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Food security programme to prove costly for government

Under the plan, the government will provide subsidised wheat and rice to 67 per cent of the country's population. The spending on the welfare scheme is estimated at Rs 125,000 crore annually for supply of about 62 million tonnes of rice, wheat and coarse cereals.

twitter-logoPTI | July 4, 2013 | Updated 10:23 IST

The food security programme to provide cheaper food grains for BPL families will put pressure on the exchequer, and government's expenditure would overshoot estimates, say economists.

"Everything has been factored in. Obviously, there will be some cost to the exchequer," said Planning Commission member Abhijit Sen.

"What the central government is doing now, lots of states have already done it," he added.

The Union Cabinet on Wednesday decided to issue an ordinance to provide BPL families food grains at cheaper rates.

The food security programme when implemented will be the biggest in the world with the government spending estimated at Rs 125,000 crore annually on supply of about 62 million tonnes of rice, wheat and coarse cereals, covering 67 per cent of the population.

HDFC Bank Chief Economist Abheek Barua said the Food Security Bill will cost the government exchequer more than the estimated figure, and there are concerns on the delivery side as well.

"I am worried on two sets on concerns. One is the delivery and other is the fiscal implication on the core cost of the government. I think it will cost the government more than the estimated," Barua said.

Also, there will be additional cost on warehousing and related things. On the delivery issue, PDS system is associated with the leakage issue," he added.

Sen said the Food Security Bill was being planned for the last 2-3 years and there is nothing new in this.

However, both Sen and Barua agreed that it was a "populist move".

Meanwhile, industry body Assocham said while the decision will put strain on government finances, but it will insulate a large number of people from inflation.

"The government must be complimented for taking a courageous decision, though it would bring strain on the government finances," the chamber said.

CRISIL Research said proper implementation of the food security proposal will lower spending on foodgrains by BPL households and free up resources for spending on other goods and services, like health, education, and nutritious food.

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