The Union Budget (2022-23) has made a provision Rs 2.06 lakh crore under food subsidy in 2022-23.

The government’s food subsidy expenses next fiscal may witness a decline because of anticipated lower volume of procurement of wheat in the forthcoming rabi marketing session, because a possible surge in exports is pushing up domestic prices above the minimum support price (MSP).

The Union Budget (2022-23) has made a provision Rs 2.06 lakh crore under food subsidy in 2022-23. Wheat has share of 45% in the total food subsidy expenses.

Last month, the government had set a target of a record 44 million tonne (mt) in 2022-23 (rabi marketing session), which would commence from April 1. This target is unlikely to be achieved because farmers would prefer to sell in the markets where prices are prevailing above MSP.

Mandi price of wheat in Madhya Pradesh, where harvesting activities are at its peak, is ruling around Rs 2,300 per quintal against the MSP of Rs 2,015 per quintal for the session. The state was to contribute about 13 mt of wheat to the central procurement drive annually.

“We are expecting a much lower wheat procurement this season against the target as prices are ruling above MSP,” Faiz Ahmed Kidwai, principal secretary, Department of Food and Civil Supplies, Madhya Pradesh, told FE.

Lower procurement by Food Corporation of India and state agencies implies that these agencies would have to handle less volume of wheat, which would imply savings on the food subsidy allocation.

The surge in global wheat price, mainly attributed to the Russia and Ukraine conflict in the last one month, has opened up the possibility of a surge in India’s wheat exports after the farmers start bringing in their produce to mandis in the next couple of weeks. In the current fiscal, India has already exported a record 7 mt of wheat.

Supply of grains for the Public Distribution System under the National Food Security Act (NFSA) won’t be impacted either as the stocks with the FCI are high. At the beginning of this month, FCI was saddled with grain stocks of 23.4 mt, much higher than the buffer norm of 7.46 mt.

Sources said that another factor which contributes to less food security expenses as the government is unlikely to extend special provisioning of free foodgrains equivalent to NFSA entitlement under the Pradhan Mantri Garib Kalyan Anna Yojana beyond March 31, 2022.

In the case of Punjab and Haryana, FCI and state government agencies purchase a major volume of wheat from the farmers. Besides, higher mandi taxes prevailing in Haryana and Punjab also discourages private trade purchase. This season the target was set for wheat procurement for Punjab (13.2 mt), Haryana (8.5 mt), Uttar Pradesh (6 mt) and Bihar (1 mt).

The economic cost of food grains procurement by FCI, which includes expenses such as MSP payment to farmers, procurement, acquisition and distribution costs etc for rice and wheat are Rs 3,597.17 and Rs 2,499.69 per quintal respectively in 2021-22, while the government distributes rice and wheat to beneficiaries under NFSA as Rs 3 and Rs 2 per kg, respectively.

More than 800 million people get highly subsidized five-kilogram foodgrains per head per month under NFSA.

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