While promising to cap subsidies at 2% of GDP, finance minister Pranab Mukherjee has cut the allocation for food, fertilizer and fuel support by almost 14% to Rs 1.8 lakh crore during the next financial year.

    The reduction comes despite the government's experience during the current fiscal when it saw a Rs 74,000-crore increase in the subsidy bill from what was budgeted at the start of the year. Against the budget estimate of Rs 1.34 lakh crore for 2011-12, the government revised it to Rs 2.09 lakh crore. At the start of the year, the FM and his officers had dismissed all suggestions of the government under-providing, something that most economists had pointed to.
    Even this year, Mukherjee is facing the same charge. After all oil prices are rising and a poor spell of rain can force the government to import foodgrain. Even fertilizer subsidy depends on external factors.
    In his speech, the FM, however, promised to fully provide for the proposed Food Security Act. At present the bill is in Parliament and it will take several months before it is cleared.
    Although the government once again promised better targeting and cash transfers, there is little more than statement of intent and increasing the coverage of several pilot projects that have been going on for years.
    For the moment, there will only be an information system to track the movement of fertilizer and subsidies and direct transfer will "be implemented in subsequent phases". There was no mention of direct transfers for petroleum products, something that Mukherjee had promised to roll out during the current financial year itself.