Higher Discount Will Raise Food Subsidy Bill To Rs 10,000 Cr,

The steering committee of the ruling United Front yesterday mulled over the economics and desirability of distributing foodgrains to 30 per cent of the population below the poverty line at a double discount 50 per cent of the already-subsidised foodgrain distributed through the existing public distribution system.

However, the committee did not take any decision; it decided to hold further discussions on the controversial issue at the next meeting.

Union finance minister P Chidambaram informed his colleagues in the committee that distributing foodgrain at 50 per cent discount would raise the food subsidy to Rs 10,000 crore a year. He reminded them that someone needed to pay for the subsidy burden and said, while arriving at decision, the committee should take note of the need to reduce the fiscal deficit in the Union budget. The next meeting of the steering committee, scheduled tomorrow, could be an extended session as the members grapple with the need to strike a balance between the pro-poor commitments and the hard realities of finding the cash for it.

 

Presided over by Prime Minister H D Deve Gowda, the meeting was attended by almost all members of the committee including Union finance minister P Chidambaram, Left leaders like H S Surjeet, A B Bardhan and chief ministers Jyoti Basu (West Bengal), N Chandrababu Naidu (Andhra Pradesh), P K Mahanta (Assam).

The two-hour-long meeting discussed only one issue the increase in the foodgrain prices. All other issues like the Sunday resolution of the Congress Working Committee to extend issue-based support to the 13-member UF coalition government, the proposed increase in petroleum products, and the controversial Tata-SIA proposal for a private airline have been put off till the next meeting of the committee.

Gowda, who left the meeting early because he had to attend the marriage ceremony of the daughter of former Prime Minister Rajiv Gandhi, expressed his commitment to the implementation of long-promised new PDS scheme.

Surjeet set the ball rolling by initiating the discussion. He was apparently representing the views of the entire Left which had separate talks before the meeting of the steering committee. Economic prudence suggested that the government should bridge the gap between the procurement price of wheat and other grains and the issue price (the price at which the grain is released for the PDS by the government).

However, the Left members said the price rise should be moderated to the extent warranted by the revision in procurement prices earlier. Effectively, this will scuttle any attempt to pass on to the consumer the burden that the government has been shouldering.

Union food minister D P Yadav explained that the management of wheat prices had come under strain because of the shortfall in wheat production by 31 lakh tonnes last year. The resultant shortfall in procurement was 41 lakh tonnes. Before the UF government took over, the price of PDS wheat was Rs 3.85 per kg. After the government took over, it was raised by 35 paise per kg.