Were Bihar to receive a subsidy transfer equivalent to Haryana, the highest per capita recipient among major states, every person in Bihar would get an additional Rs6,859 as fuel subsidy for diesel, LPG and kerosene for the three years to March 2014, says research note from IISD
Bihar, one of the poorest and most populous states, which is undergoing assembly elections, has never received its dues, especially in the fuel subsidy policy from the central government over the past decade reveals an analysis. Were Bihar to receive a subsidy transfer equivalent to that received in Haryana, the highest per capita recipient among major states, for the three years to March 2014, this would require an additional (compensatory) transfer of Rs74,008 crore, or Rs6,859 for every person in Bihar, says International Institute for Sustainable Development (IISD) in a note.
According to a research note, Bihar has consistently been the lowest per capita recipient of fuel subsidy transfers amongst all states and union territories, providing aggregated data on total subsidy expenditure per capita and disaggregated data for diesel, liquefied petroleum gas (LPG) and kerosene subsidies.
"It (aggregate data) calculates the total additional transfer required to equalize the subsidy transfer received in Bihar and that received in selected states for the three years to March 2014. This shows that were Bihar to receive a subsidy transfer equivalent to that received in Haryana (the highest per capita recipient among major states) for the three years to March 2014, it would require an additional (compensatory) transfer of Rs74,008 crore, or Rs6,859 for every person in Bihar. And to achieve parity with Delhi would require a transfer of Rs42,087 crore, or Rs3,900 per person," IISD says.
Over the past decade, fuel subsidies have collectively represented the single largest social transfer administered by the central government. During FY2011-12 and FY2013-14, the central government and associated public-sector enterprises spent a total of Rs4.48 lakh crore ($73.6 billion) subsidising diesel, LPG and kerosene. This amount is equivalent to over four times the central budget allocation to the government’s flagship National Rural Employment Generation Scheme (NREGS) public employment programme.
Bihar is undergoing state assembly elections and one of the issues being raised by local politicians is grating special category status, partly based on a sense of historical discrimination against the state within central government funding allocations.
According to IISD, a key issue frequently unrecognised in these discussions on the fiscal relationship between the central government and poorer states are the inequality between states in the distribution of (centrally financed) fuel subsidies. In the past decade, fuel subsidies have collectively represented the single largest social transfer administered and funded by the central government. At the national level, the highly regressive social distribution of fuel subsidies - and in particular of diesel and LPG subsidies - is well documented. Less widely understood is the structural discrimination between states inherent in both current and previous fuel subsidy policies, with consumers and businesses in India’s poorest states receiving a disproportionately low share of total subsidy transfers.
Figure below shows total per capita subsidy expenditure for the 20 largest states and union territories in FY2013-14, the most recent year for which state-level consumption data is currently available), highlighting the scale of the disparity between states in the receipt of subsidy transfers. In 2013-14, Bihar received an average per capita transfer of Rs602 per person. By comparison, Haryana received Rs2,556 per capita, Delhi received Rs1,967, Punjab received Rs1,912, and some smaller states and union territories received even more. For example Goa received Rs2,903 per person.
As per analysis done by IISD, during FY2013-14, Bihar was the lowest per capita recipient of subsidy transfers for diesel, receiving less than 10% or Rs175 per capita of the equivalent transfer received in Haryana at Rs1,770 per capita, the highest among major states (see Figure below).
Talking about LPG subsidy distributed by the Central government, the analysis shows Bihar as the second lowest recipient of subsidy transfers, receiving a per capita average of Rs170 during FY2013-14. During this period Bihar marginally exceeded Jharkhand. However, the per capita average received by Bihar in FY2013-14 is less than a sixth of the equivalent transfer in Delhi, which received Rs1,340 per person, IISD says.
Despite being the poorest Indian state, and among the states with the lowest level of access to electricity and LPG, Bihar’s allocation of subsidized kerosene (the one subsidized product whose distribution is directly determined by the central government) was roughly equivalent to the all-India average at Rs257 per capita, with several wealthier states - most prominently Gujarat, at Rs371 per person - receiving far higher per capita subsidy allocations, IISD says. (see Figure below).
IISD says, the cumulative effect of these distortions in subsidy expenditure, which are a direct result of central government decisions regarding the design and implementation of fuel subsidies is massive, resulting in huge disparities in multi-year resource transfers. For example, it says, during the three most recent years for which state-level consumption data is currently available (FY2011-12 to FY2013-14), the central government and associated public-sector enterprises spent a total of Rs4.48 lakh crore (about $73.6 billion) subsidizing diesel, LPG and kerosene - over four times the equivalent central budget allocation to the flagship NREGS public employment programme. During this period, Bihar consistently received the lowest per capita transfer of all states, at between Rs525-Rs625 per person. The below tables show the total per capita subsidy received in Bihar relative to selected states and union territories from FY2011-12 to FY2013-14.
The analysis and calculations shows how despite making significant social and economic progress in recent years, the development challenges facing Bihar remain profound. The analysis shows, how irrespective of a political party in power at the Central level over the past decade, Bihar has consistently been the lowest per capita recipient of diesel, LPG and kerosene subsidy transfers amongst all states and union territories.