Subsidy bill provides ample food for thought

‘‘With escalating economic cost and poor targeting, the food subsidy bill has reached a level that is a significant proportion of the total government expenditure,’’ the study notes.

In 1999-2000, this bill stood at Rs 9,434 crore. In just five years, it multiplied nearly three times to Rs 25,800 crore.

The FM cannot miss the economic logic. Much of the subsidy goes into the minimum support price at which the government agrees to buy grains from farmers. This is based on the recommendations of the Commission on Agricultural Costs and Prices, but there are glaring problems.

• In recent years, the purchase price has been consistently higher than the recommended support price. They touched a peak of 63 million tones in July 2002, against the norm of 24 million tonnes.

• Large stocks of foodgrains raise the subsidy bill and to bring these stocks down, they are being sold to exporters almost at the same price at which they are given to BPL families.

• There are severe regional imbalances as the purchase operations of FCI are limited to Punjab, Haryana, Western UP, AP and Chhatisgarh. So only farmers from these states get the subsidy and as the report notes ‘‘a large percentage of these farmers are not even poor’’.

• FCI concentrates on buying just rice and wheat. This has distorted the cropping pattern. Since both are water and fertiliser-intensive, the environment pays a price.

The study says the subsidy should go to coarse grains consumed by the poor alone.