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Mandatory cheap foodgrains for poor may cause hike in oil prices

Gargi Parsai

Adequate stocks to meet requirements a cause for concern


Constraint on procurement of grain is actually more important

Requirement of grains under PDS will be 33.90 million tonnes


NEW DELHI: It is the availability of adequate foodgrains to meet the mandatory requirements under the proposed National Food Security Bill that worries the government, not the enhanced subsidy such a move would entail.

From what the government is planning it appears that the subsidies on petroleum products would go to meet the requirement of providing cheap foodgrains to the poor under the Public Distribution System (PDS) and to bring the Above Povertyline (APL) population in the net to meet the objectives of the proposed National Food Security Bill. If there should be cheaper foodgrains for the poor, then people would have to pay higher for diesel and petrol.

“The constraint on physical procurement of grain is actually more important since the financial cost can, in principle, always be accommodated by cutting other subsidies, such as on petroleum fuels,” says a note on the proposed Bill circulated by the Planning Commission after consultations with the Ministry of Food, Agriculture, Expenditure and the Department of Economic Affairs.

The Commission has sent its document to the National Advisory Council and to the Prime Minister's office.

Already there is a difference of opinion between the Department of Food and the Planning Commission on the annual availability of foodgrains. While the former takes the average annual availability of the PDS foodgrains at 40 million tonnes, the latter has made its calculations on the average procurement of 50 million tonnes.

With a raised minimum support price of wheat and rice, argues the Planning Commission, the average foodgrains procurement has been 55 million tonnes in the last three years despite a drought during kharif of last year.

At present the foodgrains allocation for the 6.52 crore below povertyline (BPL) population at 35 kg per household per month is 27.4 million tonnes. If the Empowered Group of Ministers for Food accepts the Tendulkar Committee estimate of 7.41 crore poor households based on 2005 population figures, the requirement of foodgrains would be 31.1 million tonnes.

However, for a projected 8.07 crore poor based on the 2011 population, the requirement of grains under the PDS would be 33.90 million tonnes. The subsidy requirement for this is between about Rs 50,000 crore to Rs 54, 000 crore including an additional amount of Rs 14,000 crore.

Added to the BPL are the mid-day meal and the Integrated Child Development Scheme for which the requirement is projected at 5 million tonnes. The total requirement, as per the planning commission estimates, for the BPL and welfare schemes alone would be in the range of 38 to 41 million tonnes.

This would leave a balance of an estimated 10 to 12 million tonnes from which to meet the allocation for the APL population, the buffer and strategic reserves requirement. At present the APL off take of the subsidised grains in PDS is about 16 million tonnes. Much of this is diverted into the open market.

The Commission suggested hiking the APL grain price to contain demand and the food subsidy bill.

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