Implementing food security law to cost government Rs 88,500 crore

NEW DELHI: Implementation of food security law will cost Rs 88,500 crore in 2014-15 almost same as the total food subsidy last year, giving a push to the UPA government’s ambitious plan to meet the basic food requirements of every individual.

In addition, the government will spend Rs 26,500 crore for managing the costs and losses of the entire public distribution system.

The total food subsidy bill for 2014-15 is pegged at Rs 1.15 lakh crore, up from Rs 92,000 crore in the revised estimate of 2013-14. The share of food subsidy in total subsidy provided by the central government is estimated to rise to 45 per cent from 41 per cent when the UPA-2 returned to power in 2009-10.

Most independent experts expect food subsidy to rapidly climb as the National Food Security Act (NFSA) is rolled out, but expect the current year’s provision to be adequate.

“The identification of beneficiaries under the National Food security Act is required to be completed within one year after the commencement of the Act (Q2FY14), which would reduce additional costs to some extent in the coming fiscal,” ratings agency ICRA said in a note.

The food security law seeks to provide heavily subsidised foodgrain to nearly twothird of the population and is seen as a big drag on government finances in the coming years.

The poorest section of population would get wheat at Rs 2/kilo and rice at Rs 3/kg.

The Rs 26,500-crore amount set aside for the other component of the food subsidy is largely to cover the carrying costs of buffer stock/strategic reserves incurred by the Food Corporation of India and the difference between its economic cost and price at which grain is issued for the targeted public distribution system.

This component of subsidy also includes the amount spent on subsidised sugar distributed by states through the targeted public distribution system.