Food subsidy may devour record Rs 50,000 crore this fiscal

The food subsidy is likely to touch a record Rs 50,000 crore in the current fiscal, nearly Rs 18,454 crore higher than Rs 31,546 crore in 2007-08.

At this level, the subsidy will exceed the budgetary provision by Rs 17,333 crore. The 2008-09 Budget had set apart Rs 32,667 crore for the food subsidy.

According to the food ministry’s reckoning, the subsidy varies from 58 to 86 per cent for wheat and 51 to 82 per cent for rice for various categories of households in the 2008-09 financial year.

Ministry sources attribute the steep rise in the food subsidy to record foodgrain procurement, hefty increases in the minimum support prices (MSP) without raising the issue prices and a substantial increase in stocks in the Central grain pool.

At the recent economic editors’ conference, Food and Agriculture Minister Sharad Pawar had said foodgrain procurement this year had touched a new peak of around 51 million tonne. This included 22.6 million tonne of wheat and 28.4 million tonne of rice.

As a result, total foodgrain stocks in the official kitty swelled to nearly 30 million tonne by the beginning of October, 2008, when fresh rice procurement from the recently harvested kharif crop began.

This stockholding is nearly 14 million tonne over the buffer stocking norms, which requires the government to hold 16.2 million tonne of grain in its coffers on October 1.

In fact, inventories of both rice and wheat also exceeded the buffer norms. The food ministry’s estimates place the wheat stock on October 1 at nearly 22 million tonne, exactly double the buffer norm of 11 million tonne for this date.

The rice inventory, too, was nearly 7.86 million tonne, over 2.6 million tonne more than the buffer norm of 5.2 million tonne for this date.

Ministry sources also maintain that the country’s grain inventories will be more than comfortable even on April 1, 2009, when the next wheat procurement season begins.