Food subsidy cut Rs 4,524 cr a year

Grain rations reduced, higher prices for some.

In what will shave Rs 4,524 crore a year off the Centre's food subsidy bill, the government today reduced grain rations under the public distribution system and also raised their prices for all but the poorest households.

Differences within the Cabinet forced the government to drop a proposed increase in the issue price of grain for families below the poverty line, though it raised the issue price for rice by 85 paise a kg and for wheat by 95 paise a kg for the rest. The central issue prices of grain were last revised in July 2001.

The Cabinet also decided to cut the monthly grain entitlement for families below the poverty line by 5 kg to 30 kg a month. Beneficiary families above the line will now be entitled to a monthly ration of 20 kg instead of 35 kg.

The Centre had budgeted for a food subsidy bill of Rs 26,200 crore in 2005-06. Though the impact of today's changes will be felt only during the last quarter, it could result in a saving of over Rs 1,000 crore this fiscal year.

Proposals to snip the food subsidy were not taken up by the Cabinet on five earlier occasions because of opposition from Railway Minister Lalu Prasad who feared it might hurt his prospects in the Bihar Assembly elections.

A compromise solution between Prasad and Food Minister Sharad Pawar at today's meeting allows families below the poverty line and those covered under the Antyodaya Anna Yojana to buy grain at 2000 prices: Rs 4.15 per kg of wheat and Rs 5.65 per kg of rice.

Pawar, who moved the proposal, insisted it was high time for a decision because overall procurement of grain had come down and so availability was lower.

With families below the poverty line and those covered by the Antyodaya Anna Yojana also getting food benefits under rural employment programmes, the government feels the lower rations are adequate to meet the nutritional requirements of poor households.

Outside the Cabinet, the Communist Party of India (Marxist), a key government ally, called it a "retrograde move" and "a betrayal of the United Progressive Alliance government's commitment to the people."

The CPI(M) said this would also affect the ability of the Food Corporation of India to procure grain at minimum support prices.

The issue price of grain for families above the poverty line is now 70 per cent of the economic cost and for those below the line 50 per cent of the cost.

The actual issue price for wheat for families above the poverty line is Rs 7.05 a kg and for rice Rs 9.15 a kg. The economic cost of rice in 2000 was Rs 11.30 a kg and that of wheat Rs 8.30 a kg.