India's food subsidy up 65% in FY10

India's food subsidy bill is estimated to have crossed Rs 72,000 crore in the 2009-10 fiscal, a 65 per cent jump from the previous year, mainly due to increased procurement and rising cost of foodgrains.

The subsidy, given by the Centre to procurement agencies like the Food Corporation of India (FCI), is to cover the difference between buying and selling prices.

To ensure that farmers get a good price--the minimum support price--for their crop and at the same time food is available to the poor at below market rates, the government procurement agencies buy costly and sell cheap, with the difference being made good by the Centre.

"The requirement of food subsidy in the 2009-10 fiscal is Rs 72,234.98 crore as against the budgetary provision of Rs 58,228 crore," a senior government official said.

In the 2008-09 fiscal, the Centre had to bear Rs 43,668 crore on food subsidy.

The official said that the 65 per cent rise was primarily due to record foodgrains procurement, more supplies for the poor via ration shops and rising cost of grains.

The Centre had procured 59 million tonnes of rice and wheat in 2009-10.

Meanwhile, supplies to the states for distribution through ration shops rose to 56.6 million tonnes in 2009-10 from 39 million tonnes in the previous year.

On the reasons for rising food subsidy, the official said the economic cost, which includes purchase price, taxes, transport, handling and storage charges, has been increasing consistently in the last few years.

The economic cost of rice has now increased to Rs 20.43 per kg from Rs 17.89 a kg in 2008-09, while that of wheat has gone up to Rs 15.43 a kg from 13.92 a kg in the review period.

However, rice is being supplied to the states at Rs 3-7.95 per kg and wheat at Rs 2-6.10 per kg under the Public Distribution System (PDS).

The central issue prices (CIP) have been kept unchanged since 2002, though economic cost has skyrocketed.