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Centre might share only 25% of grain transport cost
Nov 21, 2014

The Centre is willing to bear 25 per cent of the cost of transporting foodgrain from Food Corporation of India (FCI) godowns to ration shops, as well as the commission paid to shopkeepers, under the National Food Security Act. This might help it keep its subsidy burden under check.

"A note for the Cabinet Committee on Economic Affairs is being floated on the issue; it could be sent for approval soon," said a senior official. According to a rough assessment, the overall expenditure of transporting foodgrain and commission to ration shop owners stands at about Rs 10,000 crore a year and the Centre will pay Rs 2,500 crore, the rest of the cost will be borne by state governments.

Once the National Food Security Act is implemented across the country, the total expenditure on the Act, including subsidy, is estimated to be about Rs 1,30,000 crore a year.

The United Progressive Alliance government, which had pioneered the Act, had agreed to share half the overall financial burden. Though it had moved a Cabinet note on the issue, it couldn't be cleared due to a change of government at the Centre. States such as West Bengal and Odisha have, for long, demanded the Centre bear the entire financial burden of transporting grain from FCI godowns to ration shops, as well as the commission paid to shopkeepers. Under the existing Targeted Public Distribution System, it is the state governments' responsibility to bear the entire cost of transporting the foodgrain, as well as paying shop owners. The cost of transportation of grain and the commission paid to ration shop owners varies across states. Rice to above-poverty-line families, sold by the Centre at Rs 7.95 a kg, costs Rs 10 a kg in Assam and Rs 11.5 a kg in Chhattisgarh, after factoring in transportation costs and the commission to ration shop owners. The National Food Security Act seeks to provide legal entitlement to cheap grain to 63 per cent of the country's population.

Though the Act was passed last year, just 11 states have implemented it so far. For the remaining states, the Centre had extended the deadline to do so by three months, which was then changed to six months.