Centre’s free grain decision may help T.N. save ₹1,650 cr. in subsidy

This figure is premised on the Centre retaining the existing grain allotment (essentially, rice in the context of Tamil Nadu) under the Act and absorbs the cost in full.

The Union Cabinet’s decision to provide free grain to all beneficiaries of the National Food Security Act (NFSA) for one year may help Tamil Nadu save ₹1,650 crore in food subsidy.

This figure is premised on the Centre retaining the existing grain allotment (essentially, rice in the context of Tamil Nadu) under the Act and absorbs the cost in full.

The State’s average monthly off-take is taken as around 2.96 lakh tonnes of the grain, including about 8,530 tonnes of wheat and 2.87 lakh tonnes of rice. In fact, in view of wheat shortage this year, the Centre sanctioned an additional quantum of rice to the State. The overall allocation is, in turn, decided by the allotment under three categories — Antyodaya Anna Yojana (AAA), Priority Household (PHH) and ‘tide over.’ While the issue price of rice for AAA and PHH is ₹3 per kg, it is ₹8.3 for the third category. Over and above the Centre’s allocation under the Act, the State requires at least 20,000 tonnes. It is procuring this quantum under the Open Market Sales Scheme (OMSS) of the Food Corporation of India or from private traders. The rate fixed by the Union government’s Department of Food and Public Distribution for procurement under the OMSS is ₹23 a kg. This year, the Centre suspended the sale of rice through this option, forcing the State to buy from the traders.

The State’s food subsidy is ₹7,500 crore, according to the budget estimates for the current year. As it implements a universal public distribution system and supplies more than what has been stipulated under the Act, its subsidy bill shoots up by ₹3,000 crore-₹4,000 crore. During 2021-22, the original provision was ₹6,500 crore, but the eventual cost was ₹9,324.24 crore. The possible relief to the State would likely get neutralised with the expected higher paddy procurement from mid-January, after Pongal.