No subsidy shock for Narendra Modi govt, despite Food Security act roll out

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New Delhi | Published: January 13, 2017 6:25:46 AM

Reduction of FCI grain stocks, elimination of duplicate ration cards come in handy for the government.

The current fiscal’s food subsidy bill will be about R10,000 crore more than the budgeted R1.35 lakh crore. (Reuters)The current fiscal’s food subsidy bill will be about R10,000 crore more than the budgeted R1.35 lakh crore. (Reuters)

Despite the nationwide rollout of the National Food Security Act (NFSA), the Centre’s food subsidy budget may not see a big spike in FY18; it could be around R1.45 lakh crore — roughly the same as the likely revised estimate for the current fiscal year.

What has avoided the need for a big increase in the subsidy is a sharp fall in the “excess” grain stocks held by the Food Corporation of India (FCI) and reforms undertaken to eliminate around two crore duplicate ration cards that helped curb offtake of grains, official sources told FE.

When the current financial year had started, NFSA rollout was limited to 22 states and other states including large ones like Tamil Nadu, West Bengal and Bihar joined the scheme over the course of the year.

The sources said the current fiscal’s food subsidy bill will be about R10,000 crore more than the budgeted R1.35 lakh crore. They added that the FCI through which over 75% of the Centre’s annual food subsidy is routed, has requested for an additional R7,000 crore in the current fiscal against the budget allocation of R1.03 lakh crore. State-level agencies which are entitled to a quarter of the subsidy have also asked for an additional R2,000-R3,000 crore.

The FCI expects its expenses to go up marginally in the next fiscal mainly because of increases in minimum support prices (MSPs) of paddy and wheat.


Unlike in the past, the finance ministry has been prompt in releasing the food subsidy amounts to FCI this fiscal, thus saving the corporation interest cost of R500 crore.

With the mismatch between expenses and food subsidy allocation, the outstanding dues of FCI have been rising sharply in the last many years. Clearance of these past dues to FCI is important.

Sources said FCI is pinning its hope on a proposal under which the Centre will dip into the National Small Savings Fund (NSSF) under a five-year special arrangement, in order to clear the dues to the corporation from the previous years, last pegged at R50,000 crore.

Under the plan, NSSF will release R45,000 crore from its corpus to the Centre before the end of the current financial year and the latter will repay it in five equal annual installments, starting FY17 itself.

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The FCI’s grain stocks position has been consistently declining because of excess wheat sold through Open Market Sale in the last few years and 17% lower procurement of wheat in last year’s (2016-17) rabi marketing season.

On December 1, FCI had stocks of rice and wheat of 27.55 million tonne (mt) while as per the buffer norms for January 1, it was required to hold only 21.4 mt. This indicates that the level of excess stocks has come down.

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