Govt 'subsidises' grain leakage from public distribution system

The government is supplying nearly one million tonnes of heavily subsidised wheat and rice to states for sale to people living above poverty line (APL).

But since most of these people do not buy foodgrain from the public distribution system (PDS), most of these stocks are diverted to the open market.

The subsidy works out to nearly Rs 7 a kg for wheat and Rs 6.15 for rice, the average being Rs 6.65 per kg.

Besides, the number of ration cards issued to APL families throughout the country far exceeds the estimated number of such households. About 129.2 million APL ration cards are in circulation though the Planning Commission reckons that the number of such households is around 115.2 million, food ministry sources say.

According to the food ministry's latest assessment, while the economic cost of wheat (including procurement, storage and miscellaneous expenses) comes to Rs 13.07 a kg, it is issued to states for sale to non-poor families at Rs 6.10 a kg, about Rs 6.97 a kg lower than the cost. In case of rice, the economic cost comes to Rs 14.45 a kg, against the issue price of Rs 8.30 a kg. This means a subsidy of Rs 6.15 a kg.

In percentage terms, the subsidy comes to 53 per cent for wheat and 42.5 per cent for rice.

The monthly entitlement of PDS foodgrain per APL family is 35 kg, the same as for below poverty line (BPL) families or the poorest of the poor covered under the Antyodaya Anna Yojna.

The present computation of economic cost and subsidy on wheat and rice does not take into account the hefty increase of Rs 150 a quintal in the procurement price of wheat that is being planted.

The issue prices at which the Centre supplies foodgrain to states for the PDS were fixed in July 2002 and have not been revised in the past five years though the procurement prices and, hence, the economic costs, have been rising steadily.

Few state governments concede the fact that much of the stocks allocated for the non-poor find their way into the open market.

But last week, Delhi Chief Minister Sheila Dikshit publicly stated that the non-poor did not buy foodgrain from fair price shops and the grain allotted to these shops for them were usually diverted to other destinations. She also proposed that 40 per cent households in the APL category be taken out of the PDS.

The Centre allocates about 893,000 tonnes of wheat and rice to states every month for APL families. Since September 2006, an additional 1,00,000 tonnes wheat is being given to states every month to ensure stable open market prices.

Where people living in the poverty bracket are concerned, the Central issue prices since 2002 have been Rs 4.15 a kg for wheat and Rs 5.65 a kg for rice. This means a subsidy of Rs 8.92 a kg for wheat and Rs 8.80 a kg for rice.

For the Antyodaya scheme, meant for ultra poor households, issue prices have been kept at Rs 2 a kg for wheat and Rs 3 for rice, involving a subsidy of over Rs 11 a kg in both cases.