Despite Centre’s allocation of free rice, Tamil Nadu’s food subsidy bill continues to go up

Despite the Centre making the rice allocation free to States under the National Food Security Act (NFSA), the Tamil Nadu government’s food subsidy bill is on the rise.

For the coming financial year, an allocation of ₹10,500 crore has been made. This year, it is expected to be around ₹11,500 crore against the original estimate of ₹7,500 crore. During 2021-22, the bill was about ₹9,320 crore.

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In December last, the Union government announced that it would provide free grain to all National Food Security Act (NFSA) beneficiaries for one year. As part of the NFSA allocation, Tamil Nadu’s share is approximately 36.77 lakh tonnes, of which the Antyodaya Anna Yojana (AAY) category gets 7.83 lakh tonnes; Priority Households (PHH) get 17.76 lakh tonnes and the tide over is 11.18 lakh tonnes.

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Generally, rice accounts for most of the allocation of food grains. The allocation of rice under the NFSA was priced at ₹3 per kg. Over and above the allocation, the State has been buying rice from the Centre under the Open Market Sale Scheme (OMSS) which is of the order of 20,000 tonnes per month.

Initially, it was expected that the Centre’s decision might help Tamil Nadu save ₹1,650 crore in food subsidies. Besides, the transportation cost, according to a senior official of the Union government, would be borne totally borne by the Central government. Yet, the food subsidy bill has shown an upward trend even for 2023-24.

Explaining reasons, officials of the State government attribute this to two factors. The steep increase in the selling price of rice under the OMSS is the primary reason. The Centre, in January, hiked the price of rice (including fortified rice) from the Food Corporation of India (FCI) under the OMSS at ₹34 per kg from ₹23 a kg, rendering the revised price almost as good as the economic cost of rice. Even as per the calculations of the Central Food and Public Distribution department, the figures of economic cost per kg are ₹39.2 (budget estimates of 2023-24); ₹ 38.6 (revised estimates of 2022-23) and ₹35.6 (2021-22).

Paddy procurement has been showing a rising trend, as a result of which the bill is going up. Going by the FCI data for the last 10 years, on an average, the State procured 20 lakh tonnes of paddy a year. This time, the figure touched about 28 lakh tonnes (since August last year). Even though the Tamil Nadu Civil Supplies Corporation is procuring on the FCI’s behalf, the State government is providing a production incentive, for which it has allocated ₹500 crore for 2023-24. The incentive is paid over and above the minimum support price that is fixed by the Centre. The quantity of procurement may go up by some more lakh tonnes over the next four months, as the groundwater table has been generally good and farmers would like to raise paddy even during summer so that they get assured returns.

Despite Centre’s allocation of free rice, Tamil Nadu’s food subsidy bill continues to go up

The increase is attributed to the steep hike in the selling price of rice under the Centre’s Open Market Sale Scheme, and the rise in paddy procurement

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