India's food subsidy rose alarmingly by 20.3 per cent to a mammoth Rs 21,200 crore in 2002-03 alone mainly due to a continuous hike in the minimum support prices for foodgrains and consequent increase in Centre's grain procurement over the years.
The annual pre-budget Economic Survey on Thursday warned this is a cause of concern, which if not checked would exert a further upward pressure on the already high subsidy bill.
According to the survey, the food subsidies went up to Rs 21,200 crore from 17,612 crore in 2001-02 and an estimated 20 per cent of it is accounted for by the buffer subsidies because of doubling of government's procurement in the past few years.
Wheat's economic cost for Food Corporation of India is projected to rise to Rs 921 per quintal in 2003-04 from this year's 879.16 a quintal largely due to the increase in MSP, open ended procurement and hike in the rates of state taxes and levies.
The survey hit out at the current MSP regime saying it has led farmers to divert more land for production of rice and wheat and there is little scope for crop diversification leading to mounting of stocks.
"Substantial increase in MSP of rice and wheat above the cost of production in efficient states like Punjab and the system of open-ended procurement have caused farmers to divert more land for production of these crops from coarse grains, cotton and oilseeds," it said.
Price support even if given for crops other than wheat and rice is irrelevant as market prices for most of them are higher. Procurement is done only when market prices fall below MSP.
