PM says costly subsidies must be tackled

By Rajkumar Ray

NEW DELHI (Reuters) - India must tackle growing subsidies on food, fertiliser and fuels, and improve its infrastructure if it is to sustain economic growth at around 9 percent, the prime minister said on Thursday.

India discounts widely used fuels, including petrol, diesel, cooking gas and kerosene, and the government is yet to raise retail prices of the fuels this year despite a surge in global oil prices towards $100 and a series of all-time highs.

State-run refiners are losing more than $50 million a day as a result despite the issue of bonds to partly compensate them.

"We need to address the problem of mounting subsidies in food, fertilisers and now in petroleum, which is a recent phenomenon," Manmohan Singh told the country's planning commission.

"Over 1 trillion rupees are going to be spent this year alone on these three items. It is important that we restructure subsidies so that only the really needy and the poor benefit from them and all leakages are stopped."

Singh said the farm sector had to be further revived and manufacturers encouraged if the nation was to sustain robust expansion in gross domestic product.

Policymakers have been worried about sluggish farm growth in recent years even as the overall economy has expanded at a much faster pace.

Nearly two-thirds of India's more than one billion people depend on the farm sector for a livelihood.