Food subsidy budget set at almost Rs. 2.43 lakh crore

2nd February, 2021 Agriculture

The food subsidy bill spiked sharply this year, from Rs. 1.15 lakh crore in the 2020-21 budget estimates to Rs. 4.22 lakh crore in the revised estimates.
Spike is reflecting the additional cost of free foodgrain distribution in the wake of the COVID-19 pandemic, as well as the government’s decision to pay the Food Corporation of India’s burgeoning loans and return to budgetary transfers to fund the food subsidy bill.
In 2021-22, the food subsidy budget has been set at almost Rs. 2.43 lakh crore.
Economists welcomed the Centre’s move, saying it would help clean up the government’s accounts and improve the financial health of the FCI.
It has been proposed to discontinue the NSSF [National Small Savings Fund] loan to FCI for food subsidy and accordingly Budget provisions have been made in RE 2020-21 and BE 2021-22.
FCI procures grains from farmers at an economic cost of almost Rs. 27 a kg for wheat and Rs. 37 for rice, and then provides it to 80 crore poor people through the public distribution system (PDS) at subsidised rates of 2 a kg for wheat and Rs. 3 for rice.
However, for several years, the budgetary allocation for PDS has not been sufficient to cover FCI’s subsidy costs, forcing it to borrow from the NSSF at a rate of about 8%.
Its outstanding loans are now well over Rs. 2 lakh crore.

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