Budget may provide Rs 5,000 cr to improve grain distribution

The government is all set to roll out the estimated Rs 1 lakh crore Food Security Bill in the next fiscal year, which is likely to be a vote-winner for the UPA in the next general election in 2014, similar to what happened in 2009 when the NREGA was pitched as an electoral promise for rural voters.

Even though the implementation of the scheme is only likely in the second half of 2012, Finance Minister Pranab Mukherjee is likely to announce a token allocation of Rs 5,000 crore forstrengtheningthedistributionsystem to ‘‘deliver the massive allotment promised under the scheme," reported the Economic Times today.

[caption id=“attachment_218494” align=“alignleft” width=“380” caption=“Programmes that help the rural poor and guarantee a minimum amount of work for a member of each rural household, are popular and win votes but they are costly. AFP”]  [/caption]

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The food bill guarantees cut-price grains to 63.5 percent of the country’s 1.2 billion people, and could cost the government around Rs 81,000 crore,an increase of about 34 percent over the budgeted food subsidy level in the current fiscal year. That includes the cost of additional grains that the Food Corporation of India, the state firm that procures on behalf of the government, would need to buy from farmers.

Indiacurrently spends Rs 60,572 crore for an existing food supply programme under the “Targeted Public Distribution System” for the needy. Food handouts are currently pegged to the 1993-94 poverty estimates and are in-line with 2000 census population figures.

The Food Bill, which seeks to cover 75 percent of rural households and 50 percent of urban dwellers, can boost the Congress’s ratings but implementing the bill will costthe country nearly Rs 1,12,205 crore.A minimum of 46 percent of the rural population and 28 percent urban population, called priority households, will get 7 kg of foodgrains per month per person. Rice would be provided at 3 a kg, wheat at Rs 2 and coarse grains at Re 1 per kg.

But with thegovernment’s finances in a precarious state and inflation becoming increasingly entrenched, the finance minister has his task cut out trying to balance populist aspirations with fiscal consolidation.

Many economists have predicted that the government’s fiscal deficit on account of rising food, fuel and fertiliser subsidies could rise by as much as Rs 90,000 crore . ““With growth slowing and consequently revenues not matching up to expectations, additional expenditures will keep the government away from the path of fiscal consolidation,” Kotak Mahindra Bank had warned in a note last month.

Even those within the government, like agriculture minister Sharad Pawar, chairman of the Prime Minister’s economic advisory council, C Rangarajan, and Planning Commission deputy chief Montek Singh Ahluwalia, have called the bill too ‘utopian’ and unsustainable as the government does not have the funds to implement this mammoth scheme.