Give subsidy to schools, hospitals, not oil firms

Updated on: Monday, July 12, 2010

The government should use its money on building schools and hospitals than subsidising oil companies, which were making huge profits because of grant, Planning Commission Deputy Chairman Montek Singh Ahluwalia has said.

“The profits shown by the oil companies are largely due to subsidies. We are not supposed to be subsidising the oil companies ... we should be paying for schools, education, hospitals and so on,” Mr. Ahluwalia said in an interview to CNN-IBN.

Left parties, which organised the Bharat bandh on July 5 against hike in petrol and diesel rates, had said the oil marketing companies were making huge profits, but the government was still talking about under-recoveries. The Indian Oil Corporation had said it made a profit of Rs. 10,220 crore in 2009-10.

“I think the Left has got it wrong that these companies are making huge profits. These profits reflect the fact that a large subsidy is being paid to them,” Mr. Ahluwalia said.
Tax burden

He agreed that there was significant tax burden on petrol and diesel. “You can eliminate a tax burden without recouping the revenue elsewhere. You could legitimately say don't tax petroleum, raise the same revenue by taxing everything else. Would anyone want that?” he said.

For LPG and kerosene subsidy, the government had to make up from petrol. “In the entire structure of petroleum prices, we are giving much lower prices for a large number of other items, so some built-in cross-subsidisation has to take place,” he said.

“Somebody has got to pay for it [cheaper kerosene and LPG] — either it would be paid out of general revenues or it would be paid from petrol. I think it is better if it is paid from petrol.”

In any case, the government wanted people to move away from the private transport to public transport.

A government, he said, could not be run only by those who knew how to lay roads, rebuffing Union Transport Minister Kamal Nath's charge that the Planning Commission was an “armchair adviser.”

“My view is that you cannot run a government only with people who know how to build roads. You have to give them a set of rules ...”

On July 5, Mr. Nath said the Planning Commission was oblivious to the ground realities of laying roads. “Producing a book is one thing and producing a road is another thing,” he had said at a Planning Commission programme.

While Mr. Ahluwalia agreed that “building roads is certainly different from writing guidelines, we are not an implementing body. Equally, it does not mean that you [Ministries] don't need advice. I mean accountants are not people who build roads but you cannot build roads without having decent accounts.”

Different arms of the government played different roles, he pointed out.

Mr. Ahluwalia also rebutted Mr. Nath's charge that the Commission was not allowing his Ministry to achieve the 20 km-a-day road-laying target. “I don't think that is correct,” he said. When targets were set, “you have to relate that target to the funding that is available.”

One of the principal roles of the Planning Commission was to scale down the demands of the Ministries, which were typically 100 per cent more than the money available, he said.

On Mr. Nath's remarks that the world class terminal at the Delhi airport would not have been possible, had the Planning Commission been involved in it, Mr. Ahluwalia said the Commission had a role, but was limited to selection of the operator (GMR Group).

“It was a public-private-partnership and the government's involvement was prior to the selection of the partner. It is absolutely true that once selected we didn't get involved.”

Give subsidy to schools, hospitals, not oil firms

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