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LATEST NEWS UPDATES | Food Act won't add to subsidy cost

Food Act won't add to subsidy cost

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published Published on Jun 23, 2011   modified Modified on Jun 23, 2011

-The Times of India

 

The proposed Food Security Act may not put additional burden on the government in the current fiscal year as the government can find the resources to fund the plan from the spending outlined for 2011-12 , finance ministry officials said.

However, the food subsidy bill could soar to as much as Rs 75,000 crore from the estimated Rs 60,572.98 crore for the 2011-12 fiscal. Finance ministry officials said the government will provide the money for funding this exercise. The ministry has already asked various departments to tighten their belts and not to undertake any new spending commitments as it sticks to its plan of meeting the fiscal deficit target of 4.6% of gross domestic product. The government is keen to stick to its deficit target as it has embarked on a drive to mend public finances.

Earlier, the government had said it was ready to provide for any additional fuel subsidy as result of the spike in global crude oil prices and is confident of finding the resources from within the budget for the 2011-12 financial year. The government has an ambitious share sale programme in state run companies and plans to raise Rs 40,000 crore. Despite volatile stock market and global economic conditions, finance ministry officials are confident of achieving the target. It is also banking on other nontax revenues to help it keep within it spending limits despite pressure points on the subsidy front.

Sources said the ministry of food and consumer affairs was staring at a requirement of over 70 million tonnes of foodgrain to support the food security act. Given the trends in procurement and the need to maintain buffer stocks, it could pose a problem for the government and force it to import from the international market. Any plans to impose large quantities of grains could push up prices in the global market and widen the government's subsidy burden . Some analysts say the food subsidy could touch Rs 1 lakh crore in two years.

It remains to be seen how the government balances the demand for the food security act against the backdrop of a tight fiscal situation. Analysts say importing costly food to run the Food Security Act could blow a hole in public finances and reverse the trend in fiscal consolidation.

The Times of India, 23 June, 2011, http://timesofindia.indiatimes.com/business/india-business/Food-Act-wont-add-to-subsidy-cost/articleshow/8958841.cms


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