Food subsidy bill may rise by Rs 25k crore

NEW DELHI: The food subsidy bill for 2010-11 could shoot up by nearly Rs 25,000 crore to touch Rs 80,000 crore, putting further pressure on the government’s finances, a food ministry official said on Tuesday.

The government has budgeted Rs 55,578 crore for the current fiscal.

The sharp increase in the subsidy is because of higher minimum support price ( MSP) for crops and the government holding food stock that are nearly three times the norm because of exports ban and high holding costs.

During the year, the Centre had also announced release of additional subsidised grain into both open market and the public distribution system to check rising grain prices.

Food inflation has run up to 14.44% in the week ended December 18 after falling to single digits in November.

The food ministry has also asked for another Rs 10,000 crore towards subsidy for the 2009-10 fiscal. The ministry says the actual burden was Rs 66,000 crore while the subsidy provided was only . 56,000 crore.

Food subsidy, the difference between the economic cost of holding grain and the issue price for consumers, has already trebled from the 2002-03 level.

While the purchase price of grain, taxes, transport, handling and storage charges has increased persistently over the last few years, the issue price has largely remained unchanged since 2002.

A recent study, Food Subsidies in India: A New Fiscal Risk, has estimated that the Food Security Act would entail an additional food subsidy spend of an estimated . 60 billion, pushing up the total food subsidy bill to about 1.1% of the GDP in FY10-11.