The finance minister is reported to have recently told the Planning Commission that if the growing subsidy burden is not immediately curbed, he would have to “revisit” tax exemptions to the domestic industry. The exemptions in question—excise, customs, et al—were defined as those granted due to political pressures.
So, now it seems the government is soon to face an interesting face-off—one that will be “resolved” on the strength of which of its wings (read ministry) carries greater political weight. Because the subsidy burden in question, as explained by the Prime Minister at the same meeting, comes from spending on food, fertilizers and oil, and now totals at Rs1 trillion. And we all know it was political pressures that not only blocked any efforts to cut food subsidies, but—and this is significant—led the UPA government to introduce the practice of fudging its balance sheets by issuing first the oil and then the fertilizer bonds.