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LATEST NEWS UPDATES | Food subsidy to be Rs 1,10,600 cr if NAC desire is met by Sruthijith KK

Food subsidy to be Rs 1,10,600 cr if NAC desire is met by Sruthijith KK

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published Published on Feb 16, 2011   modified Modified on Feb 16, 2011

The total food subsidy bill will balloon to 1,10,600 crore if entitlements recommended by the Sonia Gandhi-headed National Advisory Council are incorporated into the Food Security Bill , the Ministry of Food And Public Distribution has estimated. The subsidy bill in the initial phase will be 93,000 crore.

The ministry's estimates are significantly higher than the ones made by both NAC and the Rangarajan panel that studied the NAC recommendations.

The ministry, headed by Congress leader KV Thomas, will be responsible for introducing the draft bill before the Cabinet and will also be the nodal agency for implementing the ambitious flagship welfare programme of the UPA government.

NAC had estimated a total subsidy burden of 71,837 crore in the initial phase and 79,931 crore in the final phase. The Rangarajan panel had said this is likely to be higher, at 85,584 crore in the initial phase and 92,060 crore in the final phase.

The ministry's estimations assume 100% absorption of the scheme by states, while the NAC had assumed an 85% utilisation in their calculation. "I don't find any difficulty in principle in implementing NAC's proposals. There might be some slight variations when we come to the implementation stage," Thomas told ET.

"The aim of both NAC and the Rangarajan panel is to make essential commodities and nutrition available to the common man. The Food and Civil Supplies Ministry is getting ready for procurement and effective distribution once the bill is passed," he added. The ministry has started the groundwork for the scheme, which, despite disagreements between the government and NAC on the extent of legal guarantee and other details, will be implemented in some form soon.

There is now broad consensus over the benefits that the priority category, or the below poverty line segment will receive. The legal entitlement will cover 46% of the rural population and 28% of the urban population and will constitute 35 kg grain per month. Rice will be provided at Rs3 per kg and wheat will be provided at Rs2 per kg. NAC recommends 1 per kg of millets but Rangarajan panel doesn't recommend this.

Most of the differences between the two agencies are in the entitlement for the general, or above-poverty-line category. NAC's recommendations say the legal entitlements should cover 90% of the population in rural areas and 50% in urban areas. Rangarajan panel favours legal entitlement only for the priority category and recommends coverage for the general category by executive order depending on grain availability.

The Food Ministry will face mammoth challenges if the NAC recommendations become law. The procurement levels, for instance, will have to nearly double. Currently, the state procures about 30% of India's grain production, or about 42 million tonnes.

To implement NAC's version of the food security act, the necessary grain procurement will be about 71.76 million tonnes, according to ministry estimates. If procurement is ramped up to those levels, grain availability and pricing in the open market will be sharply affected. NAC's counter to this problem has been to suggest a phased and calibrated rollout of the scheme.

Another problem is storage. At current levels of procurement, the Public Distribution System is faced with shortage of storage capacity. An additional 15 million tonne of storage space is required. If the procurement doubles, storage capacity will also need to be rapidly ramped up. Ancillary costs such as these are not part of the subsidy burden calculation.

The Economic Times, 16 February, 2011, http://economictimes.indiatimes.com/news/politics/nation/food-subsidy-to-be-rs-110600-cr-if-nac-desire-is-met/articleshow/7505034.cms


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