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FM is only cheating himself with faulty budget accounting
The article in full can be read here: FM is only cheating himself with faulty budget accounting | FirstpostIn this year's Union budget, Pranab Mukherjee earmarked all of Rs 20,000 crore for oil marketing companies as compensation for selling diesel, kerosene and cooking gas below cost to consumers.
The money's already over. All of it went towards paying last year's subsidy bills sent in by Indian Oil, Bharat Petroleum and Hindustan Petroleum – the three big oil marketing companies. For this year (2011-12), Mukherjee has an empty kitty. He is left with one of two options: raise diesel, cooking gas and kerosene prices, or borrow more to pay out subsidies.
In the year before, Mukherjee had again under-budgeted for oil subsidies and ended up paying out Rs 35,000 crore (he had provided zero subsidy in his 2010-11 budget). Add the Rs 20,000 crore paid out from this year's budget, and we have a neat Rs 55,000 crore of under-budgeting. Either Pranab-da's math skills are very poor or his accounts are a piece of fiction.
Why does the Finance Minister set great store by unrealistic accounting practices which are proven wrong barely a few weeks after the budget is presented?
The truth is, Mukherjee is cheating no one but himself when he does not budget adequately for oil subsidies. The economists who watch the budget numbers closely know the numbers are false. The markets know he's fibbing, and duly discount the prices of oil companies. The oil companies know they are being screwed, but they can't protest since they are owned by the government.
Dear Mr Mukherjee, when you lose tax revenues, when the share values of your assets are falling, when your banks are making money at the cost of the exchequer, when inflation is raging due to excessive deficit financing, what can you lose with some honest accounting for oil subsidies?