Cabinet ups food subsidy burden at the time of fiscal stress

Amendments to cause additional subsidy burden of around Rs 5,094 crore

The Cabinet further raised subsidy burden on Food Security Bill yesterday, even as a section of industry leaders believe that the bill should be put off as of now.

The cabinet decision came even as Finance Minister P Chidambaram, agriculture minister Sharad Pawar and Home Minister Sushil Kumar Shinde are understood to have opposed the move in its present form. However, Prime Minister Manmohan Singh, Defence minister A K Antony and Parliamentary affairs minister Kamal Nath were for the amendments.             

The cabinet on Thursday cleared an amendment to the national food security ordinance to build a consensus over the Bill. The amendment will ensure 18 states get 3.1 million tonne more foodgrains than proposed earlier at the above poverty line price. Many states like Tamil Nadu were opposed to the Bill because their quota under public distribution system was getting reduced under the ordinance compared to their present allocation. The states would get extra rice at Rs 8.30 a kg and wheat at Rs 6.10 a kg.

The Finance minister is learnt to have asked his cabinet colleagues to link it to minimum support price which would have raised price of extra rice to Rs 11 a kg and wheat at Rs 13.50 per kg, reducing subsidy burden on the government at these difficult times.

The additional subsidy burden because of the allocation is expected to be Rs 5,094 crore, bloating the food subsidy bill to almost Rs 1.30 lakh crore.

The budget had pegged food subsidy at Rs 90,000 crore.

Biocon CMD Kiran Mazumdar Shaw had yesterday told a TV channel that the bill should not be enacted at this point of time because of its burden on fiscal deficit.