India's cheap food plans to cost more than budgeted.

NEW DELHI: India's plan to give millions more people cheap food will cost more than its forecast of Rs 1.3 trillion ($23.8 billion) a year and will accelerate inflation, a leading adviser on food issues for the government said in an interview.

The bill aims to provide subsidised wheat and rice to 70 per cent of the 1.2 billion people in India, home to 25 per cent of the world's hungry poor, according to a U.N. agency, despite being one of the biggest producers of food supplies.

The Congress party, which leads the coalition government, is pushing to pass the National Food Security Bill before elections, which are due by May 2014.

But the government's own estimates say the bill would increase India's annual food subsidy by 45 per cent, threatening to add to an already hefty fiscal deficit. Critics say it is little more than an attempt to divert attention from corruption scandals involving the government.

"Our calculation is that (Rs 1.25 trillion) is front-end subsidy. There are many costs that have not been counted," said Ashok Gulati, chairman of the Commission on Agricultural Costs and Prices which advises the government on farm goods prices.

Food Minister K.V. Thomas has said the bill could cost Rs 1.2-1.3 trillion a year. The budget for the current year ending March 31, 2014 sets aside Rs 900 billion as the bill still awaits passage by parliament.

Gulati, who advises the government on prices to pay farmers for their crops, said large-scale state grain purchases to meet commitments under the bill would lead to higher inflation.

"If the government is going to buy the bulk of wheat and rice, there will be a shortage in the open market, and that will lead to inflation," he said in his office, which is in the same corridor as the farm ministry.

India's food inflation currently runs around 10.61 per cent.


Source : economictimes.indiatimes.com