‘Govt may defer subsidized food price hike’

‘Govt may defer subsidized food price hike’

New Delhi: India may keep on hold plans to raise prices of subsidised food grains for welfare schemes to cut its subsidy bill, unwilling to take an unpopular step when inflation remains high, a government source said on Thursday.

The senior food ministry official, who did not wish to be identified, told Reuters the proposal was before the Union cabinet and “seems to be put in abeyance for the moment".

He was responding to a report in the Times of India newspaper the government would defer at least till May plans to raise prices of grain sold to over 115 million low-income families the government specifies as above the poverty line.

The government also gives grains to 62.5 million poor families at further lower prices.

The Congress party-led coalition government, which needs broad parliamentary support for landmark legislations such as the Nuclear Liability Bill, has faced tough opposition on high food prices. Its allies too have expressed disquiet.

The current parliament session, which is in recess till 15 April ends in May.

India has said it plans to reduce its subsidies progressively to help bring down its large fiscal deficit and a top adviser has said food prices for welfare schemes should be raised to keep costs at budgeted levels.

The country will spend Rs55,600 crore ($12.4 billion) on food subsidies in 2010-11 that began on Thursday, a decline of under 1% from the previous year. This, and other subsidies on fuel and fertilisers, will keep the fiscal deficit at 5.5% of GDP for the year.

The government has been unsuccessfully trying for years to raise prices of grains sold and media reports have said the hike could be as much as 80%.

Wheat is currently sold at Rs6.1 a kilogram and rice at Rs8.3 to “above poverty line" families. These prices have not been revised since 2002 but procurement costs have risen.

Food inflation has eased in recent weeks as the new harvest come to markets, but at 16.35% in late March, remains high, prompting street protests.