FY13 food subsidy already 36% more than budgeted

The demand for food subsidy has swelled to over Rs 1,01,879 crore in the first six months of 2012-13, 36 per cent more than the Budget estimate of Rs 75,000 crore for the entire year, according to calculations by the Food Corporation of India (FCI).

Of this requirement, the government has allocated around Rs 61,978 crore as food subsidy till date.The sharp rise in subsidy against nearly Rs 73,000 crore for the entire 2011-12 could jeopardise the government’s plan to rein in the fiscal deficit at 5.1 per cent of GDP, as rice procurement for the 2012-2013 kharif season is yet to start in full swing.Moreover, fuel subsidy is also likely to be higher than projected at Rs 43,800 crore for 2012-13. Almost the entire Rs 43,800 crore has been released, but that has gone to meet the demand for 2011-12. At over Rs 1 lakh crore for just half a year, the demand for food subsidy is likely to be higher than the fuel subsidy bill for the year. Even after the diesel price hike and cap on subsidised LPG cylinders, underrecoveries of oil marketing companies are estimated at Rs 1,67,415 crore for this fiscal. More than half of that is likely be paid by the government.

The Kelkar panel in its report on fiscal consolidation had said the actual subsidy could shoot up by Rs 70,000 crore, compared to the Budget estimate. Finance Minister P Chidambaram had admitted the subsidy bill would be 2.4 per cent of GDP against 1.9 per cent pegged in the estimates.

The FCI said the subsidy bill got inflated because of a rise in the amount of procurement, an increase in acquisition costs due to a higher minimum support price, a rise in stockholding by the corporation and arrear food subsidy.

Of the over Rs 1,00,000-crore food subsidy, around Rs 22,008 crore is the arrear carried over from 2011-2012. According to FCI estimates, the arrear this fiscal will now swell to around Rs 39,909 crore.

Senior FCI officials allayed fears that a slow release of subsidy would hamper procurement and storage operations. The government plans to purchase 15 per cent more rice from farmers in 2012-2013 over the previous year. Purchases have already begun in Punjab and Haryana and would start in other parts of the country around November.

“FCI would continue to purchase, store and distribute grain as earlier and there won’t be any delay in payment,” FCI Chairman Amar Singh said.

Meanwhile, to liquidate its stocks from warehouses, the government is negotiating with Iran for exporting two lakh tonnes of wheat in December and 10 lakh tonnes annually for the next three years, the FCI has said.