Food subsidy to be lower than Budget target; lower oil price to help economy

Food subsidy to be lower than Budget target; lower oil price to help economy

India’s food subsidy bill is expected to be significantly lower than the budget target this year. Thanks to states which have not implemented the National Food Security Act (NFSA) as yet.

Lower global crude prices are an added benefit that will help the country save on petroleum subsidy bill, lower fiscal and current account deficits and reduce inflation.
India is a net importer of crude oil and a one-dollar fall in crude price saves about Rs 4,000 crore. Crude prices, which hovered $107 per barrel in May-June have come down to $96 per barrel as on September 12. The Union Budget had allocated Rs 63,427 crore as fuel subsidy in 2014-15. For calculating the Budget Estimates, the finance ministry has taken crude prices at $107 per barrel and the exchange rate at Rs 61 to the dollar.

On food front, although  there is no official estimate yet of how much the government is going to save on account of lesser outgo on food subsidy, finance ministry officials have assured rating agencies that it will be substantially lower than Rs 1,15,000 crore allocated in the Budget this year.

An official said subsidy outgo will be less as most of the states have not yet implemented the NFSA. The Union Budget 2014-15 has allocated Rs 1,15,000 crore as food subsidy as against Rs 80,000 crore last year. But six months into the year, only 11 states have implemented the act.

“In fact only one or two states have implemented the act fully despite the deadline for implementation coming to an end this month,” the official told Deccan Herald. “Due to the delay in the roll out of the NFSA, the actual expenditure on the food subsidy will be much lower although we have made allocations for a full year,” the official said.

The states which have implemented the NFSA are relatively prosperous ones like Maharashtra, Haryana, Punjab, Rajasthan and Chattisgarh. Populous states such as Uttar Pradesh, West Bengal, Odisha, Jharkhand, Andhra Pradesh and Telangana have not evinced any interest in implementing the law. The Act has been partially implemented in Delhi, Himachal Pradesh, Madhya Pradesh, Karnataka, Bihar and Chandigarh.

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