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Govt underpaid food subsidy bill by Rs 69,394 crore in FY19 to meet fiscal target

According to the Controller General of Accounts, against the revised estimates for the major subsidies - including food, fertilizers and petroleum subsidies - pegged at Rs 2.66 lakh crore, only 74 per cent was paid during FY19

twitter-logo BusinessToday.In        Last Updated: June 7, 2019  | 16:16 IST
Govt underpaid food subsidy bill by Rs 69,394 crore in FY19 to meet fiscal target
The CAG claimed that FCI could have saved Rs 35,701.81 crore on interest outgo over 2011-16 had the government released food subsidy on time

The State Bank of India's Ecowrap report released last Friday revealed that while the government was able to meet the revised fiscal deficit estimate of 3.4 per cent of GDP, there was a "Rs 1.45 lakh crore reduction in expenditure" with massive cuts in subsidies covering for Rs 1.57 lakh crore reduction in total receipts.

In fact, the Centre underpaid the food subsidy bill to the Food Corporation of India (FCI) by a whopping Rs 69,394 crore and this rollover - 41 per cent of the budget estimate - was the highest during the Modi government's first term, Mint reported. Food subsidy is the cost incurred and subsequently reimbursed by the government for the procurement, storage and distribution of food grains in the country. It is basically the difference between the cost of procuring food grains and the price at which they are given to the beneficiaries.  

According to the Controller General of Accounts, against the revised estimates for the major subsidies - including food, fertilisers and petroleum subsidies - pegged at Rs 2.66 lakh crore, only 74 per cent was paid during FY19. In comparison, the figure for FY18 was reportedly much higher at 83 per cent.

When the FCI is not paid in full and on time, it is forced to raise funds from costlier external sources such as cash credit and short term loans from banks. In an FCI audit report dated August 2017, the Comptroller and Auditor General (CAG) had found that FCI could have saved Rs 35,701.81 crore on interest outgo over 2011-16 had the government released food subsidy on time. The interest component has certainly snowballed further in the past three years.

The report further revealed that although as per norms the Ministry of Finance is supposed to release 95 per cent of the estimated food subsidy to FCI during the relevant financial year - the balance 5 per cent is to be released after submission of accounts of FCI to the Parliament - the  UPA 2 government and the Modi 1.0 government had released only 67 per cent of subsidy on an average in the five year period from FY12 to FY16. The FCI reportedly also faces delays in recovering receivables from ministries, departments and state governments.

The CAG, in a separate report released earlier this year, said the government borrowed through off-budget channels to finance capital and revenue spending in 2016-17, a practice that masks the true extent of fiscal and revenue deficits.

The report titled Fiscal Responsibility and Budget Management, which was tabled in Parliament on January 8, found that off-budget financing was being used to defer fertiliser arrears, food subsidy bills and outstanding dues of FCI through borrowings. "Such off-budget financial arrangement, defer committed liability (subsidy arrears/bills) or create future liability and increases cost of subsidy due to interest payment," it had added.

In order to address these issues, the CAG recommended that the government should consider "putting in place" a policy framework for off-budget financing. The framework should specify the rationale and objective of off-budget financing, quantum of off-budget financing, sources of fund among others. It added that government should also consider disclosing the details of off- budget borrowings through disclosure statements in Budget as well as in accounts.

Obviously, shifting expenditure from one fiscal to the next also adds to the expenditure burden. According to IANS, the food subsidy may be hiked by 20 per cent to Rs 2.21 lakh crore in the coming budget, likely in July. In the Interim budget the Modi government had already set aside Rs 1.84 lakh crore for this purpose. In FY19, the subsidy was Rs 1.71 lakh crore.

With PTI inputs

Also read: Govt mulling over fixing nutrient-based subsidy rate for urea: Sources

Also read: Ind, exporters should not depend on subsidies; work on improving competitiveness: Goyal

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