The Centre must increase the prices which 80 crore poor people pay for subsidised rice and wheat at ration shops to trim the ‘bulging’ food subsidy bill, the Economic Survey recommended on Friday.
Under the National Food Security Act , ration cardholders are allowed to buy 5 kg of foodgrains per person each month at a subsidised rate of ₹2 per kg of wheat and ₹3 per kg of rice. This rate, known as the Central Issue Price (CI), has not been increased since the NFSA was enacted in 2013. However, the Food Corporation of India’s economic cost of buying and distributing foodgrains had surged since then.
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For wheat, the economic cost had risen from ₹19 per kg in 2013-14 to almost ₹27 per kg in 2020-21. For rice, the increase is from ₹26 per kg to ₹37 per kg. The NFSA also increased the number of people covered by the public distribution system (PDS). Together, they account for a rise in government spending on food subsidy.
“The food subsidy bill is becoming unmanageably large. While it is difficult to reduce the economic cost of food management in view of rising commitment towards food security, there is a need to consider the revision of CIP to reduce the bulging food subsidy bill,” said the Survey.
In 2020-21, apart from the regular NFSA expenditure, the Centre spent more than ₹1.2 lakh crore to distribute free foodgrains to ration cardholders as part of its COVID-19 relief package.
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Development economist and IIT Delhi associate professor Reetika Khera urged the Centre not to accept the Survey’s recommendation. “Saving lives should be a greater priority for the government than saving on the food subsidy. Given that the PDS played the role of a lifeline during the past year, this recommendation is suicidal,” said Dr. Khera, who is also associated with the Right to Food campaign. “The government should look for other ways of raising revenues (eg, a wealth tax, property taxes, etc) to contain the fiscal deficit,” she added.
The Survey also doubled down on the need for reforms in the sector, even as large numbers of farmers protested the agricultural farm reform laws on Delhi’s doorstep.
“There is a need for a paradigm shift in how we view agriculture from a rural livelihood sector to a modern business enterprise. In this context, both production and post production in agriculture needs urgent reforms to enable sustainable and consistent growth,” said the Survey, terming the recent Central laws as “a remedy, not a malady”. In its previous report for 2019-20, the Survey had recommended that the Essential Commodities Act be repealed, calling it an “anachronistic legislation. Its advice was partially followed, with the Centre amending that law as part of its reforms last summer.
