Big cut in food subsidy raises concerns

Food subsidy quantum is lowest in last four years

Published - March 05, 2022 08:40 pm IST - Bengaluru

The State Budget announced the distribution of one kilo of ragi or jowar additional to five kilos of rice to 4.34 crore beneficiaries at a cost of ₹1,400 crore. However, the Budget papers show that the State Government subsidy to the Food and Civil Supplies Department has come down sharply from ₹3,946.56 crore in 2021-22 to ₹2,810 crore in 2022-23, raising several questions. 

Ekroop Caur, Secretary (Budget and Resources), Finance Department, said this was so since the State Government had carried out the required procurement through rolling fund in the current fiscal, which inflated the subsidy bill in 2021-22, but showing a lower bill for 2022-23, despite an additional distribution of one kilo of ragi or jowar, with no cuts or replacement to the present distribution through the Public Distribution System. 

However, the subsidy bill for food and civil supplies, despite a new programme at a cost of ₹1,400 crore is the lowest in the last four years, not just compared to the previous year. 

“This needs to be studied more deeply, as there are chances that the Government may have introduced something new, but cut away other existing programmes, may not be in PDS but elsewhere,” said Jyotsna Jha, Director, Centre for Budget and Policy Studies. Agricultural economist T.N. Prakash Kammardi said the procurement of crops under the Minimum Support Price (MSP) regime is slowly being chipped away and the reduced subsidy bill may be an indication of this. 

Most of the other subsidies like Social Welfare, Education and Women and Child Development, except for Commerce and Industries, that were severely slashed during the pandemic years – 2020-21, 2021-22 – are making a slow climb back to 2019-20 pre-pandemic levels in terms of absolute allocations.

For instance, subsidy for the education sector which was ₹567.83 crore in 2019-20, was slashed to ₹295.72 crore in 2020-21 and ₹284 crore in 2021-22, but up to ₹388.27 crore for 2022-23, still less than 2019-20 levels. Similar is the case with subsidy for Women and Child Development, ₹187.04 crore for 2022-23, still less than ₹304.30 crore in 2019-20. The Social Welfare subsidy bill for 2022-23 is pegged at ₹168.5 crore, slightly more than ₹166.4 crore in 2019-20.

“This only shows that these subsidies may have increased relatively over the previous year, but not in real terms. Key sectors are yet to get back to pre-pandemic levels even in absolute allocations. Even those that have, have only done so nominally and not in real terms, as the inflation has shot up in these years and the size of the Budget has also increased over the last four years,” said Dr. Jha. 

Subsidy bill for the commerce and industry almost doubled to ₹1,672.16 crore in 2020-21 from ₹896.76 crore in 2019-20. The bill has slightly reduced to ₹1,490.50 crore for 2022-23 compared to ₹1,585.54 crore in 2021-22. “This is partly due to the support given to industries during the pandemic and the incentives given to the industry,” Ms. Caur said. 

“The slashing of subsidies for all social welfare sectors, while subsidies for industry is doubled, shows the priorities of successive governments. Post pandemic welfare should have been the top most priority, but it is clear that Governments are moving away from the welfare state concept,” said K. S. Vimala, of All India Democratic Womens’ Association.

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