Kelkar Committe report made public

The Kelkar’s committee’s recommendations were made public by the government for an informal debate by the stakeholders. The committee has suggested bold reform measures. 

Kelkar Committe:

• A 3-member committee headed by the former Finance Secretary and 13th Finance Commission Chairman, Vijay L. Kelkar.
• Members: a) Vijay L. Kelkar b) Indira Rajaram and c) Sanjiv Mishra
• Objective: To devise the fiscal consolidation roadmap for 2012-13 to 2014-15

Recommendations:

• Tight fiscal consolidation roadmap for the government, with subsidy targets, the future course of action on administered prices of petroleum products and fiscal deficit targets.
• Pegs the fiscal deficit at 5.9% of the GDP for the current fiscal against the Budget estimate of 5.1%.
• Enforcing the proposed Food Security Bill in phases.
• Government should raise the prices of food items sold through ration shops, every time the minimum support price is revised.
• Remov the system of selling the sweetener through the ration shops.
• Instantly raising the diesel prices by Rs 4 a litre, kerosene by Rs 2 a litre and LPG by Rs 50 per cylinder. These steps, would reduce under-recoveries of oil marketing companies by Rs 20,000 crore.
• Regular raising of diesel prices until it becomes completely deregulated, and keeping subsidy at affordable level on LPG and kerosene.
• Increase the MRP of Urea by 10 per cent during the first year with any further increase being limited to any increase in the pooled gas price and in fixed
• The government should save additional Rs 20,000 crore in plan expenditure through proper prioritization and efficient use of available resources.
• On tax front, the government should review Direct Taxes Code Bill as it would result in slippages for which there is no fiscal space.
• On indirect tax front, there should be standard deduction rate from 12% to 8% in phases, pruning the list of 6% excise duty to merit goods only etc.
• The government should at least garner Rs 30,000 crore from disinvestment by making offer for sale model attractive and using exchange traded model for securities held by it in public sector units. 
• The government should set up a group to suggest monetizing government’s land resources.

The Commission held that if the recommendations made by it are taken by the government, then the Centre may be able to cap its fiscal deficit at 4.6% of GDP in the next financial year and 3.9% in 2014-15.

Fiscal consolidation is a policy aiming at reducing fiscal deficit of government.