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Food subsidy law to cost $22 billion: official

Food subsidy law to cost $22 billion: official
AFP
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First Published: Wed, Jun 22 2011. 06 59 PM IST
Updated: Wed, Jun 22 2011. 06 59 PM IST
New Delhi:A proposed new food security law in India guaranteeing subsidised grains for the poor would cost the country an estimated Rs 1.1 trillion ($22.3 billion), an official said Wednesday.
The senior food ministry official, speaking to Dow Jones Newswires on condition of anonymity, said the government planned to introduce a bill in the monsoon session of parliament, which begins on 1 August.
“It will be politically prudent for the government to get it (the bill) passed before Christmas,” he said, adding that it would help bolster support for the government among the poor at a time of surging food prices.
The cost of food is up nearly 10% over the year, according to the latest inflation figures, and some months have seen a spike of nearly 20% compared to a year ago.
Last December, there were demonstrations about the price of onions, which are a staple in Indian cooking.
Under the current draft of the law, anyone living under the official poverty line would be guaranteed 7.0 kilograms (15.4 pounds) of subsidised grain.
The official said that the government was working at determining where the poverty line should be drawn.
Some economists have warned about the cost of the proposed law, which would add to India’s already wide budget gap unless the government finds other sources of income.
Indian Finance Minister Pranab Mukherjee has forecast a budget deficit of 4.6% of gross domestic product for the fiscal year to March 2012, but this is based on what many analysts view as optimistic growth forecasts.
The food security law is a key part of the ruling Congress party’s program as it looks to cater to the rural poor that helped return it to power in 2009 elections.
Food prices have jumped globally because of bad weather conditions affecting harvests, rising demand and a boom in trading in commodities futures.
On Friday, the UN Food and Agriculture Organisation warned that food inflation would continue, with the projected price for cereals expected to rise by 20% and meat by 30% over the coming decade.
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First Published: Wed, Jun 22 2011. 06 59 PM IST
More Topics: Food Security | Inflation | Price Rise | Subsidy | FAO |