Empty coffers abetting Food Security Law?

Populist policies don’t give the impression to get transferred on the backburner, despite economy still not necking out of slowdown entirely and scarcely managing to draw in fresh oxygen. With general elections knocking wearing iron-knuckles on the door, the UPA II government is hell bent on introducing the ruthless and exceedingly populist (and fiscally damaging) food security scheme across all states in the country.

In the interim budget (2014-15) tabled down in the parliament a couple of days back by our economically prudent and veteran in all respects Harvard graduate Finance Minister P Chidambram, the government has allocated Rs 88,500 crore towards the pushy scheme. In the full budget of 2013-14, the amount allocated was in the tune of Rs 10,000.

Is the allocated sum adequate?

For the UPA II, it may be such, but math of others reads a different story. Of the full amount of Rs 115,000 crore pegged for food security, Rs 88,500 has been kept aside for Food Security Law. The remaining (Rs 26,500 crore) is to be used in form of carry-over expenditure for subsidies from the year 2013-14.

Going by what most of the economists in the country deem, the subsidy rollover, out of the estimated amount of Rs 90,000 crore, will be in the range of Rs 35,000 crore in the year 2014-15.

As per one of the articles published in the Business Standard, the Food Corporation of India (FCI) itself estimates the subsidy requirement to about Rs 1,30,000 crore against the Budget Estimate of Rs 90,000 crore. Furthermore, the reason wheat and rice procurement prices in the year 2014-15 increased, the allocated subsidy amount of Rs 1,15,000 in the interim budget should come up as revoltingly inadequate.

But, by how much? And, what’s the sum that will be rolled over?

From where will the money come?

Already, the planned expenditure has been cut down by much and non-planned expenditure has only increased. Therefore, fiscal situation of the economy which has freshly capped fiscal deficit to 4.6 per cent can get worse in future also hitting on the “much needed” growth of economy.

Putting together the rollover amount for food and fertilizers combined, a surfeit of Rs 80,000 crore comes up, which has to be met up with still.

This can be wearisome for the next Finance Minister, as plugging the hole doesn’t appear easy considering the revenue raised due to direct taxes also being recorded low.

More threatening is to learn that the new government too wouldn’t be taking hitch of scrapping of the populist Food Security Law and hence, permanent source of income needs to be found out or devised at the earliest.

Till then Mr. Finance Minister, bask in glory (read fiscal engineering) till fortunes are on your side of the benches. Congress wouldn’t be complaining for sure.

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