Food subsidy bill expected to reach Rs 3.8 lakh crore this fiscal year

NEW DELHI:  The government's food subsidy bill has more than doubled and the liability by the end of this fiscal year is likely to reach a massive Rs 3.8 lakh crore. "This year, the food subsidy bill has gone up substantially owing to various corona relief measures. We expect that by the end of this fiscal year... the bill is expected be at Rs 3.80 lakh crore," a senior official from the finance ministry said.

For the current fiscal year, the government had estimated a food subsidy bill of Rs 2.57 lakh crore. The official also added that a substantial portion of this increased budget is due to the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme.

Announced in March this year by Finance Minister Nirmala Sitharaman as part of the relief package to the poor, the scheme covers 80 crore ration card holders. Each household gets free five kg of rice or wheat each month and one kg of pulses. While the scheme was announced only for three months ending June 30 initially, it was later extended up to November 30. 

However, even without the pandemic, the food subsidy bill has increased substantially over the past three years-from Rs 1.65 lakh crore in financial year 2017-18 to Rs 2.18 lakh crore in the last financial year. Another trend over this period has been increased off-budget financing through the Food Corporation of India, which borrows from the NSSF Fund. In financial year 2017-18, almost 40 per cent of food subsidy bill was financed through FCI borrowings from the NSSF. 

For the current financial year, this is expected to rise to Rs 1.36 lakh crore or 53 per cent of the total estimated subsidy bill. By the end of October, the FCI’s outstanding loans from NSSF stand at Rs 2.93 lakh crore, including interest on unpaid outstanding loans. 

Since the Centre has already exhausted 91 per cent of the food subsidy allocation of the current fiscal year, and has made fresh borrowings of Rs 38,000 crore from the small savings fund, officials are weighing options. One of these options is to increase borrowings from the NSSF, especially since even the fertilizer subsidy has gone up by an additional Rs 65,000 crore this fiscal.