SUBSIDIES TO BPL

Source:The Hindu Businessline

A family officially identified as being below the poverty line (BPL) stands to receive anything from Rs 8,600-Rs 9,900 a year towards food subsidy, once the system of direct transfer of subsidy announced by the Prime Minister on Friday becomes operational.

And going by the existing formulae, a BPL family which claims to be mainly rice eating will end up getting more money than a family which is principally consuming wheat.

Going by the current subsidy provisions on wheat, rice and kerosene, a BPL family of rice consumers is likely to get anything between Rs 9,400-9,900 a year while a wheat consuming BPL family will get Rs 8,600-Rs 9,100 under the targeted public distribution scheme (TPDS).

These amounts will increase if direct cash transfer for LPG is also included. However, there is no clarity on this issue.

According to Budget estimates for 2012-13, the Centre gives a subsidy of Rs 18.53 per kg on rice and Rs 14.07 per kg on wheat for BPL category. A BPL family gets 35 kg of foodgrain (rice and wheat) a month.

Such a family either can get 25 kg of rice and 10 kg of wheat or 25 kg of wheat and 10 kg of rice. Obviously, more rice translates into higher subsidy.

Subsidy is defined as the economic cost minus Central issue price. Central issue price is the price at which the foodgrain is allocated to States, while the economic cost is the combination of minimum support price and various other charges incurred by the Centre in procuring foodgrain.

Thanks to the increase in minimum support price and other charges, the economic costs are increasing.

However, the Central issue price for BPL has not been revised since July 25, 2000.

This has resulted in increase in food subsidy every year. This is not just with rice or wheat. Even for sugar, the Centre pays a levy price of Rs 19.50 per kg to millers while issuing sugar to the States at Rs 13.50 a kg. This issue price has not been revised for a decade.

After the Centre allocates rice, wheat and sugar to States, they fix the retail price after taking margins for wholesalers/retailers, transportation charges, levies, local taxes etc into account.

Some States, as a part of their policy, also offer additional subsidy.

This additional subsidy is unlikely to be a part of the Centre’s scheme of direct cash transfer.