Concerned over rising subsidy bill, which is likely to cross Rs 50,000 crore in 2008-09, the food ministry had proposed to hike central issue prices (CIPs) of rice and wheat to their minimum support prices (MSPs) levels, the source said. The CIPs of wheat and rice for APL families are Rs 6.10 and Rs 8.30 per kg, respectively and have not been revised since 2002. The MSPs of wheat and rice are Rs 10 and Rs 8.50 a kg, respectively.
The proposal is not new.The food ministry has been suggesting a hike for the last four years, he said. Though the states estimate the number of APL families at 13.13 crore as on October 2008, the Centre approves only 11.52 crore families based on Planning Commission guidelines. Each APL family is eligible to buy 35 kg of foodgrain (both wheat and rice) a month. According to food ministry data, the economic costs of wheat and rice have increased manifold and are currently at Rs 14.58 and Rs 16.99 a kg respectively due to an increase in their MSPs and handling costs. The pressure on the Centre is so high that it needs to supply over 40 lakh tonne of foodgrains in a month only to cover the APL families, if all beneficiaries buy their alloted quota. But the monthly allocation is very low. For instance, only 6.88 lakh tonnes were allocated in October 2008.
When the APL price was fixed in 2000, it was at the MSP level, but was reduced to 70% of the economic cost two years later, sources said. The rates were not changed after 2002. The subsidy burden would have been lessened had the 70% formula been implemented, a senior official said.