COIMBATORE: The recent depreciation of the rupee could increase oil subsidy by 0.1%- 0.4% of GDP ( gross domestic product) in 2013-14 and this alone could push the fiscal deficit to over 5% of GDP against the budgeted 4.8%.
"Rupee depreciation has resulted in a sharp increase in Indian crude basket prices. Despite the 50 paise per litre monthly hike in diesel prices, under-recovery of three controlled fuels - diesel, liquefied petroleum gas and kerosene oil - is threatening the government's fiscal arithmetic," India Ratings said.
"Unless the price of diesel is hiked steeply or those of the three controlled petro products are hiked moderately, the government's fiscal deficit is likely to cross 5% of GDP," said Devendra Kumar Pant, chief economist and head - public finance, India Ratings.
In the 2013-14 budget, Rs 65,900 crore and Rs 65,000 crore were set aside for the fertiliser and oil subsidies, respectively. When these amounts were allocated, the rupee was fluctuating between 53 and 54 to the dollar. A sharp depreciation in the rupee since May this year has however substantially altered the budget's fiscal arithmetic.
India's annual fertiliser consumption is around 53 million metric tonnes and over 30% of this is met by imports. However, global fertiliser prices have declined in the range of 11.3% year-on-year (y-o-y) (for rock phosphate) to 23.9% y-o-y (for urea) between April and August 2013. The rupee depreciated by only 6% y-o-y during this period.
Based on the trend of global fertiliser prices, India Ratings does not expect any significant slippage in fertiliser subsidy on account of rupee depreciation in 2013-14. The situation with respect to oil, however, is different.
The price of Indian crude basket has increased 28% between the first fortnight of April 2013 and the first fortnight of September 2013. As a consequence, the daily under-recovery of oil marketing companies (OMCs) increased to Rs 461 crore in the first fortnight of September 2013 from Rs. 349 crore during the first fortnight of April 2013. OMCs' daily under recoveries of diesel alone shot up to Rs. 14.5 per litre as on September 16.
Although the rupee has appreciated between end-August and mid-September 2013, it is unlikely that it will rise to the level witnessed when the 2013-14 budget was prepared, India Ratings, which is part of the Fitch Group, said.
The agency expects the rupee to appreciate to 59-61 per dollar by the end of 2013-14 pushing the oil subsidy higher. "OMCs' under recovery will increase by Rs. 150 crore every day if Indian crude basket price rises by Rs. 1000 per barrel," said Sunil Kumar Sinha, director - public finance, India Ratings. "This would translate into an increase of around Rs 34,000 crore in the government's oil subsidy burden," he said.
Source:-timesofindia.indiatimes.com
No comments:
Post a Comment