Food Ministry to save Rs 2900 cr on subsidy bill

The food ministry had to come out with a clarification as the information and broadcasting minister, Pramod Mahajan, misquoted certain figures relating to the prices of all varieties of rice in the official press briefing on Thursday after the Cabinet meeting.

In a press release on Friday, the food ministry has stated that the consumer subsidy is a major component of food subsidy. Had there been no increase in the central issue prices of foodgrains, the consumer subsidy component of food subsidy would have been Rs 8500crore. As a result of upward revision of issue prices, the consumer subsidy has come down to Rs 5600 crore resulting in a saving of Rs 2900 crore.

In a informal chat with the journalists after the press briefing on Thursday, Mahajan stated that the annual saving on subsidy would be about Rs 5,000 crore instead of stating that the consumer subsidy has come down to the level of Rs 5600 crore on account of the central issue price hike in foodgrains.

Defending the price hike, the food ministry has stated the minimum support prices (MSPs) of wheat and rice have been raised on several occasions during the last four years without a simultaneous increase in central issue prices (CIPs) of these items. Considering the hike in MSPs and the financial implications on the food subsidy bill, the government decided to raise the CIPs of wheat and rice with effect from January 29.

CIPs of wheat and rice distributed under PDS (ex-FCI godown) were last revised in February, 1994 at Rs 402 for per quintal of wheat, Rs 537for per quintal of common rice, Rs 617 for per quintal of fine rice and Rs 648 for per quintal of superfine rice.

However, with the inception of targeted public distribution system (TPDS) on June 1, 1997, the CIPs were readjusted at Rs 250 per quintal of wheat for BPL families and Rs 450 per quintal of wheat for APL families. The CIPs for common, fine and superfine rice was 350 per quintal for BPL families. For APL families, the CIP for fine rice was Rs 650 per quintal and that of superfine rice was Rs 750 per quintal. With the merging of the two varieties of fine and superfine rice into Grade A, the CIP of Grade A rice to APL families was adjusted to Rs 700 per quintal.

Common rice was issued to BPL families only and not to APL families.

However, on request of some state governments, a special dispensation was given to the hilly areas of northeast states including Sikkim, UP, Jammu & Kashmir and Himachal Pradesh where common rice was issued at Rs 550 per quintal.