Survey pitches for hike in PDS rates to trim food subsidy bill

Stating that the food subsidy bill is becoming "unmanageably large", the Economic Survey 2021 on Friday suggested the government to increase the selling price of foodgrains provided through ration shops to over 80 crore beneficiaries.

Foodgrains via ration shops are supplied at highly subsidised rates of Rs 3 per kg for rice, Rs 2 per kg for wheat and Rs 1 per kg for coarse grains through Public Distribution System (PDS) as per the National Food Security Act (NFSA).

“While it is difficult to reduce the economic cost of food management in view of rising commitment towards food security, there is a need to consider the revision of central issue price (CIP) to reduce the bulging food subsidy bill," the survey said.

CIP is the subsidised rate at which foodgrains are distributed through ration shops. In order to ensure food security to the vulnerable sections, the government has continued with the subsidised pricing under the NFSA.

Wheat and rice prices have not been revised since the introduction of the Act in 2013 although the economic cost has increased every year.

Further, the NFSA provides wider coverage than the erstwhile Public Distribution System (TPDS), which resulted in the rise of food subsidy.

The government in Budget 2020 allocated Rs 1,15,569.68 crore for supplying subsidised foodgrain through PDS and welfare schemes.

According to the survey, the government during 2020-21 fiscal allocated foodgrains through two channels - under the NFSA and the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY).

Under PMGKAY, additional foodgrain of 5kg per person per month at free of cost was given to all beneficiaries for a period of 3 months -- April-June, 2020.

Accordingly, about 121 lakh tonne grains were allotted to approximately 80.96 crore beneficiaries entailing subsidy outgo of nearly Rs 46,061 crore.

The PMGKAY scheme was extended for a further period of five months for July–November 2020. Accordingly, about 201 lakh tonnes of foodgrains were allocated to beneficiaries entailing subsidy outgo of nearly Rs 76,062.11 crore.

Under Atmanirbhar Bharat Package implemented for three months till August 2020, about 5.48 crore migrants -- who were not covered either state or central PDS -- were given for free around 2 lakh tonne rice and 0.74 lakh tonne wheat with a total expenditure of approximately Rs 989.30 crore, the survey said.

Photograph: Jayanta Dey/Reuters