March 20 (Bloomberg) -- India approved changes to a bill that grants the nation’s poor the right to buy food grains at subsidized rates, meeting a pledge by the ruling Congress party to spread the benefits of growth before elections due next year.
The amendments to the Food Security Bill cleared by the cabinet yesterday include a proposal to guarantee 5 kilograms (11 pounds) of grain a month per person, while families in the poorest category will be entitled to 35 kilograms of grains per month, Food Minister K.V. Thomas told reporters in New Delhi. The bill may cover 67 percent of India’s 1.2 billion people and will need the consent of the parliament to become law, he said.
Prime Minister Manmohan Singh is betting on the legislation, the drafting of which was overseen by Congress party President Sonia Gandhi, to woo voters. The program may increase the government’s food subsidy bill to about 1.3 trillion rupees ($23.9 billion) annually from 850 billion rupees this year, widening the nation’s fiscal deficit amid forecasts for the weakest economic growth in a decade.
“This is a good step but taken at a time when the government is facing serious challenges in economic and political fronts,” said Satish Misra, an analyst at the Observer Research Foundation in New Delhi. “The time is not suitable as growth is weakening, exports are not very positive and there’s a huge fiscal deficit.”
The country targets a fiscal deficit of 4.8 percent of gross domestic product in the 12 months starting April 1, and achieved 5.2 percent in 2012-2013, Finance Minister Palaniappan Chidambaram said in his budget speech on Feb. 28. He has allocated 330 billion rupees for the ruling coalition’s flagship rural jobs program and 100 billion rupees for a plan to give the poor cheap food grains.
Rice may be sold at 3 rupees per kilogram, wheat at 2 rupees and millet at 1 rupee in the first three years under the plan, Thomas said. That compares with market prices of 28 rupees a kilogram for rice and 19 rupees a kilogram for wheat in New Delhi, according to data from the consumer affairs ministry. The bill will enable widows, senior citizens, pregnant women and school children to receive cooked food, according to Thomas.
The government earlier proposed to supply 7 kilograms of rice or wheat or millet a month for every Indian falling within the so-called priority category and at least 3 kilograms per person per month for general households, according to the bill first approved by the cabinet in December 2011. As much as 75 percent of the rural population and 50 percent of the urban population were proposed to be covered under the bill.
The government will need 61.2 million tons of food grains to implement the law compared with its annual purchase of about 73 million tons from farmers, according to the food ministry.
“Looking at the huge stockpile and production, the surplus still needs to be exported,” said Atul Chaturvedi, chief executive officer of Adani Wilmar Ltd. “By implementing the food security bill it’s not going to increase consumption. Exports of food grains will continue.”
State stockpiles of rice, wheat were 62.8 million tons as of March 1, compared with 54.4 million tons a year earlier, according to state-run Food Corp. of India. Wheat exports totaled 4.03 million tons between April 1, 2012 and Feb. 22 and 7.46 million tons of rice in the nine months ended Dec. 31, according to government data.
The food bill will fulfill an election pledge by Singh’s Congress party in 2009 that it will supply 25 kilograms of rice or wheat at below-market rates to poor families each month if voted back to power. About two-thirds of the population live on less than $2 per day, based on World Bank data.
The changes to the bill were proposed by a panel of lawmakers, Thomas said.
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