Food subsidy bill likely to stay at budgeted level

NEW DELHI: The subsidy bill for this fiscal is unlikely to be higher than the Budget estimate of Rs 27,800 crore projected in the interim Budget. This is a break from the past when the food subsidy bill was invariably higher than the budgeted amount.
Early indications are that the food subsidy bill could be arrested, thanks to lower carrying costs of foodgrain stocked by the Centre.
The carrying cost (the cost incurred on every tonne of grain stored by Food Corporation Of India) on foodgrain in the central pool for ’04-05 is estimated to be 30-35% lower than last year, according to finance ministry sources. In ’03-04, it was around Rs 419 per quintal.
As it has to carry lesser quantity of grain for the central pool, FCI has de-hired private storage space, again saving on the subsidy. The Centre’s foodstocks are far lower than ’01-02 levels, and the surplus is not way above the buffer stocking level, as was the case in earlier years.

In addition, PDS offtake has been consistently higher since drought year ’02-03. Some estimates have pegged the PDS offtake at a healthy 15% higher than the pre-drought era. FCI now has foodgrain stocks no older than one year, as compared to three and four-year old stocks held earlier. The corporation has managed to dispose all the older stock through subsidised exports, thus saving on the carrying costs.
During ’01-02, the carrying cost per quintal of grain in the central stock was estimated at around Rs 287 per quintal. In ’03-04, it rose to Rs 419 per quintal due to higher procurement and lower offtake of foodgrain from the central pool. Consumer subsidy was, however, lower — at Rs 358 per quintal for wheat and Rs 481 per quintal for rice.