Tuesday, March 27, 2012

Target Subsidies For Poor

Indian Government always generous to provide subsidies rate fuel,food,power and fertilizer.Even Government spent about 14% of GDP for subsidies the fuel,food,power and fertilizer.There is no uplift of poor and below poverty line people from there status.Most of the government benefits never reach the people  in the lower status.Instead the subsidies help only rich and upper middle class of the society.Government never finds a mechanism to reach the common man in India.Subsides are also looked as a eye wash to keep poor and middle class silent enabling rich to exploit the condition.Due to lack of targeting were people extract from stronger section and provide to stronger section itself.

Subsidies In Various Sector:

Fuel-According Recent report state owned oil company provided Oil subsides rate at 33% loos of there Revenue lose of there sales.
Power-Government provide free power for agriculture and even many state government provide free power to small scale industry.
Food-Government as already planned to provide free 7 kg of rice/wheat for all below poverty line under food security bill.Already estimation crosses 1.5lak crs.
Fertilizer-Government to reduce the burden of agriculture providing a huge sum of money to subsides the cost of fertilizer per bag.
Corporate-Government as recently cleared 5lak corporates tax by providing tax exemption.
Tax exemption-Government as raised the bar for tax exemption to 2lak.Today Tax/GDP Ratio as dropped to 15.4% and 10%.
Bank Loan-To avoid bankrupt of nationalized banks government pays interest for many loans farmers,agriculture,education etc. 

Subsidy are meant to address poverty in India.The current emergence is how to lock the leakage of subsidies and target the subsidies for poor.Farmers get subsidized power,water,cheap credit and fertilizers.But much of this actually benefits large farmers.The same thing is true for subsidy on diesel,kerosene and LPG.Its also cornered mostly by the non-poor.There is strong urban bias in the petrol-products subsidies.To remove an anti-poor or anti-rural bias in any subsidies reform cannot escape a discussion of targeting efficacy.As government announcement that next financial year the government as planned to keep subsidies below 2% of GDP which is roughly rs 2 trillion.If you even distribute the money between the poor it will up lift there social status.

The major problem of subsidies are they are not reaching poor or common man.For example:-there is no targeting of subsidies because of which free food reaches upper section were they resell the food to lower section through black market.So we require to find the exact weaker section in the society and direct the subsidies towards them.The huge amount which government provide as subsidies enable only privatization of public sector company.Which is good sign for big democracy country like India.Targeting of poor can be done aadhaar card,smart kisan credit card,no-frills bank account,NREGA job card,Computerized land documents etc.             

Conclusion:

Every Government try to be robin-hood extract from stronger section and provide for weaker section.But in India alone its taking place in a reverse effect were money extracted from stronger section are re payed to stronger section itself.More than it we can see side effect of the subsidies in form of inflation,poor living condition,privatization etc.........

"Concession to rich is considered incentive and subsidy to poor is called burden on economy."-SITRAM YECHURY 

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