Agriculture Policy

FM Shifts Food and Fertiliser Subsidy Arrears to the Budget; Acknowledges their True Extent

The Finance Minister has come clean on subsidies. The food subsidy was underprovided in the last budget. The difference between the actual bill and the budget allocation was parked in the books of the Food Corporation of India. In this budget, the FM has acknowledged the concealment and provided Rs 4,22,618 cr for food subsidy against the budget estimate of Rs 1,55,570 cr, an increase of Rs 3,07,048 cr. The food subsidy bill for next year is pegged at Rs 2,42,836 cr.

The fertiliser subsidy as per the revised estimate is Rs 1,33,947 cr against the budget estimate of Rs 71,309 cr, an increase of Rs 62,638 cr. For the next year, the allocation is Rs 79,530 cr.

The food subsidy bill is high not only because procurement rates are higher than market prices, but also on account of handling, storage, transportation and interest costs. The economic cost as per the Food Grain Bulletin is Rs 37.27/kg for rice and Rs 27.84 for wheat. The procurement price of rice was Rs 18.68/kg for common grade and Rs 18.88/kg for A grade. The procurement rate of wheat is Rs 19.25/kg. Consumers pay Rs 3/kg for rice and Rs 2/kg for wheat. The economic cost of wheat is 40 percent more than the procurement price and that of rice is nearly double.

(Top photo courtesy of PIB)

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