Bloated food subsidies push record Rs 43k-cr payment to next year

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The subsidy demand for this year would be close to the budgeted amount of Rs 90,000 crore (Reuters) The subsidy demand for this year would be close to the budgeted amount of Rs 90,000 crore (Reuters)
SummaryThis would be a record roll-over amount, much higher than last year’s Rs 32,650 crore

At least Rs 43,000 crore in food subsidy costs may be carried forward to the coming years’ budgets, as the Centre is determined to keep this year’s accounts within budgeted limits. This would be a record roll-over amount, much higher than last year’s R32,650 crore.

According to official sources, the revised estimate for fertiliser subsidy for FY14 would be kept at roughly the same level as the budget estimate of R90,000 crore. This is despite the fact that the amount of R41,560 crore released by the finance ministry till September being used largely to pay the arrears that have accumulated. The food security law (for which a need-based additional outlay of R10,000 crore is envisaged) is not going to make any impact on this year’s Budget.

The tight budget regulation is despite the relentless surge in subsidy claims by the state-run Food Corporation of India and other agencies implementing the subsidised foodgrains schemes. A widening difference between the sale price at ration shops and the minimum support prices paid to farmers and the open-ended procurement policy that have jacked up the cost of stocking grains with FCI warehouses have increased the subsidy costs.

Here is how the R43,000-crore roll-over amount is arrived at. The subsidy demand for this year would be close to the budgeted amount of R90,000 crore (R5,000 crore higher than last year), according to the finance ministry. Since only R8,900 crore of this year’s subsidy costs have been met during the first half, bills of R33,000 crore (marginally higher than last year’s) will be left unpaid. Add to this R3,000 crore interest cost incurred by the FCI on borrowings to meet its operational costs in FY13 that was left unpaid and a similar cost it is likely to incur on account of deferment of payments for this fiscal, and the carry-over works out to be around R39,000 crore. “We have not disbursed last year's interest payments (by FCI) and we are unlikely to provide for interest payments this year as well,” a senior finance ministry official told FE.

Conventionally, the finance ministry pays some 5% less than the RE as fertiliser subsidy, to adjust for the audited FCI accounts that come with a lag.

So some Rs 4,000-4,500 crore accounted for in the RE may not actually be paid this fiscal, taking the roll-over amount to Rs 43,000-43,500 crore. It would be left for the government that

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