India's subsidies should not be grabbed by the rich: Jeffrey Sachs

NEW DELHI: India needs subsidies to help its teeming millions reeling under poverty but its welfare policies need to be revamped so that doles are not grabbed by the rich and flow to the deprived, says renowned economist Jeffrey Sachs.

"India has poor people. They need help. So the fundamental point with subsidies is that you need to target them as 'smart' subsidies," Sachs, also called a green evangelist and director of the Earth Institute at Columbia University, told IANS in an interview.

"Across-the-board subsidies mainly grabbed by the higher income groups is the heavy cost India has borne by poorly-designed systems. But subsidies are needed. In a country with continuing extreme poverty you need a lifeline for water, for power, for food," he said.

"You have 17 percent of the world's population but just two-and-a-half percent of land area and water supply. That's the fundamental challenge and that is where India has to crack the puzzle. It cannot simple continue to go on like this."

India has budgeted a total subsidy bill of a whopping Rs.1.43 lakh crore (nearly $32 billion) for this fiscal, mainly toward fuel and food. This is a 100-percent jump over the total subsidy of Rs.70.92 crore given out in 2007-08.

The government has accordingly promised a major re-haul in subsidies by March 2012.

"What to do is clear. Better metering, smart cards, unique identification numbers and how to apply that to subsidies which will make them a lot cheaper and a more efficient and the get the economy to work better," said the Harvard-educated professor.

Some of the proposals suggested by Sachs, who has worked on the Millennium Development Goals as advisor to the UN, are already being implemented in India, like the allocation of unique identification numbers and direct transfer of fuel and food subsidies.

Finance Minister Pranab Mukherjee also spoke of this last week and said there was a case for a differential subsidy regime for diesel, since 15 percent of this was being used as transport fuel in India for powering costly vehicles used by the rich.