Government's food subsidy bill likely to double

Various estimates of the extra cost to the government for an improved food security Bill are doing the rounds, but many agree the Union government’s proposed food subsidy bill would double.

The proposed Bill offers 25 kg per family per month at Rs 3 a kg, to only families below the poverty line, or about 84 million households. Activists are insisting this be raised to 35 kg a family and to an estimated 200 million families.

Many go further. Activists have been on the streets in Delhi for the past four days, demanding subsidised food for every family in the country, at the rate of 35 kg each. Planning Commission members Sayeda Hamid and Abhijit Sen came out recently to meet the protesters trying to get past barricades at the Commission office and said they were still working out poverty estimates.

Kavita Srivastava, one of the campaign leaders, said the government had no justification in shying away from spending a few crores more on food security when doling out many times more in subsidies to industry. The campaign is backed by economists like Jean Dreze and Jayati Ghosh. Ghosh says the universal (as in covering every family) campaign is an absolute necessity and would cost 1.2 per cent of the Gross Domestic Product, close to 90,000 crore. That would mean coverage of 200 million households.

The cost of the present public distribution system reaching out to 65 million BPL (below poverty line) card holders and another 40 million APL (above poverty line) card holders is about half of this. According to the Planning Commission’s own findings, only 25 million BPL card holders are getting the promised allotments.

According to a calculation by Jean Dreze and Reetika Khera, a reformed PDS in a quasi-universal scenario may bring down the cost of the food bill considerably. According to the costing worked out by them, the universal coverage would mean 147 million families and the cost annually would be Rs 61,740 crore compared to Rs 45,000 now. The present PDS scheme covers 110 million households.

According to economists Nilachal Acharya, a researcher with the Centre for Budget and Governance Accountability, and Praveen Jha, also with CBGA and a professor at Jawaharlal Nehru University, the cost of the food bill would go up steeply with universalisation. It would require an additional Rs 94,419 crore.
 

FEEDING INDIA
	For 35 kg/ family/month	For 25 kg/ family/month
Economic weighted average of wheat  and rice cost per kg (in Rs)	16	16
Proposed per kg price in NFSA (in kg)	3	3
Net subsidy per kg	13	13
Number of kg per month	35	25
Subsidy per month per family (in Rs)	455	325
Annual subsidy per family (in Rs)	5,460	3,900
For universal PDS for 200 million  families (Rs crore)	1,09,200	78,000
	For 35 kg	For 25 kg
Universal Public Distribution System  (200 million families)	1,09,000	78,000
Arjun Sengupta Committee (154 million families)	84,084	60,060
Saxena Committee (100 million families)	54,600	39,000
Tendulkar Committee (74 million families)	40,404	28,860
(Cost worked out by Right to Food Campaign)

That is if it targets all the 233 million households in the country, provides 35 kg with rice and wheat in a ratio of 2:1. Jha says the total yearly food subsidy would be Rs 1,46,909 crore. However, if rice is distributed at Rs 3 rather than Rs 2, the requirement would reduce to Rs 84,399 crore.

Says Praveen Jha, “The cost would definitely go up three times if the PDS is universalised.” The cost estimation done by the Right to Food campaign says the total increase would be around Rs 50,000 crore if 200 million families are given 35 kg a month at the rate of Rs 3 a kilo.

The government’s draft Bill itself had been sent back to the Empowered Group of Ministers to be reworked, incorporating the views of Congress president Sonia Gandhi, which echo some of the demands of the activists. She has asked for retaining the quantity at 35 kg, while the draft Bill sought to reduce it from 35 kg to 25 kg. She has also talked of extending it to both APL and BPL families.