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LATEST NEWS UPDATES | Release of foodgrain could inflate subsidy bill by Rs 20-25K crore-Rajeev Deshpande

Release of foodgrain could inflate subsidy bill by Rs 20-25K crore-Rajeev Deshpande

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published Published on May 4, 2012   modified Modified on May 4, 2012

With its granaries brimming over, the government faces a crippling dilemma: The tab for releasing foodgrain to make way for new arrivals adds up to Rs 20,000-25,000 crore, an unviable addition to the subsidy bill.

The government's bind was succinctly outlined by finance minister Pranab Mukherjee when he told a meeting called by Prime Minister Manmohan Singh on Wednesday that vacating food silos will mean a hefty cost at a time when battling deficits is priority.

With bumper harvests and hikes in procurement prices filling up food silos, the meeting on food stock management found there are no easy answers despite a growing concern that the government is adding to its existing stock. ToI had reported on April 4 that by June, 12 million tonnes of food grain will have to be stored in the open.

Confronted with the hard economics of moving food grain out of storage, the meeting agreed on setting up a committee to consider a long-term policy on grain export with agriculture minister Sharad Pawar's argument that a stop-start approach is hurting farmers and industry finding support.

Pawar is believed to have said CMs like Parkash Singh Badal of Punjab were pressing that they should be allowed to export foodgrain as the Centre lacks storage for wheat procured in the Rabi season. As it is, stocks had been kept in the open on "kutcha plinths" for more than two seasons.

Sources said the PM, who is conservative about foodgrain exports being wary of the political risk in case domestic prices rise, could now be more amenable. He made a telling intervention when Pawar was pitching for sugar exports, saying interests of farmers were closely linked to the health of the industry.

The PM took the view that there is a need to strike a balance between exports and domestic demands.

The meeting, attended by senior ministers like home minister P Chidambaram, food minister K V Thomas and commerce minister, besides Mukherjee and the PM, worried about a cycle of high MSP-record procurement-storage deficits becoming an fiscal nightmare.

It was felt even if government added storage capacity; it would be simply locking away foodgrain as offering stocks to states at a price higher than at PDS rates found no takers. The holding cost of food grain, meanwhile, is burning a hole through the government's pocket.

As even states other than traditional wheat baskets like Punjab and Haryana delivering bonus yields, food stocks are set to hit the 75 million tonne mark. The current off take of 53-55 million tonnes for PDS will not clear stocks fast enough for fresh procurement.

Moving grain comes at a cost as government pays Rs 22-Rs24 for every kg procured, while the above poverty line sale price to states is Rs 8 a kg and the discussion saw the ministers also approving earlier decisions to ease export controls on sugar and cotton. The procedures are expected to be put in place soon.

On ethanol pricing, the meeting was uncertain whether the government should fix a price for farmers. The issue is expected to be debated by the Cabinet soon.

The Times of India, 4 May, 2012, http://timesofindia.indiatimes.com/india/Release-of-foodgrain-could-inflate-subsidy-bill-by-Rs-20-25K-crore/articleshow/12988754.cms


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