Financial Daily from THE HINDU group of publications
Wednesday, Mar 20, 2002
Agri-Biz & Commodities - Foodgrains
Government - Policy
PDS grain prices to be cut further
NEW DELHI, March 19
IN a bid to liquidate its bulging foodgrain inventories, the Government is set to further slash the Central issue prices of wheat and rice channelised to both the below poverty line (BPL) as well as above poverty line (APL) segments under its targeted public distribution system (TPDS).
While the APL issue prices are to be brought down by Rs 100 per quintal for both rice and wheat, the BPL rates are to be correspondingly reduced by Rs 50 per quintal. As a result, the new CIP for rice would work out to Rs 515 per quintal for the BPL population and Rs 730 per quintal for APL; the corresponding prices of wheat will be Rs 365 per quintal and Rs 515 per quintal.
According to official sources, the Cabinet, which met here today, was scheduled to clear the lowering of the issue prices, as per the proposal piloted by the Ministry of Consumer Affairs, Food and Public Distribution. But a decision could not be taken due to the Finance Minister, Mr Yashwant Sinha's inability to attend the meeting. The issue prices were last revised on July 12, 2001, with APL rates being reduced from Rs 1,130 per quintal to Rs 830 per quintal for rice and from Rs 830 per quintal to Rs 610 per quintal for wheat. Prices for the BPL segment were, however, left untouched at Rs 565 per quintal for rice and Rs 415 per quintal in the case of wheat.
In his 2000-01 Union Budget, Mr Sinha had proposed a formula of fixing APL prices at the Food Corporation of India's economic cost of procuring and distributing grains, while setting it at half this level for foodgrains issued to the BPL sections. But with these turning out to be much higher than the prevailing open market rates, the Centre was forced to reduce the APL prices in July last to around 73 per cent of the economic cost. At the proposed new rates, the APL prices would work out to around 62 per cent of the economic cost of Rs 1,174 per quintal for rice and Rs 839 per quintal for wheat. The BPL rates will be below 44 per cent of the economic cost.
But the higher consumer subsidy on account of the price reductions will be more than compensated by the `carrying cost' of FCI's unsold excess inventories. The FCI is currently holding roughly 58 million tonnes of foodgrains in its godowns.
The inventory is much higher by over 40 million tonnes than what it requires to feed the TPDS.
The annual carrying cost of this excess grain, at the rate of Rs 220 per quintal, would be almost Rs 9,000 crore, forming a chunk of the Centre's budgeted food subsidy bill of Rs 21,200 crore in the coming fiscal.
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