67. Non-plan expenditure in 2000-2001 is estimated to be Rs.2,50,387 crore compared to Rs.2,24,343 crore in Revised estimates for 1999-2000, showing an increase of Rs.26,044 crore. The increase in non-plan expenditure is mainly in defence (Rs.10,083 crore), interest payments (Rs.9,841 crore) and in grants to States (Rs.9,392 crore). However, this increase is sought to be partially offset by reduction in outgo on account of food and fertiliser subsidies.

68. Major subsidies, on food and fertilizer, constitute a significant portion of our non-plan expenditure. The rate at which these subsidy payments are growing is not sustainable. We need to target the subsidies to those who are poor and needy, whereas others should pay for what they consume. Indeed, we want to expand the access to subsidised food by Below Poverty Line (BPL) families so that they can meet their basic nutritional needs. Accordingly, from next year, we are doubling the allocation of foodgrains to BPL families, under the Targetted PDS, from 10 Kg. to 20 kg. This will result in an enormous gain in food security for our poorest families. The issue price of foodgrains of BPL families is being fixed at 50% of economic cost in line with the decision taken by Government in December, 1996. The net effect of these measures will be to improve the monetary food budget of BPL families and vastly enhance their food security. This achievement is possible only by simultaneously fixing the PDS issue price for APL families at the economic cost. In respect of sugar, no allocation will be made under PDS for income tax assessees. For others, keeping in view the increase in the levy price of sugar, the issue price under PDS is being fixed at Rs.13 per kg. As a result of these measures I expect to keep the expenditure on food and sugar subsidy at Rs.8,210 crore in 2000-2001.

69. In the case of Fertilizer Subsidy, Members are aware that our present Retention Price Scheme suffers from many shortcomings. Much of the subsidy goes to producers and not to farmers. To encourage greater efficiency of our fertilizer units, some rationalisation of the Retention Price Scheme, including capping of capital related charges, will be implemented from next year. The Ministry of Chemicals and Fertilizers will also bring out soon a road map for phasing out the Retention Price Scheme in the medium-term. Separately, to take into account the rising cost of inputs, the maximum retail price of Urea is being raised by 15%. The rate of concession in the case of decontrolled fertilizer is also being reduced. However, to moderate the impact on prices the MRP of DAP and MOP is being raised only by 7% and 15% respectively. I expect that, because of these changes and some rationalisation of Retention Price Scheme, the expenditure on fertilizer subsidy will be Rs.12,651 crore in 2000-2001.

70. The Eleventh Finance Commission has since submitted its interim report for making provisional arrangements of tax devolution and grants to States for 2000-2001. Government have accepted the devolution formula and quantum of grants to States, as recommended by the Commission in its interim report. I have made provisions in the budget accordingly.