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SC line on raising BPL income cap may inflate govt’s subsidy bill

SC line on raising BPL income cap may inflate govt’s subsidy bill
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First Published: Fri, Jan 11 2008. 12 01 AM IST
Updated: Fri, Jan 11 2008. 12 01 AM IST
The Supreme Court set the stage on Thursday for a significant upward revision of the poverty line in a move that could result in a substantial increase in the government’s food and housing subsidy bills.
The poverty line demarcates the poor from the not-so-poor and while hearing a case related to reforms in the public distribution system (PDS) through which India distributed subsidized foodgrain, edible oil and other necessary products, the court accepted the findings of a panel that had suggested moving the poverty line up from Rs24,200 in annual household income to Rs49,284 in New Delhi and asked the same panel to conduct similar studies (and come up with recommended increases in the poverty line) in other parts of the country.
One expert said the impact of this on the government’s finances could be disastrous. “This will practically make 80% of the population entitled to cheap grains and all other facilities such as cheap housing now available to below poverty line (BPL) population. Clearly, this will have severe implications on government budgets, especially the food subsidy. The government...simply doesn’t have that kind of resources,” said Pronab Sen, chief statistician of India, and formerly principal adviser to the Planning Commission.
Sen added that the move could also mean the poorest of BPL families do not get even as much grain from the PDS that they currently do because “the quantity of grains supplied through the PDS is finite.”
Government officials declined comment on the court’s decision.
The court, which is hearing a “right to food” case filed by activist group People’s Union for Civil Liberties (PUCL) in 2001, accepted all the findings of a panel headed by former Supreme Court judge D.P. Wadhwa. The panel was set upin 2006 by the court and submitted recommendations restricted to Delhi.
The panel had recommended the revision in the poverty line, an abolition of any benefits to so-called above poverty line or APL families from PDS, and selling fortified wheat flour through the system in an effort to prevent diversion.
Mint had reported on 9 January that the decision to fortify wheat flour had been opposed by two commissioners, also appointed by the Supreme Court in relation to the case, because they said this was not practically possible given the short shelf life of wheat flour.
“The Supreme Court has accepted all recommendations. But detailed directions will be given later at another hearing, which is yet to be scheduled,” said Biraj Patnaik, principal adviser to the Office of the Commissioners.
The Supreme Court’s decision will result in a sharp increase in the country’s annual food subsidy bill, estimated at Rs24,200 crore in 2007-08. The quantum of this increase could not immediately be calculated.
“The report has suggested (the number of) BPL cards (that entitle a family to subsidised grain through PDS) to be doubled. Poverty is so extensive in India that the only way for PDS to be effective is to increase the BPL cards. And now the Wadhwa committee will study the whole country,” said Colin Gonsalves, senior advocate and counsel to PUCL.
The panel had also suggested that the definition of APL families be restricted to those with incomes above Rs49,284 but less than Rs1 lakh. APL families are also eligible for supplies through PDS, albeit at higher prices than BPL ones. Butthese prices are still less than market prices.
“A better idea would be to universalise PDS and sell grains at prices which are only slightly lower than market rates. This will also ensure there is no diversion,” said Sen.
Paromita Shastri contributed to this story.
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First Published: Fri, Jan 11 2008. 12 01 AM IST