The economic survey on Friday has proposed the government should scythe food subsidies by “revisiting” the prices of foodgrains at ration shops and scrap the Essential Commodities Act, which is meant to stop hoarding but has long outlived its usefulness.

Foodgrains via ration shops are supplied at highly subsidised rates of Rs 3 per kg for rice, Rs 2 per kg for wheat and Rs 1 per kg for coarse grains through the public distribution system (PDS), according to the National Food Security Act (NFSA).

“With a large share of poor people, maintaining food security is still a challenge. The rates fixed under the NFSA initially for a period of three years have not been revised since 2013, resulting in a burgeoning food subsidy. The rates under NFSA and the coverage need to be revisited,” the survey said.

The food subsidy bill has increased to Rs 1,71,127.5 crore in 2018-19 from Rs 1,13,171.2 crore in 2014-15, it said. While the economic cost has increased, the central issue price (the rate at which grains are sold in ration shops) for NFSA beneficiaries has not been revised from Rs 200 per quintal in the case of wheat and Rs 300 per quintal in the case of rice.

The acquisition and distribution costs of foodgrains for the central pool together constitute the economic cost. The difference between the per-quintal economic cost and the per-quintal central issue price gives the amount of food subsidy.

“While the interests of the vulnerable sections of the population need to be safeguarded, for sustainability of food security operations, the issue of burgeoning food subsidy bill needs to be addressed,” the survey added.

Commodities Act

The survey pitched for the scrapping of the Essential Commodities Act, saying the law is “anachronistic” that leads to harassment and is of no help in checking price volatility.The survey also favoured a “dynamic” foodgrain policy that allows switching from procurement and distribution of grains to cash transfers, but disfavoured loan waiver to farmers .

“The consumer affairs ministry and its related arms must examine whether the anachronistic ECA, which was passed in 1955 in an India worried about famines and shortages, is relevant in today’s India,” it observed.

Stating that around 76,000 raids under the ECA were conducted last year, the survey said considerable administrative effort goes into the enforcement of this law assuming a minimum of five persons involved in a raid.