Budget 2012: Govt to fully provide for food subsidy and food security act

The government will provide for the entire food subsidy, including that which is proposed in the National Food Security Bill, from next fiscal.

"The government has decided that from 2012-13 subsidies related to food and for administering the Food Security Act will be fully provided for," Finance Minister Pranab Mukherjee said in his Budget proposals.

He said, however, that all other subsidies would be funded to the extent that they can be borne by the economy without any adverse implications. Major subsidies are for food, fertilisers and petroleum products, he added.

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The National Food Security Bill, which is being vetted by the Parliamentary Standing Committee, aims to provide legal entitlement of subsidised foodgrains to 63.5 per cent of the country's population.

The subsidy is expected to touch about Rs 1,00,000 crore (Rs 1,000 billion) once the Bill is implemented.

The Finance Minister emphasised that some subsidies are inevitable for the country's development, but they become undesirable if they compromise the macroeconomic fundamentals of the economy, more so, when they don't reach the intended beneficiaries.

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He said the government will try to restrict expenditure on central subsidies to under 2 per cent of GDP in 2012-13.

"Over the next three years, it would be further brought down to 1.75 per cent of GDP. Such a step is needed to improve the quality of public spending. Our effort now will be directed towards better targeting and leakage proof delivery of the subsidies," Mukherjee said.