Budget Economic Survey said for diesel a possible intermediate step is to fix a per litre subsidy from the government

New Delhi: Advocating raising fuel price with rise in input cost, the pre-Budget Economic Survey has asked the government to pay a fixed amount per litre as diesel subsidy so as to cut subsidy outgo, reports PTI.

"For diesel, where even the rudimentary first step for freeing prices has not yet occurred, a possible intermediate step is to fix a per litre subsidy from the government," said the Survey that sets context for the Budget to be presented by Finance Minister Pranab Mukherjee Friday.

"In other words, for every litre of diesel sold by an oil-marketing company, the government will give a fixed subsidy of a certain number of rupees," it said.

The Survey advocated shifting the burden of higher international oil prices to consumers to not just limit government's subsidy bill but also curb diesel consumption.

Currently, the finance ministry meets about half of the revenue that state-owned oil firms lose on selling diesel, domestic LPG and kerosene at government-controlled rates. It provided Rs41,000 crore fuel subsidy in 2010-11. This fiscal, the oil firms are projected to lose over Rs1.37 lakh crore in revenue.

"If the price of crude rises, with the subsidy per litre fixed, the consumer's price will rise and so the signal to save on the use of diesel will be transmitted," it said.

The Survey said it was possible to make this system more sophisticated by requiring that the per-litre subsidy be raised if the price rises too high, in order to cushion the consumer.

"What is important is that the subsidy should be pre-specified so that, thereafter, government stays fully out of the picture.

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Economic Survey calls for ruthless crackdown on corruption

Amidst civil society seeking an anti-graft ombudsman in Lokpal, the pre-Budget Economic Survey has warned that the fear of a large and cumbersome anti-corruption bureaucracy can be detrimental to risk taking and may hamper legitimate activities in public institutions

New Delhi: Calling for ruthless crackdown on corruption, the government's pre-Budget Economic Survey however warned that a large and cumbersome anti-corruption bureaucracy could impact decision-making process, reports PTI.

"While we need to ruthlessly crack down on corruption, it must, at the same time, be recognised that the fear of a large and cumbersome anti-corruption bureaucracy can be detrimental to risk taking and may hamper legitimate activities in public institutions," said the Economic Survey 2011-12, which was tabled in Parliament on Thursday.

Citing a research paper by A Banerjee, S Cole and E Duflo on the Indian banking sector, it noted that the fear of prosecution for corruption resulted in reduced lending in an affected branch of a public sector banks as well as in neighbouring branches for around two years.

"In essence, smart policy design needs to be distinguished from mere procedural tightening and bureaucratic expansion, since the latter, if not properly thought out, can increase inefficiencies and wastage in public expenditure and service delivery," the document said.

The observation comes amidst civil society seeking an anti-graft ombudsman, Lokpal, covering all central and state government employees, judiciary and having investigating and prosecution powers.

The Congress-led UPA government had been against a single body idea as it feels it would need a huge workforce.

Again citing a research paper by O Bandiera and A Prat titled 'Active and Passive Waste in Government Spending: Evidence from Policy Experiment', the survey said that corruption and poor governance have been major problems in many countries.

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Taxpayers may get some relief from Budget 2012-13

Pranab Mukherjee is expected to raise the income tax exemption limit to at least Rs2 lakh and may also marginally raise the slabs in other tax brackets of 10%, 20% and 30%.

New Delhi: Taxpayers will be looking forward to some relief from Finance Minister Pranab Mukherjee who is expected to raise the income tax exemption limit to at least Rs2 lakh in his budget proposals to be unveiled in the Lok Sabha on Friday, reports PTI.

The Minister may also marginally raise the slabs in other tax brackets of 10%, 20% and 30%. The Direct Taxes Code (DTC) Bill has also made a mention of it.

The DTC, which will replace the Income Tax 1961, however, will only come into force from 2013-14 and the Minister may make a formal announcement on it in his budget speech.

The Standing Committee of Parliament that has scrutinised the DTC Bill has already submitted its report to the Lok Sabha Speaker.

Although the Committee had suggested raising the tax exemption limit to Rs3 lakh, it is unlikely that Mr Mukherjee will agree to it in view of the need to contain fiscal deficit.

With limited space for give aways, the Budget is likely to balance populism with some tough measures to check tax evasion and generation of black money.

However, in view of reverses in the recently concluded state assembly elections, Mr Mukherjee may go slow on economic reforms like foreign direct investment (FDI) in multi-brand retail and further opening of the insurance sector to foreign investment.

There could be some bad news for prospective car buyers as government may hike duties on luxury items to raise resources.

The biggest challenge before Mr Mukherjee would be to arrest decline in economic growth which is expected to touch a three year low of 6.9% in the current fiscal, down from 8.4% in the two previous years.

Further, the government is likely to set disinvestment target for the next fiscal at Rs30,000 crore.

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