Budget 2016: Posing a threat to the government’s efforts to rein in the expenditure on subsidies, its food subsidy bill for the current fiscal may exceed the Budget estimate of Rs 1.24 lakh crore by Rs 10,000-20,000 crore. Also, the allocation for 2016-17 could be more than Rs 1.5 lakh crore, according to sources privy to the Budget discussions. The pan-India roll-out of the National Food Security Act is what would take the food subsidy to new highs, even as the Centre has been successful in reining in the other two major explicit subsidies on petroleum products and fertilisers, particularly the former, owing to the crash in crude oil prices.
Significantly, the food subsidy this year is set to be higher than the budgeted level even as the arrears to the tune of Rs 70,000 crore to the Food Corporation of India could be left unpaid by March-end.
Three major subsidies — food, fertiliser and fuel — account for 96% of the Centre’s total subsidy expenditure. For FY16, the three subsidies are estimated to be Rs 2.27 lakh crore, down from Rs 2.54 lakh crore in FY15.
The Budget estimate on subsidies could be revised upwards by around Rs 25,000 crore even as subsidy on petroleum would be contained at close to the budgeted level of Rs 30,000 crore.
The fertiliser subsidy would be Rs 6,000-7,000 crore higher than the budgeted Rs 73,000 crore owing to arrears cleared.
FCI had approached the finance minister to provide Rs 20,000 crore as supplementary grant or as part of revised estimate under the food subsidy budget to meet the expenses in the last quarter of the current fiscal. But North Block provided FCI with only Rs 10,000 crore as ways and means advance.
All states except Tamil Nadu are expected to implement the food security legislation which is aimed at providing a population of around 82 crore with 5 kg of highly subsidised foodgrains monthly under the targeted public distribution system effective April 1. Sources said FCI, the biggest recipient of food subsidy, has asked for an allocation of Rs 1.35 lakh crore from the finance ministry for 2016-17 while Madhya Pradesh, Chhattisgarh and Odisha, which undertake decentralised foodgrain procurement, have asked for Rs 25,000 crore. In the current fiscal, out of the budgeted food subsidy of Rs 1.24 lakh crore, FCI was allocated Rs 97,000 crore.
An official said since 2004-05, the minimum support price (MSP) of wheat has increased by more than 130% to Rs 1,450 per quintal in 2015-16 rabi marketing season from Rs 630 per quintal. Similarly, the paddy MSP has been hiked by 150% to Rs 1,450 per quintal during 2015-16 marketing season (October-September).
The economic cost of wheat arrived at by taking into account procurement, storage, transportation, etc, for the rabi season 2015-16 had been fixed at Rs 2,267 per quintal while the economic cost of rice this year has been reported at Rs 3,258 per quintal.
“The food subsidy keeps on mounting because while FCI’s and state agencies’ cost of procurement and transportation is rising steadily, rice and wheat is supplied to large masses of people at highly subsidised rates,” a food ministry official said.