The cost of food subsidy for the poor can rise by between 25% and 140%, reaching as much as a staggering Rs90,000 crore, if new definitions of poverty suggested by two expert panels are adopted by the government, according to an analysis by the Planning Commission, India’s apex planning body.

More benefits? A true estimate of BPL families has become important for two reasons--to tackle the problem of the government’s rising subsidy bills and implementation of the proposed National Food Security Act. Ramesh Pathania / Mint

One expert group was headed by Suresh Tendulkar, former chairman of the National Statistical Commission, and will submit its report to the government next month. It estimated that four out of 10 people in rural areas are poor, a significant increase over the most recent estimate, dating back to 2004-05, that pegged rural poverty at 28.5%.

The group, appointed by the Planning Commission, expanded the criteria for defining those below the poverty line (BPL) by including education, health and actual spending on rent and conveyance as part of an individual’s consumption basket, besides expenditure on food.

The other report was prepared by the National Commission for Enterprises in the Unorganized Sector, headed by Arjun Sengupta, and was published in 2007. That report said 77% of the population subsists at just Rs12 per person per day, much below the prevailing minimum wage, which ranges between Rs40 and Rs150 a day across states.

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According to the Planning Commission analysis, the number of persons living BPL stands at 36% of the total population, or 65.2 million families. These figures pertain to poverty as estimated in 1993-94. At a monthly allocation of 35kg of foodgrains per month per family, the annual subsidy to BPL families works out to Rs37,000 crore.

“These figures rise to Rs46,500 crore, or by 25%, if we were to adopt the definition of poverty as estimated by Suresh Tendulkar," said a Planning Commission official, who didn’t want to be identified. “According to his report, all-India poverty figures stand at 38%."

According to the same Planning Commission analysis, the government will have to spend as much as Rs90,000 crore as food subsidy on BPL families, 140% more than the present subsidy cost, if the Sengupta report is accepted.

Food subsidy is the largest explicit subsidy in the government’s budget. The budget estimate of the food subsidy bill for fiscal 2009-10 was Rs42,490 crore. Apart from subsidy on foodgrains sold through the public distribution system to BPL families, the cost includes welfare programmes such as mid-day meal schemes meant for schoolchildren.

The Planning Commission official also said the Centre is continually being told by states to increase the BPL count. The total number of BPL cards, which entitle holders to subsidized foodgrains, already issued by state governments is 109 million.

Union food and agriculture minister Sharad Pawar last week told reporters in New Delhi that if states were to have their way, the BPL population can be as high as 80-85% of India’s total population.

Conventionally, poverty in India has been measured through a minimum household consumption level estimated by the National Sample Survey Organisation, part of the Central Statistical Organisation, the apex statistical body. This measure was anchored in the per capita calorie norms of 2,400 (rural) and 2,100 (urban) per day.

The existing official poverty line was originally defined in terms of per capita total consumption expenditure at 1973-74 prices; the original reference basket of goods and services was left unchanged. This is periodically updated by an expert group, using state price indices. However, the calorie count—which measures individual consumption— assumed in the original poverty line in 1973 has not changed.

A true estimate of BPL families has become important for two reasons—to tackle the problem of the government’s rising subsidy bills and implementation of the United Progressive Alliance’s proposed National Food Security Act.

Under the legislation, every BPL family in rural as well as urban areas will be entitled, by law, to 25kg of rice or wheat per month at Rs3 per kg.

A note for the empowered group of ministers on the National Food Security Act, a copy of which was reviewed by Mint, says the government will soon have to come up with well defined figures for BPL families to decide what number will be covered under the Act, besides working out a mechanism to identify BPL families in rural and urban areas.

Social worker Harsh Mander, a special commissioner appointed by the Supreme Court to advise it on the right to food, hunger and state responsibility, said a larger BPL population would reflect a “more correct scenario of the poor in India".

“Spending on education, health and shelter are basic necessities, which help in capacity building and, therefore, should be included while calculating poverty," he said.