New Delhi: To contain the rising food subsidy bill India should sharply reduce the number of beneficiaries covered under the National Food Security Act (NFSA), said the Economic Survey 2019-20 released on Friday.

“The coverage of NFSA needs to be restricted to the bottom 20% (of population) and the issue prices for others could be linked to the procurement prices," the Survey said.

The survey added that “the current food grain economy is riddled with various economic inefficiencies... These policies, therefore, need to move on now to incentivize diversification and environmentally sustainable production (by farmers)."

Direct cash transfers to consumers are a better alternative to subsidised grains under the public distribution system, the survey said.

The NFSA entitles up to 67% of Indian households to five kg of subsidised rice and wheat per person per month. Currently over 800 million people benefit from the food subsidy scheme. Issue price is the rate at which priority households purchase the grains from public distribution shops ( 2 per kg of wheat and 3 per kg of rice).

Since the rollout of NFSA in July 2013, the federal food subsidy bill increased to 1.7 trillion in 2018-19 from 1.1 trillion in 2014-15.

The survey’s suggestion to slash food subsidy coverage comes amid protracted period of economic distress in rural India. Faced with stagnant wages, lack of day jobs and a sudden rise in food prices, the NFSA continues to be a life line for vulnerable landless families.

A recent consumption expenditure survey report junked by the government immediately after it was leaked showed a sharp 9% drop in rural consumption, including on food staples, between 2011-12 and 2017-18.

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