Food ministry seeks ~2 trillion in Budget for food subsidies

The food ministry has sought more than ~2 trillion ($28.1 billion) to run the world’s biggest food welfare programme in the fiscal year beginning April 1 (FY21), three government sources said. But the government is likely to earmark only around ~1.9 trillion, they added.

“The finance ministry may not be able to allocate more than ~1.9 trillion in the Budget,” an official said. Details on the level of subsidy will be made public when Finance Minister Nirmala Sitharaman presents the 2020/21 budget on Saturday.

An inadequate allocation could force the state-run Food Corp of India, the main grain procurement agency, to borrow up to $2 billion outside of the budget, said the same official. A spokesman for the finance ministry was not immediately available for comment. In fiscal year 2018-19, the government earmarked ~1.71 trillion for food subsidies but eventually allocated only ~1.02 trillion. As a result, Food Corp had to borrow from the market, pushing its overall external borrowings to ~2.19 trillion ($30.81 billion) as of October 31, 2019, according to disclosures made in Parliament.

Despite an allocation of ~1.84 trillion for the current fiscal year, a resource crunch could again force the government to cut the payout to Food Corp, said the three officials, who asked not to be named due to the sensitivity of the matter.

India is likely to fund roughly $28 billion of its expenditure outlay in the upcoming Budget for 2020/21 via off-budget borrowings, as it seeks to revive a sagging economy while keeping its fiscal deficit in check. Under the National Food Security Act, Food Corp buys rice and wheat from farmers at a guaranteed price and sells the staples to 67 per cent of the 1.3 billion people at about one-tenth of the market price. Since coming to power in 2014, Prime Minister Narendra Modi has more than doubled food subsidies, making it the government's biggest line item after defence.