Food subsidy bill surges 51% to Rs 50k crore

Written by Commodities Bureau | New Delhi | Updated: Nov 27 2008, 08:42am hrs
Indias food subsidy bill for the fiscal year ending March 2009 is poised to surge to around Rs 50,000 crore, up almost 51% from the budgeted amount, mainly on account of sharp increase in minimum support price of paddy, higher procurement and additional subsidised sale of wheat and edible oils.

This at a time when the government is contemplating a fiscal stimulus package to tide over possible slowdown in economic growth could further offset the fiscal deficit target that is already expected to exceed 2.5% for FY-09 on expansionary fiscal measures.

Food and agriculture minister Sharad Pawar told reporters at the economic editors conference on Wednesday that governments food subsidy bill would exceed the budgeted amount of around Rs 33,000 crore.

Government sources said the main reason for this surge in food subsidy has been higher foodgrain procurement at a higher price and stable central issue price (the price at which it is sold through the public distribution system).

The government has procured a record 226.82-lakh tonne wheat in the 2008-09 season (April-June) against 111 lakh tonne in the previous year. It bought a record 284 lakh tonnes of rice in 2007-08 (October-September).

At the same time, the economic cost of wheat rose to Rs 1,458.83 per quintal in 2008-09 from Rs 1,214.39 a quintal in 2006-07 because of higher purchase price. Similarly, the economic cost of rice has gone up to nearly Rs 1,700 per quintal from Rs 1,411 levels in 2006-07.

The Centre calculates the economic costs by taking into account purchase price along with transport and handling expenses. The purchase prices have shot up with the rise in the minimum support prices of rice and wheat.

Sirohi said while the economic cost has increased, the issue price of foodgrains remained the same since 2002.

The central issue price for wheat stands at Rs 200 per quintal for Antyodaya Anna Yojna scheme, Rs 415 for Below Poverty Line and Rs 610 for Above Poverty Line categories. In the case of rice, the CIP is Rs 300 per quintal for AAY, Rs 565 for BPL and Rs 830 for APL categories.

Additional, welfare programmes like subsidised sale of wheat and edible oils is expected to further bulge the food subsidy bill.