The food ministry has rejected both proposals of the National Advisory Council (NAC) on food security. It said the government risked running up against supply constraints and taking on an unsustainable fiscal burden if the proposals were implemented.
The rejection means both NAC — headed by Congress chief Sonia Gandhi — and the government will have to come up with a fresh alternative.
One NAC proposal had called for introduction of a universal PDS — initially only for the 150 poorest districts — that would offer 35 kg rice/wheat at Rs. 3 for 80% of the families in rural areas and 33% in urban areas.
The second sought to extend the benefit across the country to 42% of rural families and 33% of urban families and provide 25 kg of rice/wheat at either Rs. 5 or Rs. 7.50 per kg to above poverty line (APL) families in rural areas; urban APL households would be excluded.
NAC estimated that grain requirement for the first option would be 70.4 million tonnes (mt) and for the second 70 mt.
The associated subsidy would be Rs. 90,264 crore in the first instance and Rs. 85,156 crore (at an issue price of Rs. 5) and Rs. 79,181 crore (at an issue price of Rs. 7.50), it said.
The ministry has, in an internal note that has been reviewed by Mint, concluded that costs had been under-estimated.
According to it, the grain requirement for the first proposal would be 76.94 mt and 63.54 mt for the second.
The subsidy cost is higher, at Rs. 1.14 trillion for the first option and Rs. 86,643 crore for the second. Currently, Rs. 55,578 crore is spent on food subsidy.
The ministry argued that the foodgrain procurement to implement NAC proposals would be challenging because the average annual procurement during the last 10 years has been 43.7 mt and in the last eight years 38.2 mt.
"This could mean resorting to imports... In such a situation, the international prices of these foodgrains could go up if our import requirements are substantial," said the note. "Farmers could complain if imports are made giving higher prices for the imported foodgrains."
The department also says the 150 poorest districts will have to be re-selected because the existing definition adopted by National Food for Work Programme is outdated.
The ministry, listing its observations on the NAC proposals, says the advisory body has not taken into consideration the current provisions for base-level stocks (existing is 2 mt), strategic reserve requirements (5mt) and for market intervention operations (5mt).
"There are anomalies in the population calculations made by the NAC," the official cited above said.
The note also points out: "Different poverty ratios have been taken into consideration by NAC under different options."
The 25.7% urban poverty ratio estimated by the Suresh Tendulkar committee has been raised by NAC to 33%, it said.