Economy

Food subsidy bill to hit govt finances

Surabhi Richa Mishra New Delhi | Updated on March 12, 2018

With all the States and union territories set to implement the Food Security Law the pressure on the fisc is expected to increase

Subsidy costs likely to rise over ₹1.3 lakh crore in 2016-17

The Finance Minister Arun Jaitley and his Budget team will have to do some more financial jugglery as the already stressed exchequer is under further pressure from the food subsidy bill.

The Centre’s subsidy costs in 2016-17 are expected to see a significant rise close to or over ₹1,30,000 crore as all 36 States and Union Territories are expected to implement the National Food Security Act by the end of the current fiscal.

From December 1, Andhra Pradesh, Goa, Assam and Odisha are expected to roll out the scheme, taking the total number of States on board to 23, a senior Food Ministry official told  BusinessLine. The Ministry expects that the food subsidy outlay for the current fiscal would be about ₹1,15,000 crore against the previous year when the total expenditure on food subsidy has been nearly ₹1,10,000 crore.

Till now with few States implementing the National Food Security Act, the Finance Ministry had been making significant savings on the Budget food subsidy bill. In 2015-16, the food subsidy is Budgeted at ₹1,24,419 crore while it was estimated at ₹1,22,676 crore in 2014-15.

Adding to the woes of the Finance Minister, next fiscal, according to analysts, will be the global crude oil prices, which is expected to harden from the prevailing average of about $45 a barrel.

OROP & Pay Commission

The Centre’s fiscal arithmetic for 2016-17 is already under stress from the expected pay out of the One Rank One Pension (OROP) scheme and the recommendations of the Seventh Pay Commission.

Underlining these challenges, Jaitley had said, “I look at the pressures next year, including striking fiscal discipline, satisfying demands for one pension one rank, burden of the Seventh Pay Commission and our commitments to infrastructure and irrigation and continuing to invest in the social sector.” During the current fiscal, the soft crude prices have helped government work on its finances.

The Finance Ministry has factored in hefty savings in its fuel subsidy bill for the fiscal thanks to the softer crude oil prices. The government had Budgeted average cost of $70 per barrel.  While the fuel subsidy is Budgeted at ₹30,000 crore in 2015-16, the total outlay on major subsidies (food, fuel and petroleum) is estimated at ₹2,43,811 crore this fiscal.

Published on November 29, 2015

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