Government’s Food Subsidy Expenses in FY23 Could Be Lower By Rs 26,000 crore

The government's food subsidy costs are expected to fall by roughly Rs 26,000 crore next fiscal year, owing to a smaller volume of wheat procurement in the rabi marketing session, which starts on April 1. The cereal may be procured around 34 million tons, as opposed to the 44 million tons aim.

Wheat exports are expected to increase due to global demand, driving domestic prices over the minimum support price (MSP).

Mandi prices in Madhya Pradesh, for example, are at about Rs 2,100-Rs 2,350 per quintal, compared to the MSP of Rs 2,015 per quintal.

Because of the state's export possibilities and closeness to the Kandla and Mundra ports, which handle the majority of India's shipments, procurement by state agencies is likely to drop sharply.

"We expect significantly lower wheat procurement against the target this season as prices are ruling above MSP," Faiz Ahmed Kidwai, senior secretary, Madhya Pradesh's department of food and public supplies, told FE. The goal in Madhya Pradesh was to purchase 12.9 MT of wheat, but this appears unlikely.

Wheat procurement targets were set for Punjab (13.2 MT), Haryana (8.5 MT), Uttar Pradesh (6 MT), and Bihar this season (1 MT). Wheat arrivals in these states will pick up from April 1.

In 2022-23, wheat exports could reach 10 MT, with the majority of shipments coming from Madhya Pradesh. Wheat is traditionally exported from India to its South Asian neighbors and northern African neighbors.

Traders claim exports from other wheat-producing states, particularly Punjab and Haryana, will be difficult due to a lack of necessary transportation infrastructure, greater transportation costs to western ports, and higher grain purchase taxes.

While mandi fees, arthia commissions, and rural development cess are imposed at 8.5 percent and 6.5 percent in Punjab and Haryana, respectively, on wheat purchases by traders, levies of 3.5 percent and 3.8 percent are imposed in Madhya Pradesh and Uttar Pradesh.

India is anticipated to export a record 7 MT of wheat in 2021-22.

The Food Corporation of India's (FCI) economic cost of wheat for 2022-23 is predicted to be Rs 2,589 per quintal, which includes MSP given to farmers, storage, transportation, and other incidental charges.

"Because of lesser wheat procurement, there would be a significant reduction in food assistance expenses," a food ministry official stated.

Food subsidy is budgeted at Rs 2.06 lakh crore in the Union Budget for 2022-23. Wheat accounts for about 45 percent of total food subsidy costs.

The stocks with the FCI are quite large so variables such as higher exports and decreased purchases will have no effect on grain supply for the public distribution system under the National Food Security Act.

FCI had wheat stocks of 23.4 MT at the start of this month, substantially greater than the buffer norm of 7.46 MT.

According to official sources, the administration has firmed up the export plan in recent weeks through a series of inter-ministerial talks.

Russia and Ukraine, which used to account for more than a quarter of global wheat trading, are expected to be absent from key markets for several months, according to the report.

Farmers will get considerably better prices than the government's MSP, according to Kunal Shah, joint director of Shah Corporation, a wheat trading firm in Vashi, Navi Mumbai.