NEW DELHI: The government’s food subsidy outgo in FY25 is likely to see a sharp increase against the budget estimate of Rs 2.05 trillion, because of mounting economic costs of PDS rice, with stocks being 3.5 times the buffer at present.
In the budget estimate for FY25, the finance ministry is likely to make provision of Rs 50,000 crore towards ‘ways and means’ advance to Food Corporation of India (FCI). In FY24, half this amount was provided as ways and means.
In the previous years, the finance ministry had provided Rs 10,000 crore-25,000 crore to FCI as short term arrangements (ways and means advance) which were then adjusted against the actual food subsidy allocation for the fiscal.
“The finance ministry would have to provide a significantly higher allocation from the Budget Estimates as fertiliser subsidy on account of rising carrying cost of surplus rice stocks, increase in minimum support price (MSP) of rice and wheat and increase in cost of other incidentals,” an official said.
As per the revised estimate, the food subsidy expenses were Rs 2.12 trillion in FY24. According to officials, the BE for FY25 has to be revised upward because of rising carrying cost of rice as well as higher procurement.
The government has announced that the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) or free ration scheme to more than 800 million beneficiaries would be implemented till 2028.
The economic cost of rice, including minimum support price (MSP), storage, transportation and other costs at the beginning of the current fiscal was estimated at Rs 3,975/quintal which may see an increase due to surplus rice stock.
“The costs of storage, transportation and other costs on account of storing surplus rise has been rising steadily and if not liquidated through open market sale or through exporting to various countries for meeting their food security needs, we may face difficulties in storing rice in coming procurement season (2024-25, October-September),” an official said.
Thanks to robust procurement, FCI currently holds 47 million tonne (MT) — 32.98 MT of rice stocks and 14.12 MT of grain receivable from millers. The stock is against the buffer of 10.25 MT for October 1.
With the arrival of paddy for the new season (2024-25) is expected to commence from October 1, the government has to initiate steps to reduce the stock in the central pool through open market sale and allow exports of white rice.
The last fiscal open market sale of rice at Rs 29/kg to bulk buyers did not elicit a positive response as only around 0.1 MT of rice was sold. Sources said the government will assess the sowing of kharif paddy before taking a call on removing curbs on shipments.
In the current year, the FCI would commence selling rice in the open market to bulk buyers at Rs 28/kg from next month.
The corporation will provide rice at Rs 24/kg to agencies such as farmers’ cooperative Nafed, NCCF and Kendriya Bhandar for selling the grain at subsidised rate of Rs 29/kg under the Bharat rice initiative.
Last year, the government had initially banned white rice exports and subsequently imposed a 20% shipment duty on parboiled rice to improve domestic supplies as price rise remained in double digits.
Source: The Financial Express
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