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The food ministry’s opposition to the Shanta Kumar committee’s suggestion of diluting coverage of the Food Security Act is likely to rekindle the debate over subsidy burden.
The committee, for reform of the Food Corporation of India (FCI), had recommended lowering of coverage to 40 per cent of the population, against the 67 per cent under the food Act at present. It also called for increasing the allocation of foodgrains to seven kg for each identified beneficiary, against five kg currently.
For 2014-15, the subsidy on food was estimated to be around Rs 1,15,000 crore. Of this, around Rs 4,000 was on account of sugar alone. But the actual requirement for the year is already estimated to have exceeded Rs 1,50,000 crore.
The difference of Rs 35,000-Rs 40,000 crore is on account of unpaid bills to be settled in 2015-16. If the food Act is implemented in full, the subsidy is projected to zoom to around a minimum Rs 1,60,000 crore.
This might not be much higher than the current subsidy requirement, but it is unlikely to remain static, given that minimum support prices (MSP) for grains never get reduced; these are not even maintained at the same level.
The sale price of foodgrains through the public distribution system (PDS), though, has been kept unchanged since 2002. Under the Food Act, it has been further lowered but with a caveat that the sale price could be altered after lapse of three years from the passage of the Bill in August 2013.
The Act guarantees a minimum of five kg of either wheat or rice or coarse cereals to each identified beneficiary per month, at a subsidised price of Rs 3 a kg for rice, Rs 2 a kg for wheat and Rs 1 a kg for coarse cereals.
The saving grace for the government, at least in 2014-15, is that only 11 of the 29 state governments have implemented the Act, and they have done that partially.
Questions have also been raised on the manner in which the beneficiaries have been identified, and the process of identification. The Act says the beneficiaries of the scheme will be identified by state governments, within the broad parameters laid down by the Centre.
The present PDS is based on beneficiaries identified in 1992-93. According to this classification, PDS grains are distributed through ration shops to around 180.4 million families — 65.2 million of those below poverty line. Assuming that each family has 4.5 members, the current PDS broadly covers 811.8 million people. But allocation of foodgrains from the central pool takes place on the basis of availability in that pool, and offtake by states in the previous three years.
Under the food Act, about 813.5 million people will be covered. This also means there will be little change in the actual number of people to benefit from the Act. A critical difference, however, is that allocation and offtake to above-poverty-line families is not fixed under the current PDS but will be static under the food Act.
Rough calculations suggest the actual number of beneficiaries will be somewhere around 480 million, if the legal entitlements under the food Act are lowered to cover 40 per cent of the population, against the current 67 per cent. It is slightly more than the current BPL coverage of around 300 million people. The quantum of grains that each person gets will be more at seven kg a month.
The total subsidy saved should be around Rs 40,000 crore a year, which, as the committee suggests, will be further brought down by way of adopting cash subsidy in phases.
A research paper published by former Commission for Agricultural Costs and Prices (CACP) chairman Ashok Gulati a few years ago had estimated the subsidy implication at over Rs 6 lakh crore. But this was based on the old food Act formula of 75 per cent coverage in urban areas and 50 per cent in rural areas.
