Context: The Economic Survey rightly flagged the issue of a growing food subsidy bill, which, in the words of the government, “is becoming unmanageably large.”

Background:

• Food subsidy, coupled with the drawal of food grains by States from the central pool under various schemes, has been on a perpetual growth trajectory.
• During 2016-17 to 2019-20, the subsidy amount, clubbed with loans taken by the Food Corporation of India (FCI) under the National Small Savings Fund (NSSF) towards food subsidy, was in the range of 1.65-lakh crore to Rs. 2.2-lakh crore.
• In future, the annual subsidy bill of the Centre is expected to be about 2.5-lakh crore.

High drawal rate:

• During the three years, the quantity of food grains drawn by States (annually) hovered around 60 million tonnes to 66 million tonnes. Compared to the allocation, the rate of drawal was 91% to 95%.
• As the National Food Security Act (NFSA), which came into force in July 2013, enhanced entitlements (covering two-thirds of the country’s population), this naturally pushed up the States’ drawal. Based on an improved version of the targeted Public Distribution System (PDS), the law requires the authorities to provide each beneficiary 5 kg of rice or wheat per month.

Issue prices and politics:

• It is against this backdrop that the Survey has hinted at an increase in the Central Issue Price (CIP), which has remained at Rs. 2 per kg for wheat and Rs. 3 per kg for rice for years, though the NFSA, even in 2013, envisaged a price revision after three years.
• What makes the subject more complex is the variation in the retail issue prices of rice and wheat, from nil in States such as Karnataka and West Bengal for Priority Households (PHH) and Antyodaya Anna Yojana (AAY) ration card holders, Rs. 1 in Odisha for both categories of beneficiaries to Rs. 3 and Rs. 2 in Bihar for the two categories.
• The Centre, by stating through the Survey that it is difficult to reduce “the economic cost of food management in view of rising commitment” towards food security, does not want the NFSA norms to be disturbed.
• But, a mere increase in the CIPs of rice and wheat without a corresponding rise in the issue prices by the State governments would only increase the burden of States, which are even otherwise reeling under the problem of a resource crunch.

Recast the system:

In this context, it is time the Centre had a relook at the overall food subsidy system including the pricing mechanism.

Give Up Option:

• It should revisit NFSA norms and coverage. An official committee in January 2015 called for decreasing the quantum of coverage under the law, from the present 67% to around 40%. For all ration cardholders drawing food grains, a “give-up” option, as done in the case of cooking gas cylinders, can be made available.
• Even though States have been allowed to frame criteria for the identification of PHH cardholders, the Centre can nudge them into pruning the number of such beneficiaries.

Slab System:

• As for the prices, the existing arrangement of flat rates should be replaced with a slab system. Barring the needy, other beneficiaries can be made to pay a little more for a higher quantum of food grains.
• The rates at which these beneficiaries have to be charged can be arrived at by the Centre and the States through consultations.

https://www.thehindu.com/todays-paper/tp-opinion/a-case-for-a-revamped-need-based-pds/article34040821.ece

Download PDF