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Food subsidy bill rises to Rs 25,160 cr

July 07, 2004 13:21 IST

The Economic Survey on Wednesday expressed concern over the bloating food subsidy bill which has grown over 10 times since early 1990s to reach a massive Rs 25,160 crore (Rs 251.60 billion) in 2003-04 even as it pooh-poohed those who question the relevance of the food security system.

The projected rise in food subsidy to an estimated Rs 27,746 crore (Rs 277.46 billion) in 2004-05, up from a mere Rs 6,066 crore (Rs 60.66 billion) in 1996-97 is a serious threat to the sustainability of the country's food security system (FSS) in its present form, the annual Survey tabled in Parliament said.

Economic Survey 2003-2004: Complete Coverage

Calling for a need to address the issues adversely affecting the efficacy of the FSS, it said fixation of MSP of grains has to bear a distinct relationship to the cost of production.

Economic cost covering both acquisition and distribution of rice and wheat is put at Rs 1,262.51 and Rs 924.82 a quintal this fiscal -- up from Rs 1074.80 and Rs 887.51 a quintal, respectively in 1999-2000.

High MSPs apart, other factors which push up the economic cost of grains to FCI and must be addressed expeditiously include high level of state levies on procurement, high cost of borrowing to FCI, highly centralised system of procurement and distribution and management inefficiency.

However, the Survey pointed out that the comfortable supply situation and remarkable price stability nationwide, in respect of grains, despite the 2002 poor monsoon, have demonstrated the relevance of the FSS notwithstanding debates about its utility in the context of the ongoing liberalisation of trade in grains and comfortable foreign-exchange reserves.

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