What is food security bill and why it could be a burden

New Delhi, July 5: There is storm over the Food Security Bill with the financial sector fearing massive inflationary impact on the economy. But the political class is divided over timing as well on several implications of the scheme.

What is this bill after all?

The proposed food security bill guarantees subsidised foodgrains to two thirds of the country's population through the public distribution system.

The food security programme will be the largest in the world.

It will amount to an annual expenditure of Rs 125,000 crore when fully operational.

The scheme will take at least six moths to cover the entire country.

The scheme will put India league of few countries in the world that guarantee majority of its population foodgrains.

It will guarantee 5 kg of rice, wheat and coarse cereals per month per person at a fixed price of Rs 3, Rs 2, Re 1, respectively.

The programme will come into effect (if the Ordinance is promulgated) from next month after state governments prepare the beneficiary list.

Some of states like Tamil Nadu, Madhya Pradesh and Odisha have their own food security programme.

What is fear of the financial sector?

The bill would have a cascading inflationary effect on the common person, especially the middle class.

As Rs 1,25,000 crore will be spent every year to supply 62 million tonnes of rice, wheat and cereals, it would raise the government's food subsidy burden to 1 percent to 1.2 per cent of GDP per annum from the current estimate of 0.8 per cent.

More subsidy outgoing means the Union budget will allocate less for other projects.

Additional expenditure on the infrastructure needed to implement the scheme yet to be calculated.

In case of monsoon failure and low agriculture output in the country, India will have to import grains, which is an additional burden.

As good portion of the grains under the security bill would be procured from the domestic grain supply, there is a possibility of creating artificial scarcity in the open market leading to rise in foodgrains prices.

OneIndia News