The government is planning to come up with a price protection fund to cushion the burden of food subsidy, which is expected to grow manifold under the new Food Security Bill.
The proposed fund, under the ministry of food and consumer affairs, is a Budget proposal for 2012-13.
Officials said the framework of the fund was at a nascent stage. “Some inferences are being drawn from the recommendation of National Farmers’ Commission report for the price stabilisation fund,” said a source.
According to the recommendation of the M S Swaminathan committee, set up by agriculture ministry, a market price stabilisation fund must be set up before the end of the 11th Five-Year Plan (2007-12), by the Centre, state governments and financial institutions. The aim is to protect farmers during violent fluctuations in crop prices — more so in the case of perishable commodities such as onions, potatoes and tomatoes.
The proposed fund, being raised by the consumer affairs ministry, also looks at the matter from the consumers’ point of view. According to officials, the objective of the fund is to rework the subsidy burden on account of the newly proposed Food Security Bill among the states and the Centre rather than overburdening the Union Government with the subsidy Bill. This will be in addition to the food subsidy in place.
An official said the view was that a fund might cover a much wider population rather than following the criterion of below poverty line (BPL), the benchmark for the food subsidy.
Initially, the scheme may cover the commodities under the public distribution system (PDS). It may later widen its scope to other commodities, which could be decided based on crop year and trends in demand and supply during the particular year.
Thus, at the proposed stage, while the Centre-borne food subsidy will cater to the subsidy bill on account of BPL families, the rest could be borne by a price protection fund and shared among states and Union Government. “After all, central schemes under public distribution system support the state subjects only,” pointed out an official. “It becomes only logical for the states to share some of the burden of the food subsidy.”
The price protection fund’s insulation of volatile and rising prices of essential commodities will ensure food supply to a much wider population — irrespective of their earning power, according to officials.
While the original budgetary allocation for the food subsidy during 2011-12 was Rs 60,000 crore, the actual subsidy outgo figured at Rs 95,300 crore. The higher outlay was due to an increased payout to the Food Corporation of India and states for foodgrain procurement for 2010-11.
The PDS involves distribution of essential commodities such as wheat, rice, sugar and kerosene to BPL families through a network of fair price shops. The system evolved as a major instrument of the government’s economic policy for ensuring availability of foodgrains to the public at affordable prices as well as for enhancing the food security for the poor. Aimed at poverty eradication, the scheme reaches out to more 300 million people through a network of about 4.99 lakh fair price shops.
The PDS is operated under the joint responsibility of the central and the state governments. While the central government has taken the responsibility for procurement, storage, transportation and bulk allocation of foodgrains, it is the states that handle the distribution.
