CACP seeks cash transfer in lieu of food, fertiliser subsidies

Government's advisory body on farm prices CACP today suggested direct cash transfer to beneficiaries in order to rationalise food and fertiliser subsidies, which could rise to Rs 2,00,000 crore next fiscal.

In its pre-budget consultations with Finance Minister P Chidambaram, Commission for Agriculture Costs and Prices (CACP) also sought stable export policy for farm commodities and promotion of palm oil to cut vegetable oil imports, which was at a record 10 million tonnes (worth Rs 60,000 crore) in 2011-12.

Higher farm exports and reduction in edible oil imports would help Centre to curb current account deficit, it added.

"Rising current account deficit is the biggest problem that the government currently facing. So, we have pitched for rationalisation of food and fertiliser subsidies in the forthcoming Budget," CACP Chairman Ashok Gulati said after the pre-budget meeting.

Pointing out that 40 per cent of food distributed through shops gets diverted, Gulati said the government can straight away save Rs 50,000 crore by plugging the leakages through conditional cash transfer (CTT). The government can also save additional Rs 10,000-15,000 crore from storage cost of grains.

CTT can be implemented initially in 33 cities of more than one million population and then expand it to cereal surplus states and finally to cereal deficit states, he added.

On fertilisers, CACP chief suggested the government to immediately start off direct cash transfer of subsidy to farmers as this can save Rs 20,000 crore.

It also demanded deregulation of urea sector to attract more investment and improve balanced use of fertilisers.

The Budget allocation for food and fertiliser subsidies was 1,36,000 crore in the 2012-13 fiscal. The figure would rise in the revised budget estimate.