Manmohan endorses govt stand on subsidies

THE sharp division within the Congress over its approach towards economic matters today was on full public display when its chief economic spokesman broke off from the Sonia Gandhi establishment and endorsed the government's contention that the era of free lunches should end and a good pair of scissors should be wielded against the unmanageable subsidy bill.

Mr Singh, who made a forceful plea in the Rajya Sabha for taking economic issues outside the terrain of politics - barely hours after Ms Sonia Gandhi organised a march from AICC headquarters to the Prime Minister's residence against the recent cut in subsidies on PDS grain and fertiliser - said there was a need to have a holistic vision on how to deal with the growing problem of subsidies. ``We need to evolve a national consensus. The problem is there and we cannot push this problem under the carpet,'' Mr Singh told the Rajya Sabha.  The leader of the Opposition in the Rajya Sabha, who effected a paradigm shift in the nation's economy, was clearly at variance with the party's current economic thinking. Unimpressed by his party's efforts to go populist, Mr Singh said it was time that reforms got a big push and the political class created a conducive economic atmosphere. ``It cannot be anyone's argument that the magnitude of subsidies that prevail - at nearly 19 per cent of the GDP - is sustainable. It is obligatory for us, as a nation, to take measures to bring subsidies down within the limits of prudence. The non-merit subsidies alone accounts to about Rs 1,30,000 crore. If the government can come up with a proposal to save the money spent on non-merit subsidies, we can finance the entire backlog of primary education''.

Mr Singh said the lopsided priorities have made resources scarce for developmental activities. ``Buy subsidising non-merit good, we are sacrificing money for education and health care.'' In short, the way the government is spending its resources on subsidies is actually hurting the poor.

On public finances, Mr Singh said there was a need for the Centre to set a model for the state governments.

He said the gross fiscal deficit of states alone has gone up by 4.28 per cent of the GDP; net fiscal deficit is as high as 3.75 per cent; the revenue deficit is at 2.3 percent; and the primary deficit is as high as 2.18 per cent. ``We are far away from the limits of prudence. The consolidated debt of states alone today is 20.5 per cent of the GDP.If the state governments' deficits are not controlled, it would hurt the fiscal integrity of the system as a whole''.

Mr Singh, who forcefully argued for reforming the state finances said that precious resources should not be used for winning political battles. ``In the area of user charges, we must move away from the system because public utilities in our country can become instruments of politics. We should have a system where the public services provided, whether it is power or water, must be properly charged. We should not indulge in competitive populism,'' Mr Singh said.

He called upon the government, particularly the finance minister to strike for a consensus on these issues. ``The finance minister should bring together all sensible, rational people and point out to them that if we do not charge for our water the way it ought to be charged, even our existing irrigation works, that are starved of funds, would be in difficulty. So there is a need to levy user charges for power, water and public transport,'' Mr Singh said.  The senior Congress leader also said that adequate attention should be paid on public sector undertakings. He demanded a yearly review of the functioning of state public sector units.  `` I am told that even the accounts are not audited in time and that is a deplorable state of affairs. With regard to the state of return, the less said the better''.

Dr Singh also attacked the political class for using state-run business establishment and centres to offer patronage. ``There is growing influence of politics in the management of public sector companies and that is eating into the resource generating capacity of these units. These issues should be discussed in public,'' Dr Singh said.
 

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