Subsidy Analysis of Section 3 of the National Food Security Bill 2011

Abstract

This study examines Section 3 of the National Food Security Bill 2011 that entitles every person belonging to ‘priority’ and ‘general’ households to receive seven and three kilograms respectively of subsidised foodgrains per person per month. The study demonstrates that the economic cost of subsidy for implementing Section 3 in the year 2012 is INR 93,038 crores and for implementing Section 3 in the year 2020 is INR 2,00,028 crores. In comparison, the financial memorandum accompanying the Bill pegs the economic cost of subsidy at INR 79,800 crore for the year 2012, which is substantially different from the present analysis. Additionally, the financial memorandum does not appraise the parliament of the rising economic costs of the subsidy in the forthcoming years with the projected increase in population. The large deviation in the two analyses of the economic costs of the subsidy highlights the need to revisit the financial memorandum to ensure that the parliament is properly appraised about the costs involved.