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Budget 2019: Centre's food subsidy bill goes up by 7.5% to Rs 1,84,220 crore

The rise in the food subsidy bill this year is primarily because of the sharp rise in minimum support prices (MSPs) for 14 summer-sown kharif crops

July 05, 2019 / 07:04 PM IST

The Centre's food subsidy bill has gone up to Rs 1,84,220 crore in 2019-20, higher by 7.5 percent as compared to Rs 1,71,298 crore last year.

A substantial part of the total food subsidy bill—Rs 1,51,000 crore—will be spent on Food Corporation of India’s (FCI) procurement of food grains under the National Food Security Act (NFSA). This is a slight increase from Rs 1,40,098 crore allocated for FCI last year. 

NFSA, also sometimes described as the Right to Food Law, legally entitles upto 75 percent of the rural population and 50 percent of the urban population to receive subsidised foodgrains under Targeted Public Distribution System (TPDS).

About two-thirds of India’s population is covered under the Act to receive highly subsidized foodgrains. 

The rise in the food subsidy bill this year is primarily because of the sharp rise in minimum support prices (MSPs) for 14 summer-sown kharif crops

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MSP is the price at which the government buys crops from farmers. It acts as a kind of guaranteed floor price, aimed to prevent distress sale by farmers.

As per a proposal made in budget 2018-19, the government has set the MSP at a minimum of 1.5 times the cost of cultivation. The support prices are based on Commission on Agricultural Costs and Prices (CACP) calculations.

Last year, bumper harvests had led to a price crash in several products, triggering widespread farmers’ protests. Higher support prices are aimed to increase farmers’ “purchasing power” and boost the broader economy. The benefits will also depend on how effectively government agencies can buy in times of glut.
Moneycontrol News
first published: Jul 5, 2019 07:04 pm

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