The UPA government may be a step closer to offer subsidised foodgrain to the poor after the Food Security Bill was passed by the Lok Sabh on Monday, but India Inc feels the massive outlay of funds required for rolling out the programme is bound to raise the fiscal deficit.
The ambitious food security programme will give the country's two-thirds population the right to five kg foodgrains every month at between Re 1 to Rs 3 per kg.
"As far as the issue of additional burden is concerned, it would add to Rs 25,000 crore annually to the food subsidy, Assocham President Rana Kapoor said, adding, however, that with proper implementation the long term benefits in terms of human capital will far outweigh the costs.
The plan is seen as the biggest in the world with the government expected to spend about Rs 1,25,000 crore annually on supply of 62 million tonnes of rice, wheat and coarse cereals to 67 per cent of the population.
"Such a large outlay at this point in time would definitely have a negative impact on the fiscal deficit. This needs to be managed," CII President Kris Gopalakrishnan said.
Commenting on the passage of Food Security Bill, Gopalakrishnan said: "With a significant section of the population living below the poverty line, government intervention to provide nutritious food is essential".
However, he also raised concerns related to the effective implementation of such a high profile and critical social agenda of the Government.
"The use of PDS (public distribution system) raises questions about the efficacy of the model. Targeting is another area that would need special attention," Gopalakrishnan said.
Raising similar concerns, Rajat Wahi, Partner at KPMG India, said: "The government should ensure that they have the checks and balances in place to ensure there is minimum leakage and wastage and severe penalties for people who abuse it".
The total food subsidy budgeted in the current financial year is Rs 90,000 crore, of which Rs 10,000 crore is towards implementation of the Food Security Bill.
With inputs from PTI