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‘Charge of govt trimming food subsidy not true’

Richa Mishra/K.R.Srivats New Delhi | Updated on February 03, 2020 Published on February 03, 2020

Expenditure Secretary says funding pattern changed to remove crowding out effect on private sector

Asserting that the Budget is expansionary in nature, Expenditure Secretary TV Somanathan said that it is inaccurate to conclude that the food subsidy has been trimmed.

Speaking to BusinessLine, Somanathan said that the Budget has altered the manner of funding of food subsidy to reduce the crowding-out effect on the private sector. The debate on food subsidy being reduced started because the July Budget had estimated the food subsidy at ₹1.84-lakh crore while the Revised Estimate, now, puts it at ₹1.09-lakh crore. The new Budget has proposed ₹1.16-lakh crore.

Two-part payment

According to Somanathan, the Budget envisages a framework wherein the entire food subsidy will be paid to the Food Corporation of India in two parts: One, from the direct provisioning in the Budget and the other as credit (financial support in the form of loans) from the National Small Savings Fund (NSSF).

He asserted that the new arrangement is neither a burden on the FCI, nor an attempt to reduce the subsidy through the backdoor. Under the new arrangement — put in place for the first time — as much as ₹1.1-lakh crore will get funded through the NSSF and about ₹1.08-lakh crore via the Budget.

“The reason we shifted to the NSSF is to maintain the pace of expenditure without breaching fiscal prudence. We don’t want to overload the bond market and crowd out private borrowing. This allows us to fund the food subsidy using resources not available to the private sector. We are not hiding this. It is all there in Budget documents,” he said.

Somanathan stressed that the government was not under-provisioning the FCI. “We are fully aware that the FCI is not a revenue-earning organisation and that is why we are showing it in the Budget as extra-budgetary resource. We are committed to funding the food security system,” he said.

The Centre has shown the complete picture on the off-Budget resources in this Budget as regards food subsidy payment. “We want to be transparent. We don’t want anyone to ‘discover’ and say they have done a great analysis. It is all in the Budget for everybody to see,” he added.

All commitments on the food subsidy will be fully met, Somanathan said, adding that “the government will be servicing the NSSF funding towards food subsidy.”

Somanathan said the entire Budget has focussed on helping the economy while maintaining fiscal prudence. The overall expenditure for both fiscal 2020 and fiscal 2021 has only seen an increase and not a contraction. Also, capital expenditure in fiscal 2021 has been projected to increase 18 per cent.

“We have not shrunk the overall expenditure. We have also consciously increased the capital side as it has growth multiplier effects. The quality of public expenditure is what we have tried to achieve. The long-term effects are higher,” he added.

NREGA & PM-Kisan

On NREGA and PM-Kisan, he said that allocations are “BE equals BE for both. RE is an adjustment to reflect current circumstances,” he said.

The overall expenditure estimatein the Budget is the “most likely scenario”. It is neither an optimistic one nor a pessimistic one.

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Published on February 03, 2020
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