Costly impact of skewed PDS pricing

As the government battles to keep its food subsidy under check, the finance ministry on Monday said the present pricing policy of foodgrain sold through the Public Distribution System (PDS) had hit the exchequer hard.

It also said the periodic ban on export of farm products and repeated closure of futures trading made it hard for producers to plan their output and harms the output rises needed to keep prices under check.

The mid-year economic analysis for 2012-13, laid in Parliament, said the unabated increase in the economic cost of procurement, storage and transportation of foodgrain, unmatched by a corresponding increase in the price at which these are sold through ration shops, had put substantial pressure on the exchequer in the form of subsidies.

The food subsidy for 2012-13 was pegged at Rs 75,000 crore in the year’s Union budget.

However, officials said its requirement had crossed Rs 110,000 crore, with three months remaining in the financial year. This was mainly due to bumper procurement of wheat and rice and excess sale at cheap rates. The government purchased a record 38 million tonnes of wheat in 2012-13, 10 mt more than last year. Rice procurement in 2012-13 has been 40 mt, almost five million tonne more than in 2011-12.

As on December 1, wheat stocks in the central pool were 37.65 mt, as against a buffer stock and strategic reserve norm of 14 mt, while rice stocks were 30.6 million tonne, against a requirement of 7.2 million tonne.