constituted - of Planning Commission

Other Subsidies: For each of their projection years, the Thirteenth FinanceCommission had kept constant in nominal terms the number equivalent to thefigure in the base year, reflecting the need for some real reduction in thesesubsidies. They stated that such reduction in subsidies was important toimprove equity as well as growth in the economy. As per a study undertaken byNational Institute of Public Finance and Policy (NIPFP), these subsidies areregressive, in the sense that in per capita terms, they are relatively higher for thehigher income States. Further, large subsidies, such as in fertilizers and LPG,are likely to be regressive on an inter-personal basis also, as fertilizer subsidiesare higher in per capita terms in irrigated areas and LPG subsidies are higher inper capita terms in urban areas. The reduction of these subsidies, by freeing upfiscal space, will facilitate increase in the supply of public goods such asschools, village roads and irrigation, which will lead to higher growth byinducing greater private investment.Following the rationale adopted by the Thirteenth Finance Commission, theGroup has retained the BE 2011-12 figures for these subsidies during theTwelfth Plan period.Pay and Allowances: Expenditure on Pay and Allowances (excluding Police &Defence personnel) increased during the Eleventh Plan period by 143.22 percent from `16,448 crore in 2007-08 to `40,005 crore in 2011-12. A sharpincrease is on account of the implementation of the recommendations of theSixth Central Pay Commission. During the Twelfth Plan period, however, payand allowances have been assumed to grow at 6.5 per cent per annum, takinginto account increases on account of dearness allowance and normalincrements.Pensions: Expenditure on Pensions increased during the Eleventh Plan by124.73 per cent from `24261 crore in 2007-08 to `54521 crore in 2011-12. AWorking Group Report on Centre’s Financial ResourcesPage-43