As Food Subsidy Bill is on the verge of official launch, India's Finance Minister P Chidambaram is started all acts of preparing 30% Indians (non-beneficiaries of food subsidy bill) to face food price rise and pay for rest 70%. Though entire theme looks a political drama set for 2014 elections, no party will oppose to this move as it would cut down the prospects of their winning.
P Chidambaram's unofficial (may be official more) assistant and Commission for Agricultural Costs and Prices, chairman Ashok Gulati told CNBC-TV18 that if rice is offered at Rs 3/kg and wheat at Rs 2/kg, along with a greater inclusion of population, "then I do not think there is any escape (from escalting cost)."
He calculated that the real cost will be much higher because it involves spending on infrastructure. Grains would have to be moved from one state to another and railways are choked; so fresh investments have to be made in railways, in stocking facilities and in the basics of logistics.
Ultimately, if the government really wanted to improve infrastructure and PDS it would have done it in the past. However, despite being the bottlenecks it was eager to launch this scheme believing that tax payer's kitty is with full of money.
Unfortunately, the government neither realises that creating job opportunities is a major goal rather than giving free grains. Interestingly, the study of change in productivity and motivation after the free (prices are unbelievably low for subsidised food) food scheme could throw some light on utility of such creative idea came into minds of our political think tanks.
CNBC TV18 article says that Economists were initially working with a deficit figure of 5.5-5.8 percent which was much higher than the government's estimate of 5.1 percent (which was later revised up to 5.3 percent). But reports suggest that few millions more will have to inducted in the proposed National Food Security Bill (NFSB), reportedly a pet issue of Congress boss Sonia Gandhi, is a direct threat to the finance minister's efforts to put the fiscal accounts in order.
The talk is that providing cheap grain to nearly 70 percent of India's population could increase the country's subsidy bill for fiscal 2014 to Rs 1.2 lakh crore, which would include an additional Rs 45,000-Rs 50,000 crore under NFSB. In fiscal 2013 itslef, the actual spend is said to have exceeded the budgeted Rs 75,000 crore. The question, and by extension fear, now is that the figure can very well be go above Rs 1.2 lakh crore.
The bill, if passed, will come at a time when the Indian population was hit by spiralling prices of basic goods such as rice and wheat.
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