India: Government to offer extra subsidised food grain

  • The government is set to offer additional foodgrains at subsidised rates to offload massive stocks piled up in granaries due to a liberal support price regime and also add a kilo of sugar to the monthly ration for beneficiaries under the National Food Security Act (NFSA).
  • Over the next few days, the Union Cabinet is expected to decide on providing additional 2 kg grains to every NFSA beneficiary on a monthly basis — a move that will increase the monthly quota to 7 kg. While 810 million individuals stand to get more wheat and rice through the temporary move, nearly 190 million families can now draw their quota of sugar.
  • NFSA provides for a monthly quota of 5 kg foodgrain for all below poverty line individuals at highly subsidised rate of INR1, 2 and 3 per kg for coarse grains, wheat and rice, respectively. Households covered under Antyodaya Anna Yojana (AAY), which is targeted at the poorest of the poor, are entitled to 35 kg per household per month.
  • Politically, the new move may be seen as a post-election gift to the poor but it is meant to reduce the carrying cost of foodgrains.
  • Food Corporation of India spends INR290mn on storage and handling of 100,000 tonnes of wheat and INR410mn on 100,000 tonnes of rice. Going by this estimate, the FCI’s annual bill on account of carrying cost is more than INR260bn.
  • An additional allocation of grains for six months will result in extra subsidy burden of around INR500bn but will result in large savings in terms of the FCI’s carrying cost. The move to provide subsidised sugar at INR13.50 a kg will result in an additional burden of INR47bn on an annual basis.

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