Economic Survey 2020: Need to address rising food bill, revisit PDS rates

There is a need to address the rising food subsidy bill, and the government needs to "revisit" the subsidised rates at which foodgrains are distributed through ration shops, the Economic Survey said on Friday.

Foodgrains via ration shops are supplied at highly subsidised rates of Rs 3 per kg for rice, Rs 2 per kg for wheat and Rs 1 per kg for coarse grains through Public Distribution System (PDS) as per the National Food Security Act (NFSA).

"With a large share of poor people, maintaining food security is still a challenge. The rates fixed under the NFSA initially for a period of three years have not been revised since 2013, resulting in burgeoning food subsidy. The rates under NFSA and the coverage need to be revisited," the Survey said.

The food subsidy bill has increased from Rs 1,13,171.2 crore in 2014-15 to Rs 1,71,127.5 crore in 2018-19, it said adding that the reasons for widening of the food subsidy have been many.

While the economic cost has increased, the central issue price (the rate at which grains are sold in ration shops) for NFSA beneficiaries has not been revised from Rs 200 per quintal in case of wheat and Rs 300 per quintal in the case of rice.

The acquisition and distribution costs of foodgrains for the central pool together constitute the economic cost. The difference between the per-quintal economic cost and the per-quintal Central Issue Price (CIP) gives the quantum of food subsidy.

"While the interests of the vulnerable sections of the population need to be safeguarded, for sustainability of food security operations, the issue of burgeoning food subsidy bill needs to be addressed," the Survey added.

The NFSA has been implemented in all states and Union territories. However, in Chandigarh, Puducherry and urban areas of Dadra and Nagar Haveli, the NFSA is being implemented in cash transfer mode, under which food subsidy is being transferred into the bank accounts of beneficiaries who then have a choice to buy foodgrains from open market.

During the financial year 2019-20, the government allocated 603.88 lakh tonnes of foodgrains to states and UTs under the NFSA and other welfare schemes as on December 2019.

Under the NFSA, the government supplies 5 kg of subsidised foodgrains to each person per month to over 81 crore people through 5 lakh ration shops in the country.