Food subsidy allocation in the budget for 2012-13 is way short of what is required for the implementation of the proposed National Food Security Act, despite a categorical assurance by Finance Minister Pranab Mukherjee that the government would “fully provide” food subsidy to administer UPA's flagship legislation. In fact, the regular food subsidy requirement has been cut.

While declaring that the government proposed to phase out subsidies in fertilizer and petroleum products, the Minister had promised that the government would totally meet the food subsidy requirement while ensuring leakage-proof delivery.

However, he has not made enough allocation to bear out this assurance.

The requirement of subsidy for implementation of the proposed Act is estimated at Rs. 1,02,000 crore, but the budgetary provision for this is only higher than the previous year's by Rs. 2,177 crore for 2012-13, which does not even meet the Food Corporation of India's routine annual requirement of food subsidy for 2012-13 estimated at Rs. 85,000 crore.

Enquiries revealed that in addition to the above, the government owes the Food Corporation of India more than Rs. 28,000 crore as arrears on April 1, 2012.

Consider this: the total budgeted food subsidy was Rs. 72,823 crore in the Revised Budget Estimates for 2011-12.

As against this, the proposed subsidy allocation for 2012-13 is Rs. 75,000 crore. On the other hand, the total requirement to provide wheat at Rs. 2 per kg and rice at Rs. 3 per kg to at least 46 per cent rural poor and 28 per cent urban poor (priority category) under the food law is estimated at Rs. 1,02,000 crore.

Food subsidy accrues from the difference between the economic cost of foodgrains and their issue price for meeting the requirements of the targeted Public Distribution System, other welfare schemes and the carrying costs for food stocks. Subsidy also includes payment to a few States that go in for decentralised procurement of foodgrains.

On April 1, the FCI will have stocks to the tune of 518 lakh tonnes against the buffer norm of 212 lakh tonnes, incurring huge carrying costs. To meet its requirement, the FCI has been borrowing from the market and its cash credit limit is estimated at nearly Rs. 45,000 crore.

Experts opined that FCI arrears were perhaps not cleared to keep the fiscal deficit low.

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