Budget 2001-2002

17. Increased production and rising productivity makes the proper management of the food economy more critical then ever before. Our policy has to be transformed to deal with surpluses rather than only shortages. The present arrangement of Government of India procuring foodgrains and States managing the PDS has led to many problems. While the subsidy has increased from Rs 8210 crore at B.E. to Rs 12,125 crore at R.E. stage this year, the satisfaction level has gone down. I propose, therefore, to give an enlarged role to the State Governments in both procurement and distribution of foodgrains for PDS in their respective states. Instead of providing subsidised foodgrains, financial assistance will be provided to the State Governments to enable them to procure and distribute foodgrains to BPL families at subsidised rates. FCI will continue to procure foodgrains for maintaining food security reserves and for such State Governments who will assign it this task on their behalf. Details for operationalising these arrangements will be worked out in consultation with the State Governments at the earliest.

18. The agricultural sector continues to be constrained by the existence of a number of inhibiting controls and regulations. The Essential Commodities Act, 1955 provides for the control of production, supply and distribution of certain commodities identified as essential commodities under the Act to protect the interest of consumers. State Governments have issued a large number of Control Orders under this Act inhibiting free movement of some food and agriculture products. In the changed present situation undue restrictions on movement and stocking of foodgrains and agricultural produce is acting as a disincentive to farmers.

19. Government therefore proposes to review the operation of the Essential Commodities Act, 1955 and  remove many of the restrictions that have been imposed on the free inter-State movement of foodgrains and agricultural produce and also on the storage and stocking of such commodities. It will also review the list of commodities declared as essential under the said Act and bring their number down to the minimum required. My colleague the Food Minister will issue necessary direction in this regard after consultations with the State Governments.

Infrastructure

20. Rapid development of the economy depends on adequate investment in infrastructure. A key issue here is imposition of appropriate user charges necessary to provide adequate returns on investment. Public resources have been invested in the public sector over the last 50 years for the provision of infrastructure services in the country. One consequence of this has been that user charges have inevitably become politically determined. Over time non-merit subsidies inherent in such low user charges have mounted to over 10 per cent of GDP, a figure similar to the total fiscal deficit of the Central and State Governments combined. Hence they are a major cause of the fiscal distress being experienced at all levels.

21. I believe that this issue is now so important that it needs urgent discussion throughout the country. The challenge is to achieve a consensus on the imposition of appropriate user charges in such a manner that the poor are protected while those who can pay are made to do so. Only then will we be able to accelerate investment in these essential services in both the public and private sectors. A prime example of this is the power sector.

Power

22. The importance of power in fuelling economic growth cannot be over emphasised. The total cost to the State Electricity Boards of implicit subsidies amounts to about Rs 36,000 crore this year. After accounting for cross subsidy and State subventions, actual commercial losses of all SEBs combined are estimated to be about Rs 24,000 crore. Hidden in these loss figures are extremely high T&D losses.

23. Although all of these losses are borne by SEBs and State Governments, I have to express my concern on this issue since this is a massive national loss and affects Central Government undertakings also. The total dues owed to Central Government utilities by SEBs and others now amount to over Rs 25,000 crore. If these resources were available, the country would have no difficulty in investing adequately in power sector expansion to the benefit of all. Theft of electricity must be stopped and economic tariffs levied.

24. The most vital element of the reform process is the restoration of financial viability of the State Electricity Boards (SEBs). On the basis of consensus that has progressively emerged in the National Development Council Resolution of 1992, the Common Minimum National Action Programme drawn up in 1996 and the Power Ministers’ Conference of February 2000, the Central Government is accelerating the programme of reforms in SEBs on the basis of specific milestones that are being built into MOUs entered into with State Governments. These MOUs include specific milestones such as:

• A time bound programme for installation of 100 per cent metering by December 2001.

• Energy audit at all levels.

• A specific programme for reduction and eventual elimination of power theft.

• Tariff determination by SERCs and compliance thereof.

• Commercialisation of distribution and

• SEB restructuring.

To demonstrate the importance of this task, the Prime Minister will hold a meeting of State Chief Ministers on March 3, 2001.