Grain buying implications worry finance ministry

The ambitious scheme of providing food security to the large masses of India is giving much worry to the Union finance ministry. The concerns include the additional subsidy burden and the extra grain state agencies will need to purchase, leaving little surplus in the market.

“It needs to be figured out how to address some practical problems. More than the availability of money to fund the scheme, the worry is about procuring foodgrains. Reduced food grain supply in the open market will put pressure on prices. Moreover, if there is a bad crop in a year, India will have to buy from the international market at high prices,” said a ministry official.

Food subsidy is estimated to cost the government about Rs 1,00,000 crore a year, with the amount going up every year, depending upon the increase in Minimum Support Price (MSP). This is more than a tenth of estimated tax collections in the current year and about one per cent of India’s GDP.

UNFREE FOOD

* Bill seeks to cap coverage of rural population at 75% and urban at 50%

* Of this, 46% of rural and 28% of urban population classified as priority category, getting 7 kg grain per head monthly

* General category households to get 3-4 kg grain per head monthly

* Priority category allocation at Rs  3 per kg for rice, Rs  2 per kg for wheat and Rs 1 per kg for coarse grains; for general category at half the MSP

* Average annual procurement to rise to 60-65 mt against current 55-60 mt

* Food ministry feels additional expenditure Rs  51, 000 cr annually. Agriculture ministry says extra annual need would be at least Rs  200,000 cr

* At present, targeted PDS supplies 65 mn BPL and 115 mn APL families.

Earlier, an experts’ panel headed by the Prime Minister’s Economic Advisory Council Chairman C Rangarajan, had also raised concern over procurement if a wider section of the population was covered. Once the contemplated law is implemented, average annual procurement will rise to 60-65 million tonnes of foodgrains, about 10 mt more than current levels. Implementation is expected to cost Rs 3.5 lakh crore.

The food ministry, though, feels the subsidy burden will escalate by just around Rs 28,000 crore and grain procurement as percentage of production will remain at around 30 per cent. “Since 2007-08, the average annual procurement of grains by government has been 30 per cent of total production. Assuming a normal growth in production, it will not be difficult to procure at least 30 per cent. As such, it won’t impact private trade,” said a senior food ministry official, actively involved in framing the law.

Earlier, agriculture minister Sharad Pawar had opposed the huge subsidy proposed under the programme. Some state governments, including Bihar, Tamil Nadu, West Bengal and Uttar Pradesh, also made their apprehensions clear about sharing any financial burden for implementing the proposed Act. Some states insist there be a proper budgetary provision by the central government for implementing the landmark Bill.

The Bill, aimed at providing access to nutrition at affordable rates, was introduced in the Lok Sabha in December. It seeks to give a legal right to cheaper foodgrains to 63.5 per cent of the population.

It provides for coverage of 75 per cent of people in rural areas, with 46 per cent of those covered in priority sections. And, 50 per cent of people in urban areas, with at least 28 per cent in the priority category. People in the priority category will be entitled to seven kg of foodgrains, comprising rice, wheat and coarse grains, per person per month. Rice will be provided at Rs 3, wheat at Rs 2 and coarse grains at Rs 1 per kg. The general category will get at least three kg of grain at a rate not exceeding 50 per cent of the MSP.

Currently, under the targeted public distribution system, the government provides 35 kg of wheat and rice per month at subsidised rates of Rs 4.15 and Rs 5.65 per kg, respectively, to 65 million below-poverty-line families. And, provides rice and wheat at Rs 6.10 and Rs 8.30 per kg, respectively, to 115 million above-poverty-line families.