The food subsidy bill for the fiscal is likely to exceed the interim budget estimate of ₹2.02 lakh crore by about ₹18,000 crore because of huge stocks of rice at the godowns of FCI.
Sources said the surge in subsidy stems from the high cost of carrying and storing a massive 50 million tonnes (mt) of rice — three-and-a-half times the buffer stock requirement.
This is expected to push up storage costs alone by ₹16,000 crore in the current fiscal year.
"The carrying cost of rice, including storage, transportation, and other expenses, has been steadily rising," the sources said.
"Unless we find ways to offload this surplus through open market sales or exports, we will face difficulties storing rice during the upcoming procurement season (October-September 2024-25)."
The economic burden of rice stockpiles extends beyond storage. The minimum support price (MSP) paid to farmers, coupled with storage and transportation costs, has pushed up the total economic cost of rice to an estimated ₹3,975 per quintal (100 kg) at the beginning of FY24-25. This figure is likely to rise as surplus rice accumulates.
The ballooning food subsidy bill also reflects the extension of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) — a free foodgrain scheme for over 800 million beneficiaries - for the next five years. This programme, along with higher procurement costs, contributed to a food subsidy bill of ₹2.12 lakh crore in 2023-24.
Rice procurement in the 2023-24 marketing season has already crossed 51mt, significantly exceeding the annual requirement of 38mt for the PMGKAY scheme. The overflowing stockpiles have strained the storage capacity of the Food Corporation of India (FCI), forcing them to turn away milled rice from several states due to space constraints.
The government's attempt to offload surplus rice through open market sales at ₹29 per kg to bulk buyers met with limited success.
Before considering the relaxation of export curbs, sources said the government will closely monitor the upcoming kharif paddy (rice) sowing season.
