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India 'set to cut fertiliser subsidy bill'

MUMBAI: India plans to cut its fertiliser subsidy bill by at least 15 per cent for the fiscal year 2013-14, four sources said, a move that takes advantage of a fall in international prices to help narrow the country's fiscal deficit.

Fertilisers, after oil and food, account for the third-biggest share of India's total subsidy bill, which is expected to rise to 2.4pc of gross domestic product (GDP) in fiscal 2012/13.

The government had estimated the fertiliser subsidy at 609.7 billion rupees ($11.4bn) for the fiscal year ending next month, but it is likely to be much higher than the target.

Based on the estimated subsidy level for 2012/13, a 15pc cut would save the government nearly 91.5bn rupees. Calculating from the projected fiscal deficit for this year, this would narrow the deficit by as much as 0.1-0.2 percentage point.

Finance Minister P Chidambaram has staked his reputation on lowering the deficit to 5.3pc of GDP to improve the investment climate following ratings agency threats to downgrade India's sovereign debt to junk if action was not taken.

It was reported last week that after small steps to reduce fuel subsidies, Chidambaram is now putting welfare, defence and road projects on the chopping block in a last-ditch attempt to hit his deficit target by next month.

A senior official at the fertiliser ministry with direct knowledge of the plan said the subsidy bill would be reduced by at least 15pc or more in the next financial year, though the actual cut will depend on the views of the agriculture and finance ministries.



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