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Why Is the Government Looking For Hike in Grain Prices

With the relentless rise in the food subsidy budget, the Centre is under pressure to reduce the quantum of subsidy on food grains being supplied under National Food Security Act (NFSA). When NFSA was passed by Parliament in 2013, it stipulated monthly entitlement of five kg of grain per beneficiary at the rate of Rs 3, Rs 2 and Rs 1 per kg for rice, wheat and coarse grains respectively, for three years.

“A price increase of Rs 1 per kg for grain supplied to beneficiaries would result in reduction in annual food subsidy of around Rs 5,000crore,” an official said. If grain price under NFSA is increased, the rising cost to government due to annual rises in MSP given to farmers could be reined in.

As per the NFSA, states were given an year’s time till July 2014 to roll out the mega food security law, which currently covers 81crore people. However, majority of the states could not implement the Act within this time frame due to the time-consuming process of identifying beneficiaries and developing the infrastructure. Only last year, all the 36 states and Union territories rolled in the food security legislation.

However, sources said, with rising burden of food subsidy – budgeted at Rs 1.45lakh crore in the current fiscal year – there was a debate in the government to increase the price of grains to be supplied under the food security Act.

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