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Food Subsidy Bill rises 14% to Rs 137 billion

The Economic Survey 2001-02 on Tuesday presented a grim picture for the food economy, saying much higher carrying costs have pushed up food subsidy bill to an alarming Rs 136.70 billion in this fiscal, a 13.8 per cent rise over 2000-01.

Illustrating the vicious cycle, leading to foodgrains stocks of 58 million tonnes with the government, it pegged a 29.4 per cent rise in food credit to Rs 517.63 billion this year.

Higher minimum support prices has led to excess procurement which together with reduced offtake has resulted in a much larger buffer stock entailing equally higher carrying costs.

The carrying costs which comprise freight, storage and interest charges have in turn raised the subsidy burden thus aggravating the attempt to contain the fiscal deficit.

Due to large stocks the buffer component of food subsidy has increased from only 13 per cent in 1997-98 (Rs 9.37 billion) to an alarming 41.6 per cent (Rs 56.80 billion).

Analysing the reasons for the mounting stocks, the survey says offtake of foodgrains has been low particularly in case of wheat on account of narrowing differential between the public distribution syatem and open market prices.

It expressed concern over the above poverty level families moving out of the PDS as the issue price was close to the market prices.

Offtake of wheat and rice has fallen to 32 and 48 per cent of the allocated quantity in 2000-01 compared to 86 and 96 per cent respectively in 1991-92.

Offtake declined dramatically after the introduction of the targeted PDS in 1998-99 which made distinction between the APL and BPL (below poverty level) population.


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