With the relentless rise in the food subsidy budget, the Centre is under pressure to reduce the quantum of subsidy on food grains being supplied under National Food Security Act (NFSA). When NFSA was passed by Parliament in 2013, it stipulated monthly entitlement of five kg of grain per beneficiary at the rate of Rs 3, Rs 2 and Rs 1 per kg for rice, wheat and coarse grains respectively, for three years. Last year, the government, through an executive order, extended the subsidy rates till June 2017.
However, sources said, the highly subsidised pricing of grain coupled with annual rise in Minimum Support Price (MSP) given to farmers, has led to huge increase in food subsidy budget in the last few years. “The prices of grains supplied under NFSA should be realistic and currently the prices being charged from beneficiaries are too low,” an official said.
“A price increase of Rs 1 per kg for grain supplied to beneficiaries would result in reduction in annual food subsidy of around Rs 5,000 crore,” the official said. If grain price under NFSA is increased, the rising cost to government due to annual rises in MSP given to farmers could be reined in.
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Section 37 of NFSA empowers the Centre to amend the schedule. The first schedule grants the Centre the right to fix prices of grains to be supplied to beneficiaries after a passage of three years, which should not exceed the MSP offered to farmers for the respective commodities.
Annually, the Centre through the Food Corporation of India (FCI) supplies about 50 to 53 million tonne of mostly rice and wheat under the NFSA to about 81 crore population. Recently, in a communication to MPs and state governments, Union food minister Ram Vilas Paswan has said that in 2016-17, the government incurred a food subsidy of Rs 29 per kg for rice and Rs 21 per kg for wheat.
As per the NFSA, states were given a year’s time till July 2014 to roll out the mega food security law, which currently covers 81 crore people. However, majority of the states could not implement the Act within this time frame due to the time-consuming process of identifying beneficiaries and developing the infrastructure. Only last year, all the 36 states and Union territories rolled in the food security legislation.
However, sources said, with rising burden of food subsidy – budgeted at Rs 1.45 lakh crore in the current fiscal year – there was a debate in the government to increase the price of grains to be supplied under the food security Act.
According to the FCI, the economic costs (including the MSP, storage and transportation) of rice and wheat are Rs 3,264 and Rs 2,408 per quintal, respectively.