The government has decided to retain the generous subsidies being given to two-thirds of the country’s population under the National Food Security Act (NFSA) for another year, that is, until June 2018. The move is despite the steady increase in the Centre’s food budget after the Act came into force in 2013.
Sources told FE that each beneficiary will continue to get 5 kg of grains a month for the next one year too; the subsidised price of rice, wheat and coarse cereals will be retained at Rs3, Rs2 and Rs1 per kg. respectively. A notification to this effect would issued by the food ministry shortly.
The NFSA had initially capped the period to three years. However, when this period was over, the government through an executive order in June 2016 extended the scheme for another year.
“The prices of grains supplied under NFSA should be realistic… The prices now are too low and inflating the subsidy budget along with the annual increases in the minimum support prices for key crops,” an official said.
“An increase of Rs1 per kg in the price of NFSA grain would result in reduction in annual food subsidy of around Rs5000 crore, more than offsetting the cost of annual MSP increases,” the official added.
Currently Food Corporation of India (FCI), which handles foodgrain procurement, storage and distribution for the government, incurs a subsidy of Rs 21.09 per kg in the case of wheat and Rs 29.64 per kg for rice. Annually, FCI supplies about 50 million tonnes (mt) to 53 (mt) of mostly rice and wheat under NFSA.
Section 37 of NFSA empowers the central government to amend the schedule under which the subsidised price is mentioned. Only last year all the 36 states and UTs rolled out the NFSA scheme.