Finance red flag over 38% jump in food subsidy


The annual subsidy bill for the UPA's proposed food guarantee law has been estimated at Rs 1,24,747.1 crore, 38.6 per cent over the budgeted food subsidy of Rs 90,000 crore for next year.

An alarmed finance ministry is learnt to have red-flagged some major changes proposed in the original National Food Security Bill, sources said.

It has objected to the proposal to do away with the original categorisation of beneficiaries into priority (akin to BPL) and general (APL), with the latter being entitled to lesser foodgrains at prices higher than those fixed for the priority category.

The food ministry's revised proposal seeks to provide 5 kg of foodgrains every month to each individual in BPL and APL households. The original proposal envisaged 7 kg every month to BPL and only 3 kg to APL individuals, that too at higher prices.

Government sources said that the Department of Expenditure, in its comments to the food ministry's cabinet proposal, has termed the bringing of APL on par with BPL as "totally inequitious and not justified" because "BPL beneficiary's entitlement will be reduced" while APL would get "double benefit" in the form of more grains at prices lower than originally planned.

The department has also expressed reservations against the sweeping coverage, in which 75 per cent of rural and 50 per cent of the urban population would be uniformly guaranteed heavily subsidised foodgrains.

Referring to the updated poverty estimates of 2009-10, according to which only 33.8 per cent of people in rural areas and 20.9 per cent in towns and cities are below the poverty line, the department has submitted that "it may not be desirable to cover a larger segment".

In view of the legally binding nature of the subsidy burden that the food guarantee law will impose, the department has suggested that the proposed prices (Rs 3, 2, 1 per kg of rice, wheat and coarse grains respectively) "should be valid for one year" and "thereafter, the prices should be revised" in accordance with a formula that takes into account annual changes in procurement costs and other expenditures.

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