Plans to reduce food subsidy on hold

Succumbing to political pressure, Food and Agriculture Minister Sharad Pawar has decided to postpone the hike in prices of grain supplied through the public distribution system (PDS) to those above the poverty line and the reduction in monthly rations.

This follows the adverse political fall-out of the government's decision, with most constituents of the ruling United Progressive Alliance, including the Congress and the Left parties, demanding its roll-back. The DMK and the ruling AIADMK in the Tamil Nadu had also vehemently opposed the move.

Pawar today said he would try to convince detractors about the necessity of taking such a step. Till then, its implementation will be kept on hold.

A detailed statement issued by the food ministry today categorically stated that the government's grain stocks haddwindled to below buffer stocking norms and it would be difficult to meet the requirement of the PDS next year if the supply was maintained at the previous level.

The decision to change the PDS prices and supply norms was taken by the Cabinet Committee on Economic Affairs on Friday, based on the proposal mooted by the food ministry.

The proposal was aimed at ensuring better targeting of the subsidised grain in view of the dwindling grain inventories of the Food Corporation of India (FCI).

The approved changes involved reduction of monthly ration quota from 35 kg to 20 kg for the above-poverty line households and to 30 kg for the families below poverty line and those covered under the Antyodaya Anna Yojna.

The central issue prices were raised by Rs 85 a quintal for wheat and Rs 95 a quintal for rice for the families above poverty line. The prices for the below-poverty line households and Antyodaya beneficiaries were kept unchanged.

The food ministry is learnt to have floated some other suggestions as well for better subsidy targeting but these proposals could not get the CCEA approval. All the proposed measures together would have resulted in a subsidy saving of Rs 4,524 crores.

The saving on subsidy through the measures finally approved by the CCEA would be rather limited, food ministry sources pointed out.

Food ministry's official statement maintained that the impact of the cut in monthly quota and price revision would have been "marginal" in most states.

Considering the low offtake of grain by the families above poverty line (14.4 per cent of the allocation in 2004-05), even the reduced quota of 20 kg would enable most states to lift the grain based on the 2004-05 offtake level.

"Similarly, in respect of the below-poverty line households, as the allocation has been brought down only by 14 per cent and the overall offtake was 81 per cent last year, most states would have continued to get the allocation comparable to their offtake during 2005-05," the food ministry maintained.

The grain allocation for the Antyodaya scheme would actually rise because of the increase in the number of households covered under it from 2 crores in 2004-05 to 2.5 crores in 2005-06.

Giving the details of the FCI stock position, the ministry said the inventory of wheat had come down to 6.2 million tonnes on January 1 this year and would fall further down to mere 1.5 million tonnes by April 1.

This would be below the buffer norm of four million tonnes for April.

However, the stock position of rice was expected to be above the buffer norm of 12.2 million tonnes in April thanks to the anticipated good procurement in the on-going marketing season.

The total grain stock in the country, which had peaked at around 64.8 million tonnes in June 2002, had plummeted to 15.1 million tonnes in October 2005. This was lower than the buffer norm of 16.2 million tonnes for October.